English freezing orders in support of foreign proceedings: the need for careful drafting and monitoring

A recent Court of Appeal decision highlights a number of important practical issues for claimants regarding freezing injunctions issued by the English courts in aid of foreign proceedings, under section 25 of the Civil Jurisdiction and Judgments Act 1982: GFH Capital Ltd v Haigh [2024] EWCA Civ 65.

Even where the foreign court has issued a worldwide freezing order, a supporting injunction from the English court can be particularly valuable for its binding effect when served on non-party banks and other institutions subject to the English jurisdiction.

However, in the present case, a majority of the Court of Appeal held that an order which froze a foreign defendant’s English assets “until the disposal of the Claim or further order” had been automatically discharged when the foreign court delivered a judgment on the substantive claim, some years previously.

The decision reinforces the importance of clear and unambiguous drafting of such orders, particularly where they deviate from the usual wording for freezing orders in the relevant court (which may often be the case for orders in support of foreign proceedings). The potential for ambiguity is starkly demonstrated here by the fact that an interpretation which one Court of Appeal judge considered would be “very odd” was considered by the majority to be “plainly intended”.

The decision also highlights that:

  • Certainty is particularly important as to when a freezing order will come to an end. Both the defendant and third parties such as banks need to be able to identify a clear point at which an order will cease to operate.
  • Claimants are expected to monitor actively the continued effectiveness of any freezing order they obtain and must be astute to apply for a continuation or a fresh order where that becomes necessary – even if that occurs unexpectedly.
  • The court will not allow freezing orders to continue in limbo on an extended basis. While every order will be construed on its particular terms, a freezing order expressed to operate until a claim is “disposed of” (or “until judgment”, as is common in the Commercial Court) is likely to be interpreted as ceasing to operate as soon as there is a judgment on the substantive claim – rather than when all avenues for appeal are exhausted. As the minority judgment here noted, where the substantive claim is in foreign proceedings that may well require a claimant to make an urgent application to the English court in response to developments of which it may not have advance warning.

Continue reading

High Court refuses Norwich Pharmacal disclosure order in aid of foreign proceedings

In a significant recent decision, the High Court refused to grant a ‘Norwich Pharmacal’ disclosure order (NPO) on the grounds that the information was sought for the purpose of foreign proceedings, which is an impermissible use of such orders: Green v CT Group Holdings Limited [2023] EWHC 3168 (Comm).

The NPO procedure enables a victim of wrongdoing to seek disclosure from a third party who was ‘mixed up’ in the events (often innocently), for the purpose of obtaining information the victim needs in order to pursue legal redress.

On the basis of earlier authority, the High Court held that the NPO procedure cannot be used to obtain evidence (i) for the purpose of foreign civil proceedings (existing or contemplated) or (ii) in connection with foreign criminal investigations or proceedings. That is because the English courts’ power to assist in obtaining such material is governed exclusively by the statutory regimes (civil and criminal) for international cooperation in this regard, under which foreign courts and prosecuting authorities can issue formal “letters of request” for such assistance.

The High Court observed that this jurisdictional constraint on the NPO procedure has not been widely recognised in practice, and suggested that some earlier NPO authorities must be reconsidered in light of it. It also proposed that the established test for granting an NPO be amended to take into account this restriction, by adding an express requirement that the order be sought for a proper purpose.

In any particular NPO application, the question of whether the information is being sought for the purpose of foreign proceedings (including whether a possible future foreign action can be said to be “contemplated” at that stage) will be fact-sensitive, and a judge’s view may be difficult to predict. The present judgment suggests that, although in a wholly domestic context courts may sometimes be prepared to adopt a “wait and see” approach to the potential uses of the information once it is received, that approach will not be appropriate in cases where there is an international element and jurisdiction is an issue.

