INTRA EU FREEZING AND

SEARCH ORDERS

Peter McMaster QCMonday, 21st March 2011

©

SCOPE

The EU:

– 27 member states;

– 500,000,000 people;

– GDP USD 15 trillion

Switzerland, Norway and Iceland

IMPLICATIONS

A lot of complex economic activity

Assets spread across national borders

Different states, different legal systems

Substantive claim is before one and one only legal system

Need to freeze assets in territory external to state of

substantive claim

Some other European legal systems won’t grant extra

territorial freezing relief. England a particularly attractive

forum for freezing orders.

ROADMAP

Issues for practitioners advising on cross border

freezing orders.

– where the substantive claim is in another convention state;

– where the substantive claim is in England & Wales.

Limited scope as matters currently stand for cross

border search orders.

NO SUBSTANTIVE CLAIM HERE

Where there is no substantive claim in England and

Wales, practitioners need to consider:

– Jurisdiction of the English court.

– How to serve the defendant

– The grounds for an order - the test is not the same

as for purely domestic cases.

JURISDICTION

Section 25 Civil Jurisdiction and Judgments Act 1982

(1) The High Court in England and Wales or Northern Ireland shall have power to grant interim relief where—

(a) proceedings have been or are to be commenced in a [relevant state]

(2) On an application for any interim relief under subsection (1) the court may refuse to grant that relief it, in the opinion of the court, the fact that the court has no jurisdiction apart from this section in relation to the subject-matter of the proceedings in question makes it inexpedient for the court to grant it.

SERVICE

Defendant present in England & Wales

Defendant in territory of a convention state

– Permission under CRP Part 6

– Practice direction 6, paragraph 3.1(5)

• “A claim is made for an interim remedy under section 25(1) of

[the Act].

GOOD GROUNDS FOR AN ORDER

Relief would be granted if the substantive

proceedings were in the English Court.

– Refco Inc v. Eastern Trading Co [1999] 1 Lloyd’s Rep

159

The tailpiece to s 25(1). It is not ―inexpedient to

grant the order‖.

THE MOTOROLA GUIDELINES

Motorola Credit Corporation v. Uzan (No. 2)

[2004] 1 WLR 116

– Established a two stage approach: would the court have

granted the relief in purely English proceedings and if so,

are there circumstances connected to the fact that the

substantive claim is proceeding elsewhere that should lead

the court nevertheless to decline to intervene?

5 points to consider on expediency.

1. THE MAIN ACTION

Would making the order interfere with the

management of the case in the primary court?

– The order is supposed to help, not hinder the main action.

2. PRIMARY JURISDICTION

POLICY

Is it the policy in the primary jurisdiction to make worldwide freezing and disclosure orders?

– Distinguish the cases where e.g. a Swiss court has not power to make an order affecting assets outside its borders but would have or has made an order affecting assets within them and where the court has power to make an order but would not do so on the facts.

3. EFFECT IN OTHER

JURISDICTIONS

Is there a danger of the order giving rise to

disharmony or confusion or a risk of overlapping

orders in other jurisdictions?

– If there are other jurisdiction which have or may make

orders the scope for resulting confusion and overlap may

lead the English court to decline the order.

4. JURISDICTIONAL CLASHES

Is there at the time the order is being made a

potential conflict as to jurisdiction making it

inexpedient to make an extra territorial freezing

order?

– See e.g. Motorola where there were anti-suit injunctions

aimed at the English ancillary proceedings.

5. FEASIBILITY

If the defendant resists the jurisdiction and is likely

to disobey the order, can the order be enforced?

– The courts are pragmatic and won’t make orders in vain.

SUBSTANTIVE CLAIM HERE

Convince the court to make an extra territorial order

– a worldwide freezing order.

Limitations on the extra territorial effect.

If you want to enforce your order in another

convention territory, you will usually need leave.

