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JURISDICTION AND FREEZING INJUNCTIONS: A REASSESSMENT

Published online by Cambridge University Press:  11 July 2019

Filip Saranovic
Filip Saranovic*
Affiliation:
Lecturer in Law and Member of the Institute of Maritime Law, University of Southampton, [email protected].
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Abstract

The existing international scope of English freezing injunctions in support of foreign proceedings is excessively claimant-friendly and inconsistent with the need for a level playing field in litigation. The English courts must reconsider the current boundaries of relief by taking into account an international systemic perspective of the purpose of private international law rules. This requires a multilateral and horizontal approach to the existence of jurisdiction rather than the unilateral and vertical approach that exists under the rules of jurisdiction of English national law. The traditional justifications for the availability of collateral freezing injunctions with respect to assets located abroad rest on a series of fundamental theoretical flaws. This article proposes a range of reforms with the aim of strengthening the equality of the parties and eliminating encroachment on the sovereignty of foreign States.

Keywords

private international lawpublic international lawcomparative lawfreezing injunctionsjurisdictionequitable remedies
Type
Articles
Information
International & Comparative Law Quarterly , Volume 68 , Issue 3 , July 2019 , pp. 639 - 664
Copyright
Copyright © British Institute of International and Comparative Law 2019 

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Footnotes

I would like to thank the anonymous reviewers for their helpful comments and suggestions. Any errors are my responsibility.

References

1 See Fentiman, R, ‘Theory and Practice in International Commercial Litigation’ (2012) 2 IJPL 235Google Scholar; McLachlan, C, ‘International Litigation and the Reworking of the Conflict of Laws’ (2004) LQR 580Google Scholar.

2 The term ‘scope’ can be used to refer to two aspects of freezing injunctions. The first aspect involves the substantive circumstances in which a freezing injunction is available, such as its availability in support of both proprietary and non-proprietary claims (the author refers to this as the ‘substantive scope’ of freezing injunctions). The second aspect is the availability of a freezing injunction in cases involving one or more foreign elements such as the use of freezing injunctions to restrain a foreign defendant from dissipating any assets located abroad (hereinafter, the ‘international scope’).

3 See, inter alia, Republic of Haiti v Duvalier [1990] 1 QB 202 (‘Duvalier’).

4 Credit Suisse v Cuoghi [1998] QB 818 (‘Credit Suisse’). For critique of this reasoning, see Briggs, A, Private International Law in English Courts (Oxford University Press 2014)Google Scholar.

5 On the international systemic perspective, see Mills, A, The Confluence of Public and Private International Law (Cambridge University Press 2009)CrossRefGoogle Scholar.

6 This article does not analyse the consistency of jurisdictional theories with the current framework for freezing injunctions in support of foreign proceedings in another European Union Member State. This is primarily because, in the author's view, the rules of jurisdiction in Reg (EU) 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (‘Brussels I Recast Regulation’) are not unilateral and vertical, in contrast to the common law rules of jurisdiction. Here, the focus is on the residual common law rules of jurisdiction.

7 Refco Inc v Eastern Trading Co. [1999] Lloyd's Rep 159 (‘Refco’) 170–71.

8 See, for example, Motorola v Uzan (No 2) [2003] EWCA Civ 752. Prior to the decision in Babanaft v Bassatne [1990] Ch 13, it was not possible to obtain any freezing injunction regarding assets located abroad: Ashtiani v Kashi [1987] QB 888 and Intraco Ltd v Notis Shipping Corporation (The Bhoja Trader) [1981] A.C. 557.

9 See especially Credit Suisse v Cuoghi [1998] QB 818, Refco v Eastern Trading [1999] Lloyd's Rep 159, and Motorola v Uzan (No 2) [2003] EWCA Civ 752.

10 Motorola v Uzan (No 2) [2003] EWCA Civ 752 (worldwide freezing injunction granted to restrain one of the defendants whose only connection to England was the existence of English assets); Banco Nacional de Comercio Exterior SNC v Empresa de Telecommunicaciones de Cuba SA [2007] EWCA Civ 662 (the existence of English assets was not sufficient to justify a worldwide freezing injunction). For criticism of the court's reasoning in Motorola v Uzan (No 2), see Fentiman, R, ‘The Scope of Transnational Injunctions’ (2013) 11 NZJPIL 323Google Scholar.

11 See, inter alia, Royal Bank of Scotland Plc v FAL Oil Company Ltd [2012] EWHC 3628 (Comm); ICICI Bank UK v Diminco NV [2014] EWHC 3124 (Comm) (‘Diminco’); Eastern European Engineering Ltd v Vijay Construction (Proprietary) Ltd [2018] EWHC 1539 (Comm).