Related developments re cross-border third party disclosure

This decision follows several other recent cases considering when the English courts will make disclosure orders against third parties where there is a cross-border element.  In the converse of the scenario in the present case, the following cases considered applications for disclosure by foreign third parties for the purpose of English proceedings:

  • In Gorbachev v Guriev [2022] EWCA Civ 1270 (discussed here) the Court of Appeal granted a third party disclosure order under CPR 31.17 (rather than an NPO) against an entity located abroad where the  documents sought were located in England. It left open the question of whether such an order could be made where the documents were held abroad  (as would be more typical). It commented however that, even if such jurisdiction exists, it would rarely be appropriate to exercise it due to the risk of trespassing on the statutory “letter of request” regime.
  • In Scenna v Persons Unknown [2023] EWHC 799 (Ch) (discussed here) the High Court reiterated that the English courts should only make ‘Bankers Trust’ disclosure orders against foreign banks in exceptional circumstances, because of the risk of putting the bank in breach of local laws. The case law suggests that exceptional circumstances might include urgency, or any other reasons why approaching the courts of the foreign jurisdiction for similar orders would not be a viable alternative.

Continue reading

Navigating UK sanctions against Russian persons in English court proceedings

The UK is one of many countries that have introduced extensive sanctions against Russia, its individuals and entities in light of the ongoing military action in Ukraine.

An area where the UK sanctions regime may have significant impact, but which is not often discussed, is the effect on proceedings in the English court involving sanctioned Russian parties. Whilst UK sanctions generally do not restrict court proceedings against Russian individuals or entities subject to sanctions, the effect of the overall sanctions regime means that pursuing such claims may involve practical difficulties, such as delays to the proceedings or issues with enforcement.

Of particular relevance to English court proceedings is the targeted freezing of assets, which restricts access to funds and economic resources of Designated Persons (whether individuals or entities). The asset freeze restrictions are very wide and, among other things, prevent a Designated Person from accessing funds, without a licence, to make payments related to court proceedings, including legal fees, court fees and amounts payable under court orders.

Another major difficulty that parties may face in proceeding against Designated Persons is the ability to enforce money judgments. Subject to licensing, the UK asset freeze would restrict enforcement against the assets of the Designated Persons in the UK and would prevent a UK person from receiving the assets of a Designated Person.

As the cases against Russian sanctioned parties continue to unfold, it is to be expected that the parties and the courts will have to deal with an increasing number of procedural issues arising out of the sanctions regime.

Those who wish to pursue claims against sanctioned Russian persons in the English courts therefore need to understand how to navigate the relevant sanctions in order not to be caught off-guard by such difficulties.

This post on our sister blog, Litigation Notes, examines these issues in detail.

 

Letters of request from foreign courts: High Court orders disclosure to assist Canadian civil fraud action

The High Court has acceded to a letter of request (LOR) from a Canadian court to order a number of banks to disclose documents for use in Canadian proceedings, but has declined to make other orders requested in the LOR. The judgment is a useful illustration of how the English courts approach such foreign judicial requests for assistance, and reinforces the importance of parties obtaining English law advice when seeking a LOR from a foreign court: Sakab Saudi Holding Co v Al Jabri & Ors, Re: HSBC & Ors [2021] EWHC 3390 (QB).

The LOR was issued by the Canadian court in the context of civil proceedings alleging an international scheme to defraud certain companies of USD 3.47 billion.

The High Court’s judgment reflects the established position that the English courts will, if they can properly do so, accede to LORs issued by foreign courts seeking evidence for use in foreign litigation. Notably, it emphasises that this will be particularly so where the litigation concerns fraud on an international scale, given the evidential difficulties in pursuing such actions.

However, it also illustrates that an English court may refuse to make disclosure orders requested in a LOR to the extent that it considers the disclosure would be oppressive, speculative, fishing, or not relevant to the issues in the foreign proceedings. Continue reading

Privy Council restatement of the law on freezing and other interim injunctions

In a recent judgment, the Privy Council has delivered a “ground-breaking exposition of the law of injunctions” (in the words of the Master of the Rolls), including a restatement of the test for freezing injunctions.  Although the analysis is technically obiter dicta, it will be highly influential on any English or other common law court exercising a general power to grant injunctions on the basis of what is just and convenient: Broad Idea International v Convoy Collateral Ltd and others; Convoy Collateral Ltd v Cho Kwai Chee [2021] UKPC 24.

