The High Court has recently examined the criteria for granting a worldwide freezing injunction in support of foreign arbitration proceedings.
The applicant, a Venezuelan state-owned company, sought the setting aside of a worldwide freezing order obtained against it in support of arbitration proceedings in New York. The order froze the applicant's worldwide assets up to a total sum of US$12 billion, reportedly the largest sum ever frozen by the English courts. The court had used its powers under s.44 Arbitration Act 1998 to grant the injunction.
On appeal of the order, the Court noted that worldwide freezing injunctions would only ever be granted in very rare cases. It is a requirement of English law that applicants must persuade the court that it would be "just and convenient" to grant a freezing order. In this case, it would not be just and convenient to maintain the injunction if the applicant did not have a sufficient connection with this jurisdiction. The applicant had no branch in England and Wales. The Court held that in the absence of an exceptional feature such as fraud, this link could be demonstrated if substantial assets of the applicant were located within the jurisdiction. The respondents could not prove this. The Court therefore held that international comity meant it would be inappropriate to grant an order under s.44 where, as here, the seat of the arbitration was located in another jurisdiction. The general principles of comity were held to apply equally strongly to arbitration cases as to litigation cases. The proper jurisdiction for a freezing order to be granted would, in this case, have been Venezuela, which was a signatory to the New York Convention on the reciprocal enforcement of foreign arbitration awards, thus eliminating the need to consider whether the award could be enforced.
In addition to the above, the respondents also failed to demonstrate that there was a risk that the applicant would attempt to dissipate its assets. Neither could they show that the matter had been sufficiently urgent to justify an order under s.44(3) which requires that urgency be shown where the applicant for a freezing order does not have either the permission of the tribunal or of the other party to apply for it. Usually, the urgency would consist of an immediate risk of dissipation of assets.
As a result of this case, it is now clear that, while a worldwide freezing order can be granted in support of arbitration proceedings, the courts will only make such an order where a sufficient connection with England and Wales can be established.
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