Summary

In Cruz City v Unitech & Ors, the English High Court confirmed the English law policy that judgments of the English court and English arbitration awards should be complied with and, if necessary, enforced.  In light of that policy, and the principles set out in Masri v Consolidated Contractors International (UK) Ltd (No 2), the court held that it was appropriate to enforce an arbitral award by the less common route of the appointment of receivers over the first and second defendants’ (“Unitech”) assets, notwithstanding the fact that the English court’s order may not be recognised in foreign courts where the assets are located.

Background

In 2012, the Claimant was awarded US $300 million on the conclusion of three arbitrations relating to a property development project in Mumbai.  The defendants did not pay any part of the sum awarded and proceeded to“thwart…[the Claimant’s] attempts at enforcement, in a variety of different jurisdictions by placing every obstacle in [the Claimant’s] way”.

The Claimant’s attempts at enforcement included an application for the appointment of receivers (pursuant to section 37 of the Senior Courts Act 1981) by way of equitable execution over Unitech’s assets (such that Unitech would be restrained from receiving any property subject to the court’s order), which application was heard in September 2014.  

Decision

With regard to the court’s jurisdiction to grant the order, and applying the principles set out in Masri, the court held that there was no rule which prevented it from making the order sought in relation to foreign assets, and that the requirement of a sufficient connection with the English jurisdiction was satisfied by the fact that the order would be made with a view to enforcing an English arbitration award.

With regard to the merits of granting the order, the court based its decision to order the appointment of receivers, on the following factors: 

  • The opaque manner in which Unitech held its assets through multiple chains of companies in a variety of jurisdictions and the resulting difficulty in identifying and realising the value in the shareholdings held by Unitech.
  • The impracticability of recovery of the award debt by other processes of execution in the countries where Unitech held assets.
  • The granting of the order was likely to be a highly effective remedy and there was a real prospect that the order would side-step the obstacles Unitech was determined to place in the way of other means of enforcement.
  • There was a realistic prospect that the order would be complied with.
  • The appointment of receivers was valuable support for a pre-existing freezing order (such that breach of the freezing order would not go undetected).
  • The appointment of receivers by the English court was necessary given Unitech’s determination to place every possible obstacle in the way of the appointment of receivers by the courts in other relevant jurisdictions.

Comment

Without an effective enforcement regime, an arbitral award is of little value. Although it is widely accepted that the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards creates an international framework intended to simplify the process of enforcement, defendants do sometimes embark on sustained campaigns in an attempt to render an arbitral award irrecoverable. It is also the case that, in some courts, such actions can have success, often due to the time it can take to pursue enforcement proceedings. This case is a useful reminder that there is always a range of enforcement options available, including the option of seeking to appoint a receiver against specific assets. The court has confirmed that in appropriate cases the existence of an English arbitral award may be a sufficient connection to England to justify the exercise of this power. In cases where enforcement is sought in respect of an award made other than in England and Wales, the appointment of a receiver may still be possible, but it would be necessary to identify some other connection to England and Wales.