Although the issues were examined in the context of British Virgin Islands (BVI) law, the analysis and conclusions in the majority judgment apply much more broadly, amounting to what the minority described as “a juridical foundation for the entire law of freezing and interlocutory injunctions”.

Importantly, the Privy Council concludes that the general equitable injunctive power includes a power to make a freezing order (against a party over whom the court has personal jurisdiction) where there are no relevant domestic proceedings in prospect and the sole purpose of the order is to aid enforcement in foreign proceedings. In doing so, it firmly rejected the contrary position which has long been treated as established by the House of Lords’ decision in Siskina v Distos Cia Naviera SA [1979] AC 210 (The Siskina): “The shades of The Siskina have haunted this area of the law for far too long and they should now finally be laid to rest”.

Further, the Privy Council considered that a freezing order may be made even where the judgment it is intended to support (foreign or domestic) will not be against the respondent to the order, and where proceedings to obtain the judgment have not yet been commenced, and even where no cause of action has yet crystallised.

The decision does however confirm the established position that a claim for a freezing injunction cannot be served out of the jurisdiction under a procedural gateway permitting service out of claims for ‘injunctions’ generally. It remains the case that any such permission will need to be based on a specific gateway for freezing orders or some other ground in the relevant jurisdiction.

Implications

In England, a power to grant injunctive relief in support of foreign proceedings already exists under statute (s.25 Civil Jurisdiction and Judgments Act 1982), supported by a specific gateway for service of such claims out of the jurisdiction (CPR PD 6B 3.1(5)). Accordingly, the Privy Council’s recognition that there is such a power at common law will not alter the availability of such relief in the English courts in principle (although its wider restatement of the test for freezing orders generally could expand the circumstances in which the English courts are prepared to make such orders).

However, such recognition could have a greater impact in other common law jurisdictions where there is currently no statutory power to grant injunctive relief in support of foreign proceedings. In the context of cross-border litigation, it could potentially open up new opportunities for litigants worldwide to apply directly to the courts in such jurisdictions to secure assets held there (either by a defendant who is resident there or a related company incorporated there). Indeed, the Privy Council specifically cited the use of offshore companies (for which it noted the BVI is a popular location) as part of the modern commercial context in which the law on freezing injunctions needed to be considered.

More broadly, the Privy Council’s judgment may facilitate a future expansion of the scope of freezing and other injunctive relief in both England and other common law jurisdictions.  The majority judgment emphasises the need for the law in this area to be able to adapt to meet changing commercial practices. In particular, its exposition of the rationale underlying freezing orders and other enforcement-focused injunctions is intended to provide a foundation for the future development of such remedies as required, unshackled from principles developed in the different context of traditional ‘orthodox’ interim injunctions. It is not difficult to envisage it being relied upon in a number of areas where the law is currently being asked to respond to fundamental changes in commercial and financial practices, such as cryptocurrency and blockchain commerce.

How that development will unfold is difficult to predict – as Sir Geoffrey Vos (in the minority) observed, the fact that the majority’s fundamental restatement of the law will have only powerful obiter status may result in a lack of clarity as to its consequences: “I fear that it may take more litigation to sort out the ramifications of the majority’s decision”. That may be particularly the case if future courts considering it share some of the minority’s concerns that the restatement went beyond the issues that arose and were fully argued in this case and was “an unsatisfactory way to change the law in such an important area”.

Background

Convoy Collateral Ltd (Convoy) was pursuing its former director Dr Cho (a resident of Hong Kong) in Hong Kong proceedings, claiming substantial damages in connection with allegedly inappropriate investments.

