UK: Freezing Injunctions in Fraud Cases - Recent Cases

Last Updated: 20 December 2002

A freezing injunction (formerly known as a "Mareva" injunction) restrains a party from dealing with its assets. They are frequently used in fraud cases to safeguard the proceeds of the fraud until trial.

The English Courts’ powers to grant freezing injunctions are more extensive than in most other jurisdictions and they are seen by some to allow a fundamentally draconian procedure. However, an increasingly flexible interpretation of the modern and global application of freezing injunctions is evident in the following Court of Appeal decisions.

  • In Bank of China v IBM LLC and others [2001] EWCA 1933, it was recommended that the so-called ‘Baltic proviso’ be adopted into the standard form of the worldwide freezing injunction to enable third parties to the freezing order, such as banks or similar institutions with overseas branches, to comply with what they reasonably believe to be their obligations under the laws of the country where the assets are located.
  • In Halifax Plc v Rupert Sydney Chandler [2001] EWCA Civ 1750, it was held that the standard provision set out in freezing injunctions which allows the exemption of a sum specified by the court at the time of the freezing injunction, representing the reasonable legal expenses of the person the subject of the freezing order, ought to include such expenses relating to other actions with a real prospect of success on foot at the time of the order.

Incorporating the ‘Baltic proviso’

In the Bank of China case, the Bank of China obtained a worldwide freezing injunction in aid of proceedings in the USA against companies and individuals associated with John Chou and his wife Sherry Liu, who were alleged to have defrauded the bank in the USA by various means. Chou and Liu had a historical relationship with a third party, the Union Bank of Switzerland (UBS), which had a branch in London. UBS was served with the worldwide freezing injunction, to which it responded (as it always did when presented with a worldwide freezing injunction) with an application for a variation of the freezing order to include what has become known as the ‘Baltic proviso’ (derived from Baltic Shipping v Translink [1995] 1 Lloyd’s Rep 673). The order was varied by David Steel J to include the Baltic proviso, which states, inter alia, that nothing in the order should, in respect of assets outside England and Wales, prevent UBS from complying with ‘what it reasonably believes to be its obligations, contractual or otherwise, under the laws and obligations of the country or state in which those assets are situated or under the proper law of any bank account in question’.

Tuckey LJ in the Court of Appeal reviewed the authorities on the effects of a worldwide freezing injunction upon third parties. The first case in which it was recognised that third parties such as banks within the jurisdiction might be in contempt of court if their offices abroad permitted frozen overseas assets to be dealt with in breach of a freezing order was Babanaft International Co v Bassatne [1990] 1 Ch 13. The ‘Babanaft proviso’ was therefore developed so that a worldwide freezing injunction should only bind the party the subject of the order personally and should only be enforceable against third parties in respect of assets outside the jurisdiction if declared enforceable in the country concerned.

Soon after, Derby v Weldon (No. 3 & 4) [1990] 1 Ch 65 outlined a number of objections to the Babanaft proviso. Tuckey LJ considered the objection that, for the freezing order to be effective, the third party (wishing to comply with the English court’s order) would have to obtain an order from the foreign court. The ‘Derby and Weldon proviso’ therefore imposed an additional requirement that persons who were subject to the jurisdiction of the English court with notice of the order were required to prevent breaches of its terms if they were able to do so.

This, however, gave rise to a situation of ‘double jeopardy’ for banks subject to the jurisdiction of both the English court and the courts of the country or countries where they were holding assets of the person the subject of the freezing order. Since certain countries did not recognise or give effect to without notice orders made by the English court and as a result made orders inconsistent with the English court’s freezing order, a bank might find itself obliged to do something by the English court and the opposite by a court abroad. The Baltic proviso was therefore framed to avoid this difficulty.

Before the Court of Appeal, the Bank of China argued that there was no need for the inclusion of the Baltic proviso in the present case or in the standard form of worldwide freezing order as the Derby and Weldon proviso would strike a sufficient balance between providing adequate protection for the party who obtained the order and avoiding double jeopardy for third party banks. The Baltic proviso was said to afford too much protection to third parties because it enabled the third party itself to decide what its obligations were.

