Insurer seeks freezing order against international compensation fund

The claimant insurer (and its insured) were held liable by a criminal court in Venezuela for pollution damage arising out of the grounding of the insured’s vessel off the coast of Venezuela. The judgment sum was over USD 60 million and the insurer seeks an indemnity (in English court proceedings) from the defendant, an international fund for compensation for oil pollution. The insurer is also seeking a declaration from the Venezuelan courts that the fund is liable for the claim and should reimburse any payment made by the insurer. 

The insurer sought a freezing injunction from the English courts because of the imminent winding up of the fund. Hamblen J held as follows:

  1. The agreement which provided privileges and immunities to the fund in the UK did not provide any immunity from the grant of freezing order relief (which falls within the scope of the “legal process” exception in the agreement). Nor was there any immunity for the underlying claim because of the loan exception in the agreement: “Whilst there was no formal loan arrangement, I consider that it is reasonably arguable that paying money to satisfy the liability of another on the basis that it would be repaid in an agreed manner is a form of “loan” or “transaction for the provision of finance””. 
  2. However, the fund did have immunity from the claim being brought in Venezuela (there being no relevant exception under the convention which established the fund), and so also had immunity in respect of the application for freezing relief in so far as it is made in relation to the Venezuelan proceedings.
  3. The judge held that the insurer was entitled to a freezing order in respect of its claim brought in England. In so doing, he held that the insurer had demonstrated a real risk of dissipation because of the imminent winding up of the fund and monies being given back to the contributing states which had set it up. 

COMMENT: The risk of insolvency is not normally sufficient, in itself, to justify a finding that there is a real risk of dissipation when making an application for a freezing order. Although there was no discussion of this point in the judgment, it may be that there had been an argument that the winding up of the fund was, in reality, an attempt to deliberately move its assets in order to avoid a judgment against it, thus justifying a finding of potential dissipation of those assets.