It applied in the BVI for a freezing injunction against Dr Cho, including permission to serve the claim on him out of the jurisdiction. It also sought a freezing injunction against Broad Idea International Ltd, a BVI-incorporated company in which Dr Cho owned a majority shareholding and which Convoy claimed he used as a “money-box”. Broad Idea was not a party to the Hong Kong proceedings.

The Court of Appeal of the Eastern Caribbean Supreme Court (EC Court of Appeal) held that:

  • there was no jurisdictional gateway permitting service of the claim for a freezing order out of the jurisdiction on Dr Cho; and
  • there was no power to grant a freezing order against Broad Idea because the BVI courts’ general powers (to grant injunctions where such orders were “just and convenient”) only permitted such orders as ancillary to proceedings for substantive relief brought in the BVI. The EC Court of Appeal acknowledged that this might be seen as undesirable in modern day international commerce, but considered it necessary on the authority of The Siskina in the absence of legislation (such as in England) conferring a broader power.

Decision

Given the importance of the issues, the Privy Council appeal was expedited and heard by an enlarged Board of seven Privy Council justices – comprising Lords Reed, Hodge, Briggs, Sales, Hamblen and Leggatt, and Sir Geoffrey Vos (Master of the Rolls).

The Board upheld the Court of Appeal’s ultimate ruling on both issues – ie refusing permission to serve Dr Cho out of the jurisdiction and refusing a freezing order against Broad Idea. However, on the latter issue, the majority disagreed with the reasoning of the Court of Appeal.

The issues before the Privy Council were, in essence:

  • whether a procedural gateway allowing a claim to be served out of the jurisdiction if “a claim is made … for an injunction ordering the defendant to do or refrain from doing some act within the jurisdiction” (as in Part 7.3(2)(b) of the Eastern Caribbean Supreme Court CPR 2000 (“EC CPR”)) permits service out where the only claim made is for a freezing injunction (“the service out issue”); and
  • whether a court has the power at common law to grant a freezing injunction against a defendant when no substantive claim is made against that defendant in proceedings before the domestic court (“the power issue”).

The majority judgment was given by Lord Leggatt (with whom Lord Briggs, Lord Sales and Lord Hamblen agreed).  A minority judgment was given by Sir Geoffrey Vos (with whom Lords Reed and Hodge agreed).

The service out issue

The EC Court of Appeal’s finding that the BVI general gateway for “injunction” claims did not extend to freezing orders was based on the interpretation to that effect of materially identical procedural rules (in England and Hong Kong respectively) by the House of Lords in The Siskina and the Privy Council in Mercedes Benz AG v Leiduck [1996] AC 284.

The Privy Council here was unanimous in the view that it should not depart from that interpretation of a procedural rule, which had been considered twice at the highest level. In Lord Leggatt’s words, “The common law does not operate on a principle of third time lucky”. If that left a lacuna in procedural rules it should be remedied by the relevant rule committee rather than by judicial reinterpretation, particularly where such reinterpretation would have implications for other common law jurisdictions with similar rules.

The power issue

However, the majority considered that it was necessary and important on this appeal “to confront and decide the power issue”. Specifically, they considered it important to “dispel the residual uncertainty emanating from The Siskina” – in particular, statements by Lord Diplock in that decision suggesting that a court’s power to grant an injunction was dependent on the existence of an action claiming substantive relief which the court had jurisdiction to grant.

Lord Leggatt undertook a detailed review of key authorities in the development of both “orthodox” interim injunctive relief and the more recent phenomena of injunctions to aid enforcement. He noted that the latter had developed far beyond the confines of the original form of order (known as a ‘Mareva’ injunction) and also highlighted the development of remedies such as Norwich Pharmacal and Bankers Trust orders, and more recently website blocking orders against internet service providers – none of which are based on a cause of action against the respondent.

