In Zim Integrated Shipping Services Limited v European Container KS and European Container KS 11 [2013] EWHC 3581 (Comm), the High Court considered whether to exercise its discretion to grant interim relief under s44(3) of the Arbitration Act 1996 (the Act). Section 44(3) empowers the Court in cases of urgency to make an order for interim relief for the purpose of preserving evidence or assets.

Zim Integrated Shipping Services Limited (Zim), the claimants in an arbitration, had made a without notice application to the Court for an order under s44(3) of the Act and/or s37 of the Senior Courts Act 1981 to preserve the contractual right to the repayment of loans by the Respondents; and the contractual right to deduct from charter hire payable to the Respondents by Zim under certain charterparties. The existence of these rights was the subject of the arbitral proceedings between the parties. The effect of the order sought by Zim would have been to secure the outstanding loan amounts.

Zim’s application was unsuccessful. The Court’s decision focused on s44(3) of the Act, as it was clear that s37 of the Senior Courts Act could not be used to circumvent the limitations contained in s44(3). In declining to make an order, the Court noted that s44(3) was a limiting provision which could only be used for the purposes of preserving assets or evidence, and could not be used to make any kind of interim injunction. The Court questioned whether the rights Zim sought to preserve were within the scope of s44(3), although was prepared to assume, with some hesitation, that this was a case that fell within s44(3). However, in the exercise of its discretion, the Court refused to grant the injunction.

The Court highlighted that, the closer any injunction came to determining a matter which parties have agreed should be decided by an arbitral tribunal, the more wary it should be as a matter of discretion. In this case, the question of whether the claimants did have the contractual rights which they sought to preserve was the question which the tribunal had to decide.


In 2004, Zim entered into a sale and leaseback arrangement with the Respondents whereby Zim sold four vessels to the Respondents and then leased them back on charters. The Respondents were special purpose vehicles (SPVs). The purchase of the vessels by the Respondents was part financed by loans from Zim.

Subsequently, the global financial crisis intervened, severely affecting Zim’s business and causing Zim to make a unilaterally reduced payment of hire to the Respondents. The Respondents threatened to exercise all rights and remedies available to them under the charters, and later asserted that Zim had forfeited its right to be repaid amounts outstanding under the loans it had made to the Respondents. Zim sought to recover the outstanding loan amounts in arbitral proceedings, arguing that its rights to repayment under the loans had not been forfeited. The Court accepted that Zim had a good arguable case on the merits, noting that there was evidence that the charters had been renegotiated, and that a reduction in, and rescheduling of, the hire payments under the charters had been agreed. However, the Court also pointed out that Zim had not suggested in the arbitration that the Respondents’ defence could be disposed of on a summary basis.

Zim’s reason for seeking interim relief from the Court was that, whereas at the time of the application, its claim against the Respondents was secured because the amount of hire outstanding exceeded the amount it was claiming under the loans, payment of the next hire instalment, due on 1 December 2013, would result in the amount owing to the Respondents being less than the amount owed by them to Zim. Zim was concerned that should it obtain an award in its favour in the arbitration, it would be unable to enforce it against the Respondents, which were SPVs, with no other known assets (apart from the charters). The relief sought was therefore an injunction restraining the Respondents from:

  • assigning their right to hire payments under the charters; and
  • taking steps to terminate or purporting to terminate any of the charters.

Zim was concerned that if it refused to make the payment on 1 December 2013 without the benefit of such an injunction, the Respondents would take steps to terminate the charters and recover the outstanding hire amount of approximately USD 8 million. This could involve the Respondents arresting Zim’s vessels around the world.

The application of section 44(3) of the Act

Regarding the requirement under s44(3) of the Act that the case be one of urgency, the Court accepted that if Zim’s application was otherwise well-founded, then it could be regarded as a case of urgency, as the tribunal in the arbitral proceedings had not yet been fully constituted and was incapable of making an interim order.

The Court then considered the scope of s44(3). It observed that a range of assets fell within the scope of s44(3). For example, in Cetelem SA v Roust Holdings Ltd [2005] 5 EWCA Civil 618, the Court of Appeal had held that assets could include contractual rights and choses in action. Nevertheless, it was clear that s44(3) was intended to be a limiting provision, applying only to the preservation of specific subject matter in cases of urgency, and should not be used to usurp the function of the arbitral tribunal. Although it might sometimes be necessary, in order to preserve assets in an urgent case, for the Court to determine a question which has been referred to a tribunal for determination, it should proceed with caution before making an order which might have the effect of encroaching on the tribunal’s jurisdiction.

Zim was seeking to protect two assets, namely:

  • its contractual right to repayment of the loans by the Respondents; and
  • its contractual right under the loans to deduct from hire payments in the event of an event of default on the part of the Respondents.

In both cases, the existence of the asset depended on whether principal or interest was in fact due under the loans, which was the issue to be determined by the arbitral tribunal.

The Court noted that treating these contractual rights as assets within s44(3) was stretching the term asset very nearly to breaking point. This was at odds with the limiting nature of the section and meant that the Court should be wary of invoking its discretion to grant relief.

Further, the question whether Zim was indeed really preserving assets begged the question which the arbitral tribunal had to decide. Therefore, if the Respondents were right in their case in the arbitration, it was impossible for the Court to make an order which would not interfere with their contractual rights. The Court did not accept Zim’s assertion that it could not be adequately compensated in damages if its position in the arbitration was ultimately vindicated. It could, and the risk that the Respondents might not have sufficient assets to pay out an award in Zim’s favour was a fact of life when transacting with SPVs. Zim did not have a right to be secured for its claim. The Court suggested that Zim could mitigate its exposure if the arbitral tribunal was constituted quickly and issued an award promptly.

For these reasons, the Court refused to grant the injunction sought by Zim. The Court also remarked that, strictly speaking, its jurisdiction to grant relief only arose if Zim did in fact have the assets on which it relied. The existence of these assets depended on a determination of the extent of Zim’s contractual rights. The Court was not convinced that it was necessary (i.e. sufficiently urgent) for it to determine this question in view of the fact that it was the very question which the parties had agreed should be referred to arbitration and which was shortly due to be determined by the arbitral tribunal.

Significance of the decision

This decision indicates that the courts are wary of granting relief under s44(3) of the Act where to do so would involve deciding matters that parties have agreed should be referred to arbitration.

The decision also sheds light on the scope of section 44(3). The Court emphasised that s44(3) contained a limitation, as it empowered the courts to make orders only in relation to the preservation of assets and evidence. The courts will therefore carefully scrutinise the purported subject matter of any application to ensure that this limitation is given effect.

For further information, please contact Matthew Weiniger, Partner, Hannah Ambrose, Professional Support Lawyer, or your usual Herbert Smith Freehills contact.

Matthew Weiniger
Matthew Weiniger
+44 20 7466 2364
Hannah Ambrose
Hannah Ambrose
Professional Support Lawyer
+44 20 7466 7585