Following the well-known case of VTB Capital plc v Nutritek International Corp and Ors [2013] UKSC 5 the English Courts are perceived as being less willing to take on cases with little or no connection to the jurisdiction. However, the flexible remedies of the English Court can be brought to bear even if proceedings are commenced elsewhere. Given London’s position as a global financial and legal hub as well as a home for the world’s elite, assets and documents to be secured may well be based in England, and parties to foreign litigation may be based here. The Civil Jurisdiction and Judgments Act 1982 (“CJJA”) gives the English Court the power to make orders for interim relief in support of foreign civil proceedings in appropriate circumstances.

These proceedings are becoming especially significant as the UK has (surprisingly) become a jurisdiction of choice to shield corporate assets. Recent changes to company law allowing electronic filing at Companies House has lead to what a parliamentary committee described as a “compliance car crash”. The limited need for directors to provide ID, lack of checks upon multiple nominees and the use of electronic authentication codes has been seized upon by fraudsters who frequently use a UK shell company with nominee directors– which can appear far more respectable than an offshore entity which may ironically be better regulated.

The Test

Section 25 of the CJJA gives the High Court power to grant interim relief where:

  • Proceedings have been, or are to be, commenced in the courts of another jurisdiction; and
  • It would not be inexpedient for the English court to make an order.

The English Court has the power to grant any interim relief that it may grant in English proceedings. The majority of such applications involve freezing injunctions but the full range of English interim remedies (including search orders and evidence preservation orders) are available.

The Need For Ongoing Or Imminent Foreign Proceedings

To make an order under Section 25 of the CJJA proceedings in a foreign jurisdiction must be underway, or be imminent. It may be necessary to obtain an English freezing injunction to secure assets before openly commencing substantive proceedings elsewhere, but in such cases the English Court will require an undertaking to commence foreign proceedings within days. They will set aside an order made if those proceedings are not issued as promised.

Fourie v Le Roux & Ors [2007] UKHL 1. The liquidator of two South African companies applied to the High Court in London without notice for a freezing order to be made against two individuals and a number of companies. At the without notice hearing, the liquidator stated that he was “intending to proceed in South Africa in terms of statutory inquiries and … various claims would be formulated.” The High Court granted the application for a freezing order. This was overturned by the Court of Appeal which held that the court had no jurisdiction to make an order under the Act if the applicant had no intention of issuing proceedings immediately or almost immediately. The House of Lords upheld the Court of Appeal’s decision and agreed with its reasons.

The Test To Make An Order

The general approach of the English courts to an application for interim relief under section 25 CJIA was set out by the Court of Appeal in Refco Inc v Eastern Trading Co [1999] 1 Lloyd’s Rep 159:

  • The Court initially considers whether the facts would warrant the relief sought if the substantive proceedings had been brought in England (e.g. when dealing with a freezing injunction, whether the Claimant had shown that there was a good arguable case and a real risk of dissipation of assets); and
  • If the answer to that question is "yes", then the Court must consider whether it would be "inexpedient" to make the order sought.

"Not Inexpedient" – When Should The English Court Make An Order

In Motorola Credit Corporation v Cem Cengiz Uzan (No 2) [2004] 1 WLR 113 the Court of Appeal provided some guidance as to the application of the "inexpediency" test in the context of an application for a worldwide freezing order. In summary:

  • An order will be likely to be made in respect of assets either in England or anywhere in the world held by a person or company domiciled in England (or with a strong connection to England) as the Court can take steps against the individual or company in England to enforce a worldwide order.
  • An order will be likely to be made in respect of assets in England owned by a person or company domiciled anywhere in the world, even if they have no personal connection to the jurisdiction, as the Court can take steps to enforce the order in relation to the assets in this jurisdiction.
  • Where an order is sought in respect of assets outside of England owned by a person or company with no real connection to England, the English Court will only make an order in exceptional circumstances as any order made is unlikely to be enforceable.

Credit Suisse Trust S.A. v Cuoghi [1998] QB 818: the court granted worldwide relief against a defendant domiciled in England in aid of Swiss proceedings. Millett LJ noted, however, that it would have been “a very different matter” if relief had been sought against another defendant domiciled in Switzerland. In those circumstances, the English court would have had no effective means of enforcing a worldwide freezing order, which was a good reason for not granting relief.

ICICI Bank UK Plc v Diminco NV [2014] EWHC 3124 (Comm): The Claimant sought a worldwide freezing injunction and asset disclosure order against a diamond merchant based in Belgium in aid of litigation in the Belgian Courts. The Court granted the order in respect of assets in England, but did not make a worldwide freezing or disclosure order as the lack of power of the Belgian Court to make such an order, and the fact that the Belgian company had no presence in England, meant that such an order would not be enforceable.

In cases of fraud the English Court may be more willing to intervene than in ordinary civil litigation, because of public policy to assist other nations in combatting fraud and corruption.

Republic of Haiti v Duvalier [1990] 1 QB 202: The Defendant, the notorious former dictator of Haiti known as “Baby Doc”, had stolen vast sums of the country’s assets whilst in office. Deposed by a revolution, he fled to France where the new Haitian regime brought proceedings to recover the loot. The French court had no power to make a worldwide disclosure or freezing order. Duvalier was not resident in England, and no proof emerged that he had any assets in England. However, Duvalier had used London lawyers to conceal and manage his assets. This was held to be sufficient to justify the making of a worldwide freezing and disclosure order.

The Duvalier case has been described as “going to the very edge of what is permissible” but given the growth of anti-corruption litigation and the continued growth of London as a centre for asset management and professional services, it is likely that the Court will have to consider more and more applications against London-based fiduciaries.