He observed that those developments could only be understood by appreciating the distinction between the power to grant an injunction and the principles and practice governing whether a court should exercise that power.  He regarded it as settled law that, where a court has a general power to grant an injunction on the basis of what is “just and convenient”, that power is effectively unlimited (subject to any relevant statutory restrictions). However, the power will only be exercised where to do so accords with equitable principles and practice. As the historical development of freezing and other orders illustrated, courts with equitable powers can and do modify existing practice where to do so accords with principle and is necessary to provide an effective remedy. The legal developments had been forged, often explicitly, in response to fundamental changes in commercial and financial practices, driven in large part by the revolution in information technology. “Such flexibility is essential if the law and procedure is to keep abreast of changes in society”.

Lord Leggatt concluded that the constraints on the power to grant freezing orders suggested in The Siskina “are not merely undesirable in modern day international commerce but legally unsound”. They did not in fact form part of the binding ratio of that decision and, in any case, do not reflect the position that has developed since The Siskina was decided in 1977, when the concept of freezing injunctions was still in its nascent stage.

The EC Court of Appeal had therefore been wrong to hold that the common law equitable injunctive power does not include a power to grant relief solely in the aid of foreign proceedings.


Restatement of the test for freezing injunctions

Drawing together the above analysis, Lord Leggatt went on summarise the current test for a freezing injunction as follows: A court with equitable and/or statutory jurisdiction to grant injunctions where it is just and convenient to do so has power – and it accords with principle and good practice – to grant a freezing injunction against a respondent over whom the court has personal jurisdiction provided that:

i) the applicant has been granted or has a good arguable case for being granted a judgment or order for the payment of a sum of money that is or will be enforceable through the process of the court;

ii) the respondent holds assets (or, potentially, may take steps that would reduce the value of assets) against which such a judgment could be enforced; and

iii) there is a real risk that, unless the injunction is granted, the respondent will deal with such assets (or take steps that make them less valuable) other than in the ordinary course of business with the result that the availability or value of the assets is impaired and the judgment is left unsatisfied.

Importantly, although other factors are potentially relevant to the discretion whether to grant a freezing injunction, there are no other relevant restrictions on the availability in principle of the remedy. In particular:

i) The principle applies equally to a foreign judgment or other award capable of enforcement in the same way as a judgment of the domestic court

ii) There is no requirement that the relevant judgment should be a judgment against the respondent

iii) There is no requirement that proceedings in which the judgment is sought should have been commenced, nor that a right to bring such proceedings should yet have arisen. It is enough that the court has a sufficient degree of certainty that a right to bring proceedings will arise and that proceedings will be brought.

Having concluded that there was no jurisdictional or legal impediment to the grant of a freezing order against Broad Idea, the majority did however go on to find that the facts in this case did not support such an order.

The minority’s concerns

Giving the minority judgment, Sir Geoffrey Vos noted that there was no disagreement on the ultimate outcome of the appeals, given a unanimous view on the service out issue and that a freezing order against Broad Idea was not appropriate on the facts.

However, the minority strongly disagreed that it was necessary or appropriate for the Board to decide in this appeal the legal question arising under the power issue (ie the availability of a freezing order solely in aid of foreign proceedings). It considered the majority’s conclusion on that issue a deviation from the doctrine that a court should only depart from previous decisions of equal status where it is essential to do so to decide the case before it.

Further, it noted that the majority had gone further than simply confirming that the relevant statements in The Siskina were no longer good law. Rather, it had sought to provide “a juridical foundation for the entire law of freezing and interlocutory injunctions”, when the argument had been limited (at most) to freezing injunctions in general and the circumstances of this case in particular. In the minority’s view, providing such “ground-breaking exposition of the law of injunctions” in the form of only obiter dicta was “an unsatisfactory way to change the law in such an important area and could result in a lack of clarity in many jurisdictions as to the consequences of such obiter dicta”.

