On 27 February 2013, the Supreme Court gave its judgment in The Financial Services Authority v Sinaloa Gold plc and others and Barclays Bank plc [2013] UKSC 11. The court held that public bodies applying for freezing injunctions are not required to provide a cross-undertaking in damages in respect of third parties, and that such a cross-undertaking will be ordered only if the specific circumstances require it.

Key points

  • A party applying to the court for a freezing injunction must usually give an undertaking in damages, stating that it will compensate the party whose assets it is attempting to freeze for any loss incurred in the event that the injunction subsequently proves to have been wrongly granted.
  • Private parties who apply for such an injunction may also be required to provide a cross-undertaking in respect of any third parties who might suffer loss as a result of the injunction. Such a third party would typically be a bank, which may be required to freeze the assets of a customer who is the subject of a freezing order and which may incur loss as a result.
  • However, when the applicant for the freezing injunction is a public body, the position is different. The court will not generally expect the public body to provide a cross-undertaking in respect of third parties affected by the order, the reasoning being that public bodies, such as the FSA, should not be discouraged from pursuing claims against parties suspected of wrongdoing.


The FSA applied to the High Court for a freezing injunction over the assets of Sinaloa Gold plc ('Sinaloa'), which the FSA alleged was carrying out regulated activities without authorisation. Among Sinaloa's assets were balances in several bank accounts held at Barclays Bank plc ('Barclays'). In the course of applying for the injunction, the FSA used standard freezing injunction wording contained in the Civil Procedure Rules ('CPR'), which contains a cross-undertaking in damages in respect of third parties who may be affected by the order. The injunction was granted in the terms drafted by the FSA, granting a cross-undertaking in respect of third parties affected by the order, including Barclays.

This had not, however, been the FSA's intention, and it subsequently applied to the High Court to retract the cross-undertaking wording. Barclays objected, and the court found in Barclays' favour, preserving the cross-undertaking in respect of third parties. However, this decision was overturned by the Court of Appeal, which found that the cross-undertaking should be deleted from the order. Barclays appealed to the Supreme Court.


The Supreme Court unanimously held that the FSA was not obliged to provide a cross-undertaking in damages in respect of third parties, and that the cross-undertaking wording could be removed from the freezing injunction.

The court noted that in English law there is no general remedy for loss suffered as a result of administrative law action. Furthermore, the court held that there was nothing in the facts of the present case to require a cross-undertaking to be given in respect of third parties. The court noted that, in relation to persons authorised to carry out regulated activity under the Financial Services and Markets Act 2000 ('FSMA'), the FSA is empowered to freeze such persons' assets without application to the court, and without incurring any liability by way of a cross undertaking. It was held that there is no reason why a different rule should apply to unauthorised persons (such as Sinaloa) where the relevant provisions of FSMA do not apply and it is necessary to apply to the court to grant the injunction.

However, the court retained wording in the injunction obliging the FSA to pay Barclays' reasonable costs in complying with the order, a point which was conceded by the FSA. The court dismissed Barclays' argument that for the FSA to concede on this point was inconsistent with the argument that a cross-undertaking in respect of losses other than costs should not be required.

Implications of the judgment

It is tempting to assume that the judgment will have limited practical effect, given that the FSA has seemingly never been called upon to make payment to an injured third party as a result of giving a cross-undertaking in damages. That assumption itself seems to be given weight by the court's comments that "[a] defendant or a third party who is or fears being adversely affected by an injunction obtained under section 380(3) [FSMA] can and should be expected to come forward, to explain the loss feared and to apply for any continuation of the injunction to be made conditional on such cross-undertaking, if any, as the court may conclude should in all fairness be required to meet this situation".

The practical effects come, however, from a consideration of the stage at which a third party must assess its risk of loss, in the absence of a cross-undertaking being given at the time an injunction is granted. These effects are likely to be particularly significant for large financial services institutions, who find themselves routinely dealing with freezing orders from public bodies.

Where the cross-undertaking is in place, processing a freezing injunction is a fairly routine matter; there is no real choice in whether or not to abide by the terms of the order and any risk posed by the circumstances of the case is mitigated by the fact that the court would later have jurisdiction, by virtue of the cross-undertaking, to compensate any loss suffered as a result of that risk manifesting itself. No detailed assessment of the risk posed in any given case is warranted, unless it becomes clear that some loss is likely to be or has been suffered.

However, where the cross-undertaking is not given (which will now be in the majority of cases such as this) the third party recipient must consider whether it will be exposed to a risk of loss in each case where it receives this kind of freezing order. The court will not have jurisdiction to grant relief for any loss caused by that risk manifesting itself - unless it is asked to vary the order, either at the return hearing or by a further application, before a loss is actually suffered.

From the perspective of a large financial institution, this is potentially burdensome, as consideration will have to be given to putting systems in place to assess and monitor the risk of loss posed by these freezing orders in every case.

It will be of interest to observe whether this additional burden will have the effect of increasing the costs of complying with these freezing orders, costs which the Supreme Court has held the FSA should still be required to reimburse.