GETTING THE ORDER

―The jurisdiction to make such orders is now firmly

established. It must be exercised with caution, and a

sufficient case to justify its exercise must always be

made out; but such orders are now routinely made in

cases of international fraud …‖

– Credit Suisse Fides Trust S.A. V. Cuoghi [1998] QB 818,

824

LIMITATIONS

The order does not bind persons outside the

jurisdiction (other than the respondent or its officers

and agents).

The order does not prevent third parties from

dealing with overseas assets as required by foreign

law.

These restrictions are written into the standard forms

of order.

PERMISSION TO ENFORCE

The standard form of worldwide freezing order

contains an undertaking that the applicant:

– ―Will not without the permission of the court seek to

enforce this order in any country outside England and

Wales or seek an order of a similar nature … ‖

If you want to enforce, permission is given by

reference to the ―Dadourian‖ guidelines.

– Dadourian Group International v. Simms & Ors [2006] 1

WLR 2499.

GUIDELINE 1

―The principle applying to the grant of permission to enforce a WFO abroad is that the grant of that permission should be just and convenient for the purpose of ensuring the effectiveness of the WFO, and in addition that it is not oppressive to the parties to the English proceedings or to third parties who may be joined to the foreign proceedings.‖

GUIDELINE 2

―All the relevant circumstances and options need to be considered. In particular consideration should be given to granting relief on terms, for example terms as to the extension to third parties of the undertaking to compensate for costs incurred as a result of the WFO and as to the type of proceedings that may be commenced abroad. Consideration should also be given to the proportionality of the steps proposed to be taken abroad, and in addition to the form of any order.‖

GUIDELINES 3 and 4

―The interests of the applicant should be balanced against the interests of the other parties to the proceedings and any new party likely to be joined to the foreign proceedings.‖

―Permission should not normally be given in terms that would enable the applicant to obtain relief in the foreign proceedings which is superior to the relief given by the WFO.‖

GUIDELINE 5

―The evidence in support of the application for permission should contain all the information (so far as it can reasonably be obtained in the time available) necessary to allow the judge to reach an informed decision, including evidence as to the applicable law and practice in the foreign court, evidence as to the nature of the proposed ―proceedings to be commenced and evidence as to the assets believed to be located in the jurisdiction of the foreign court and the names of the parties by whom such assets are held.‖

GUIDELINE 6

―The standard of proof as to the existence of assets

that are both within the WFO and within the

jurisdiction of the foreign court is a real prospect,

that is the applicant must show that there is a real

prospect that such assets are located within the

jurisdiction of the foreign court in question.‖

GUIDELINES 7 AND 8

―There must be evidence of a risk of dissipation of the assets in question.

―Normally the application should be made on notice to the respondent, but in cases of urgency, where it is just to do so, the permission may be given without notice to the party against whom relief will be sought in the foreign proceedings but that party should have the earliest practicable opportunity of having the matter reconsidered by the court at a hearing of which he is given notice.‖

COMBINING THE TWO

In principle you can get a worldwide freezing order

where substantive proceedings are in another

convention state.

In practice you will only get this where there is a

substantial connection with this jurisdiction. If D is

not present in the jurisdiction and has no assets here

it will be rare to see an order.

– Belletti v. Morici [2009] EWHC 2316.

SEARCH ORDERS

The jurisdiction exists.

But it is tantamount to a search warrant in a

foreign country.

RECAP

The cases where relief is possible:

– Substantive proceedings another convention state,

assets England and Wales.

– Substantive proceedings E&W, assets another

convention state.

– No substantive proceedings or assets in E&W.

LONDON AS A FORUM?

England bolder than others - opportunities for

practitioners.

Is the jurisdiction exorbitant?

Peter McMaster QC

Commercial and chancery commercial law and

practice.

C&P recommended leading silk 2011: chancery

commercial, energy and natural resources.

Tel: 020 7242 6105. Full contact details, c.v. and

articles written: Google or www.serlecourt.co.uk.