Jan O'Neill
Jan O'Neill
Professional Support Lawyer, London
+44 20 7466 2202

Commercial Court clarifies scope of standard undertaking not to enforce worldwide freezing order abroad without court’s permission

The Commercial Court has recently considered the scope of the standard undertaking provided in connection with worldwide freezing orders, which requires the applicant to seek the court’s permission before seeking to enforce the order outside England and Wales, or seeking an order of a “similar nature”: Akcine Bendrove Bankas Snoras v Antonov [2018] EWHC 887 (Comm).

The court held that the claimant bank was not in breach of its undertaking by obtaining orders in Lithuania and Switzerland seizing certain of the respondent’s assets, as the foreign courts had independent jurisdiction to make the orders which did not derive from the making of the worldwide freezing order in England.

This decision provides welcome clarification as to the scope of the standard undertaking, and should provide some comfort to those seeking to secure assets abroad based on a separate and independent right or jurisdiction, where they have also obtained an English freezing order.

The decision also suggests that, where there has been a breach of the undertaking, the court may be inclined to grant retrospective permission and continue the freezing order unless the respondent can present clear evidence that the foreign order has had an oppressive or prejudicial impact.

Gareth Keillor and Rosanna Pinker in our disputes team consider the decision further below. Continue reading

Cross-Border Litigation – international perspectives

We are pleased to publish the second issue of our periodic publication “Cross-Border Litigation”, designed to highlight legal and practical issues specific to litigation with an international aspect.

Tapping into the expertise of the firm’s leading commercial litigators across the globe, the publication gives readers the benefit of their hands-on experience and flags key developments that should be on commercial parties’ radars.

The topics covered in this issue include:

  • Highlights of recent developments from across the globe
  • The Singapore International Commercial Court
    Has it lived up to the hype?
  • Cross-border litigation and Brexit
    What we know so far
  • Partner Spotlight on Helmut Görling
    His journey from a police detective to head of our corporate crime team in Frankfurt
  • Using disclosed documents for multiple proceedings
    Recent judgments suggesting a restrictive approach
  • Jurisdiction disputes
    When will the English courts take into account politics, corruption and other obstacles to justice in foreign jurisdictions?
  • India related commercial contracts
    Getting your dispute resolution and governing law clauses right

To download the publication, click here.

To read the previous Issue 1 (March 2017), click here

High Court orders foreign defendant to disclose assets worldwide to aid execution

The High Court has reaffirmed its jurisdiction under section 37(1) of the Supreme Court Act 1981 to compel defendants who are subject to the court’s jurisdiction to disclose their assets worldwide in order to aid execution of a judgment or (as in this case) arbitration award, despite the absence of a freezing injunction: Cruz City 1 Mauritius Holdings v Unitech Limited and others [2013] EWHC 1323 (Comm).

Section 37(1) provides that the High Court may “grant an injunction or appoint a receiver in all cases in which it appears to the court to be just and convenient to do so”. Previous cases held that this gave the court jurisdiction to order disclosure of assets worldwide in aid of execution, even if there was no freezing injunction in aid of execution. The defendants in the present case argued that, to the extent that such cases decided that a foreign defendant could be ordered to disclose assets outside the jurisdiction in aid of execution, they were no longer good law following Masri v Consolidated Contractors International (No 4) [2008] UKHL 43. In Masri the House of Lords held that CPR 71.2, which allows a judgment creditor to apply for an order requiring an officer of a corporate judgment debtor to attend court to provide information needed to enforce the judgment, did not have extraterritorial effect; i.e. the court had no jurisdiction to compel a company officer who was outside the court’s jurisdiction to attend court to provide such information.

In the present case, the High Court held that Masri did not prevent the court from granting an order under section 37(1) requiring the defendants to provide disclosure “verified by an affidavit of a proper officer”. The critical distinction was that the defendants in this case were subject to the jurisdiction of the English court, even if all of their “proper officers” were likely to be outside the jurisdiction. Unlike in Masri the court was not asked to make an order against a non-party outside the court’s jurisdiction. Click here to read more about the decision on our arbitration blog.