Alan Williams May 8 2018 Guidance provided on freezing order undertaking RPC | Litigation - United Kingdom Alan Williams Litigation FactsApplicationLawDecisionCommentThe English courts can make draconian worldwide freezing orders – interim injunctions restraining a party from disposing or dealing in its assets. Such an order will usually contain an undertaking by the applicant to seek permission from the English court before enforcing the order outside England and Wales or seeking an order "of a similar nature". A recent commercial court decision in Akcine Bendrove Bankas Snoras v Antonov(1) provides welcome guidance on how the court will approach the scope of this undertaking.FactsGrant of freezing orderThe first defendant (Mr Antonov) and the second defendant (Mr Baranauskas) had been significant shareholders in and, respectively, chair of the supervisory board and chair of the board of the claimant – a Lithuanian retail bank. In 2011 the claimant went into administration. In late 2011, at the request of the Lithuanian authorities, Antonov and Baranauskas were arrested in London in connection with an alleged fraud affecting the claimant and were bailed. Lithuania sought to extradite them.In May 2012 the claimant commenced proceedings against Antonov and Baranauskas for breaches of directors' duties under Lithuanian law and applied for a worldwide freezing order against Antonov (the English civil proceedings). Although the proceedings were formulated as matters of Lithuanian law, they were brought in England because Antonov and Baranauskas were resident or domiciled there.The freezing order was granted in respect of Antonov's assets up to a value of €492 million. It referred to a number of undertakings given by the claimant, including an undertaking (tracking the wording from the English civil procedure rules)(2) 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 including orders conferring a charge or other security against the Respondent or the Respondent's assets."Subsequent eventsAntonov subsequently applied to the court in July 2012 for discharge or variation of the freezing order, but these applications were dismissed. The English civil proceedings were stayed by consent in 2013 without prejudice to the freezing order.In 2014 Westminster Magistrates Court ordered the extradition of Antonov and Baranauskas to Lithuania, but they had left England in breach of their bail conditions.In April 2017 the claimant commenced civil proceedings in Lithuania against Antonov and Baranauskas (the Lithuanian civil proceedings). In connection with the Lithuanian civil proceedings, the claimant obtained an order from the Lithuanian court seizing certain assets belonging to Antonov and Baranauskas and also obtained various orders from the Zurich District Court seizing funds in certain named Swiss bank accounts.Notably, some (but not all) of the claims brought in the Lithuanian civil proceedings arose from the same facts as the facts in issue in the English Civil Proceedings. However, the legal bases of the Lithuanian and English civil proceedings were different.Application In October 2017 the claimant applied for a declaration that the claimant's obtaining of the Lithuanian and Swiss orders did not constitute a breach of the undertaking – or, alternatively, for the retrospective grant of permission for the claimant to obtain any such orders which had constituted a breach of the undertaking.The application was originally scheduled to be heard in December 2017, but was delayed until March 26 2018 following an intervention from a third-party judgment creditor of Antonov and Baranauskas (the third respondent). Having obtained a judgment against Antonov in separate proceedings, which it was seeking to enforce, the third respondent was concerned that it was competing for the same pool of assets as the claimant.While the claimant argued that it had not breached the undertaking by obtaining the Lithuanian or Swiss orders, the third respondent disagreed.Antonov and Baranauskas were not represented at the hearing, but in early March 2018 Antonov had given notice to lift the stay of the English civil proceedings, stating that:"after starting the case in the UK [the claimant] took another case in Lithuania using the same facts. [The claimant] is trying to avoid its own UK case and to take an unfair case against me in Lithuania which it knows it will guarantee to win."LawThe case in this instance turned on the correct interpretation of the scope of the undertaking; specifically as regards whether the claimant's obtaining of the Lithuanian and Swiss orders amounted to:enforcement of the freezing order outside England and Wales; orthe seeking of an order of a similar nature to the freezing order, without the permission of the English Court.On a wide interpretation, the undertaking might have been breached on the facts; on a narrow interpretation, it may not have been.In arriving at its decision in this case, the court analysed the origins of the undertaking, which lay in the Court of Appeal's decision in Derby & Co Ltd v Weldon ( Ch 48). It noted that the twin concerns which appeared to underpin the origin of the undertaking were:the avoidance of oppression of the defendant by the institution of multiple proceedings for the enforcement of the English freezing order in several countries at the expense of the ability of the defendant to defend the English proceedings; andthe prevention of the enforcement of the freezing order in a foreign jurisdiction having a more far-reaching effect in that jurisdiction than in England (eg, by creating a security interest in favour of the claimant).The court went on to analyse how the undertaking had developed beyond addressing the direct enforcement of the freezing order in foreign jurisdictions to extend to an undertaking not to seek, without the permission of the English court, "an order of a similar nature including orders conferring a charge or other security against the Respondent or the Respondent's assets". The court's decision discussed the consideration given to the undertaking in In the matter of an LMAA Arbitration E, F, G v M (F v M),(3) which itself addressed the guidelines as to the exercise of the court's discretion pursuant to the undertaking as to whether to permit proceedings abroad to enforce a worldwide freezing order, as enunciated by the Court of Appeal in Dadourian Group International v Simms.(4)Significantly, the judge in E v M noted that:"The English Court would not want its order to be used to wider and different effect than it considers appropriate in making such orders. Those concerns do not, however, arise where what is sought to be done is to obtain an order aboard of a different nature."Accordingly, in this case the court considered that the narrow interpretation should be applied, as this was consistent with the principal concerns underlying the undertaking, including preventing endowing the freezing order with a more far-reaching effect abroad.Decision Accordingly, the court found that the undertaking had not been breached.Although there was an overlap in the factual bases of the Lithuanian and English civil proceedings, the causes of action were different. The Lithuanian and Swiss orders had been obtained:in support of the Lithuanian civil proceedings, not the English ;independently of the existing of the freezing order; andnot for the purpose of enforcing the freezing order.They were not orders of a "similar nature" to the freezing order, but arose from different proceedings in which different causes of action were pursued.Therefore, the application succeeded and the judge ruled that the claimant was entitled to a declaration that the undertaking had not been breached. The judge went on to note that even if it had been breached, he would have been willing to retrospectively grant permission for the Lithuanian and Swiss orders to be sought.CommentThe decision provides useful guidance as to the narrow scope of the undertaking and the matters that the court will take into account in determining whether it may have been breached or was not engaged.It is notable that the court decided that no breach had occurred, even when orders were obtained abroad by the claimant against the same defendant and in relation to (some of) the same factual matters at issue as in the English civil proceedings.For further information on this topic please contact Alan Williams or Jonathan Cary at RPC by telephone (+44 20 3060 6000) or email ([email protected] or [email protected]). The RPC website can be accessed at www.rpc.co.uk.Endnotes(1)  EWHC 887 (Comm).(2) Paragraph 10 of Schedule B of the draft example order annexed to Practice Direction 25.(3)  EWHC 895 (Comm).(4)  EWCA Civ 399;  1 WLR 2499.