English court grants worldwide freezing order to aid enforcement of arbitration award, despite lack of connections with England

ArcelorMittal USA LLC v Essar Steel Limited and others [2019] EWHC 724 (Comm)

The Commercial Court has recently granted a worldwide freezing order (“WFO”) in aid of enforcement of an arbitration award, even though the award was foreign, the Claimant and Defendant companies were foreign and there were no significant assets within the jurisdiction. In doing so the Court rejected a submission that it “should not become an international policeman”.

The Facts

ArcelorMittal USA LLC (“AMUSA”) obtained an award for payment of US$1.3billion by Essar Steel Limited (“Essar Steel”), following a dispute arising from an agreement for the supply of iron ore pellets. AMUSA is a Delaware company, whilst Essar Steel is a Mauritian company. The tribunal was seated in Minnesota.

AMUSA commenced proceedings in England and obtained permission, under s101 of the 1996 Arbitration Act, to enforce the arbitration award as a judgment of the High Court. It also obtained a WFO against Essar Steel.

The Court’s Reasoning in relation to the WFO

The Court concluded that there was a “solid risk of dissipation of assets” and that it was “just and convenient” to grant the WFO, despite the absence of factors connecting the case with England. It applied the principle that in cases of “international fraud” the English courts should be more willing to intervene. Two points in particular should be noted.

First, the Court held that “international fraud” is not limited to situations where the underlying claim is in deceit or related to the theft of assets, but extends to “serious wrongdoing comprising conduct on a large or repeated scale whereby a company, or the group of which it is a member, is acting in a manner prejudicial to its creditors, and in bad faith”. On the facts, “the attempted dissipation of Essar Steel’s US$1.5billion asset in the face of the commencement of arbitration proceedings” was sufficient in itself to warrant intervention under the international fraud principle.

Second, the Court was prepared to grant the WFO despite evidence that the Mauritian courts could in principle grant WFOs. The Court considered that the Mauritian courts “would not regard the WFO as offensive in some way” and also noted that this was not a case of conflict with any existing order of the Mauritian courts.

Significance

This judgment opens the door for parties seeking to enforce foreign arbitration awards to obtain WFOs from the English courts even where: (1) the case has little or no connection with England; (2) there is no substantive claim for fraud; and (3) the defendant’s home courts could in principle grant WFOs.

See the full judgment attached.