Tuckey LJ noted that the Court of Appeal had not previously had to consider the point fully but that the authorities established two general propositions. First, that the limit of the English courts’ jurisdiction required that the effectiveness of freezing orders operating on assets abroad should normally derive only from the recognition and enforcement by the local courts (and it was noted that the English courts’ powers to grant freezing orders were more extensive than in most other jurisdictions). Secondly, third parties amenable to the English jurisdiction should be given all reasonable protection.

His Lordship reasoned that the need to avoid unwarranted extra-territorial jurisdiction, the need to provide reasonable protection to third parties amenable to the English jurisdiction (the usual undertaking as to damages was not deemed adequate) and the need to clarify the Derby and Weldon proviso would usually entitle third parties to have the Baltic proviso added to the worldwide freezing order unless the court considered on the particular facts of the case that it was inappropriate.

The standard form of the worldwide freezing injunction has been amended since this decision and now includes the Baltic proviso. A review of the standard form of freezing injunctions and search orders was commissioned by Lord Justice May, Deputy Head of Civil Justice following concerns that the standard forms were too complicated. Amendments came into force in March 2002 and there is now one standard form of freezing injunction to be used whether the assets to be restrained are in England and Wales or worldwide.

Scope of reasonable legal expenses

In Halifax Plc v Rupert Sydney Chandler, the Halifax obtained a judgment against Mr Chandler in 1995 for £586,008 arising from his default on a mortgage. Some five years later, in 2000, Halifax agreed to accept £17,500 in full and final settlement of its claim in reliance upon an allegedly fraudulent misrepresentation made by Mr Chandler that he was impecunious. The Halifax issued proceedings against Mr Chandler and obtained a worldwide freezing injunction against him, restraining him from disposing of his assets up to a value of £552,000, with the exception of £3,000 to cover the costs of legal advice and representation.

Mr Chandler applied to vary the freezing order to mortgage his Spanish villa to raise sufficient funds to cover his legal expenses in both the action brought by the Halifax and a second separate action he had commenced against a third party prior to the imposition of the freezing order to recover assets alleged to be worth over £2,000,000. An application for summary judgment brought by the defendants against Mr Chandler in those separate proceedings failed and Mr Chandler’s claim was found to have a real prospect of success.

In the Halifax proceedings Park J allowed the requested variation to the order to allow for the mortgage of the Spanish villa, only for Mr Chandler to return before the court just five days later with a second application to vary the freezing order to allow him to remortgage another property for the same purpose of covering his legal expenses for the two actions. Although Park J expressed displeasure at Mr Chandler’s attempt to ‘have a second bite of the cherry’, a capped charge of £10,000 (to be extended by court upon evidence of further legal expenditure) was allowed on the second property to be used for the sole purpose of funding the legal expenses in the Halifax proceedings. Mr Chandler appealed against this last decision, arguing that reasonable legal expenses should include all of his reasonable legal expenses, including those in the separate recovery action rather than only those expenses of the main action in which the freezing order was made.

Clarke LJ in the Court of Appeal stated that a freezing injunction must not operate oppressively and a defendant must not be hampered in their ordinary business dealings any more than is absolutely necessary to protect the claimant from the risk of improper dissipation of assets. Although they were not ordinary business expenses in the usual form, Mr Chandler was in principle entitled to incur reasonable legal expenses in connection with the second action, and the freezing injunction should be varied accordingly. A freezing injunction should not in principle prevent expenditure on bona fide legal expenses in connection with an action which had a reasonable prospect of success and which was on foot at the time the order was granted.

On the facts, however, the appeal was dismissed. Clarke LJ stated that Mr Chandler was entirely protected so far as the second action was concerned due to the ability to make a further application to vary the freezing injunction once the sums allowed to be expended on that action were exhausted. He was also protected in the main action as Park J had expressly allowed a further application once the initial £10,000 was exhausted.

© Herbert Smith 2003

The content of this article does not constitute legal advice and should not be relied on as such. Specific advice should be sought about your specific circumstances.

For more information on this or other Herbert Smith publications, please email us.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.