12 See, inter alia, Mobil Cerro Negro Ltd v Petroleos de Venezuela SA [2008] EWHC 532 (Comm); Belletti v Morici [2009] EWHC 2316 (Comm); ICICI Bank UK v Diminco NV [2014] EWHC 3124 (Comm).

13 Refco Inc v Eastern Trading Co. [1999] Lloyd's Rep 159; Masri v Consolidated Contractors International (UK) Ltd [2009] QB 450 (‘Masri (No 2)’).

14 See Cruz City 1 Mauritius Holdings v Unitech Limited [2014] EWHC 3704 (Comm), [85]–[90] (although this was in the context of an application for a freezing injunction in aid of enforcement of a London arbitration award).

15 Apart from the Court of Appeal's guidance in Motorola v Uzan (No 2) [2003] EWCA Civ 752, the Commercial Court has also provided a list of relevant considerations in ICICI Bank UK v Diminco NV [2014] EWHC 3124 (Comm).

16 Motorola (No 2) [2003] EWCA Civ 752, [115].

17 Fourie v Le Roux [2007] 1 WLR 320.

18 [2008] EWHC 532 (Comm).

19 ‘Courts Freeze $12 Billion Venezuela Assets in Exxon Row’ (7 February 2008) Reuters: <http://www.reuters.com/article/us-exxon-venezula-idUSN0741426720080207>.

20 Gloster LJ observed that freezing injunctions ‘carry a reputational stigma’ in her judgment in Candy v Holyoake [2017] EWCA Civ 92, [36].

21 Some instances of forum shopping could be regarded as legitimate rather than abusive, see Bell, A, Forum Shopping and Venue in Transnational Litigation (Oxford University Press 2003)Google Scholar. See also L Merrett, ‘Abuse of Rights and Forum Shopping’ (Cambridge Private Law Centre Seminar Paper, 7 March 2013), who points out, at fn 5, that ‘[a]ttempting to relitigate an issue that has already been decided has also been described as forum shopping’ and the examples provided therein.

22 The term ‘substantive preconditions’ is used in this article to denote all preconditions other than those arising from the rules of private international law. The main substantive preconditions include a good arguable case on the merits and a real risk of dissipation of the assets.

23 See Lord Donaldson MR's warning about ‘criss-crossing long arm jurisdictional orders’ in Rosseel NV v Oriental Commercial Shipping (UK) Ltd [1990] 1 WLR 1387, 1388 G/H - 1389 D. For the application of Lord Donaldson MR's reasoning, see S & T Bautrading v Nordling [1997] 3 All ER 718.

24 Rogerson, P, Collier's Conflict of Laws (Cambridge University Press 2013) 140–1CrossRefGoogle Scholar.

25 Mobil Cerro Negro Ltd v Petroleos de Venezuela SA [2008] EWHC 532 (Comm). For comments on this case, see Johnson, A, ‘Interim Injunctions and International Jurisdiction’ (2008) 27 CJQ 433Google Scholar.

26 [2008] EWHC 532 (Comm).

27 The language of ‘sufficient interest’ or ‘connection’ and its link to the principle of comity was initially developed by Lord Goff in the context of anti-suit injunctions in Airbus v Patel [1999] 1 AC 119. For an argument that a sufficient interest in, or connection with, the matter in question is a necessary (but not a sufficient) condition for compliance with comity; see Fentiman (n 10) 323.

28 ibid.

29 Masri v Consolidated Contractors International (UK) Ltd (No 2) [2009] QB 450, 465.

30 ibid 465.

31 For a further explanation of the reasoning in The Mahakam, see section V(B)(2) below.

32 See, for example, Collins, L, The Conflict of Laws (15th edn, Sweet & Maxwell 2016) Ch 1Google Scholar; Bogdan, M, Private International Law as Component of the Law of the Forum (Hague Academy of International Law,2012)CrossRefGoogle Scholar, esp at 41.

33 Mann, FA, ‘The Doctrine of Jurisdiction in International Law’ (1964) 111 Recueil des Cours 1Google Scholar. Mann regarded territorial sovereignty as the root of private international law rules of jurisdiction.

34 See Mills (n 5). See also JW Singer, ‘Real Conflicts’ (1989) 69 BULRev 1. The latter criticizes the view that the forum should simply adopt private international law rules that further the goals of its substantive laws. A forum must have a multistate concern about appropriate tolerance and respect for the choices of other normative and political communities.

35 Mills (n 5) 5–6.

36 ibid 16–17.

37 Sterk, SE, ‘Personal Jurisdiction and Choice of Law’ (2012) 98 IowaLRev 101 113–14Google Scholar.

38 See Mills, A, ‘Rethinking Jurisdiction in International Law’ (2014) 84(1) BYBIL 187Google Scholar, 188.

39 Maier, HG and McCoy, TR, ‘A Unifying Theory for Judicial Jurisdiction and Choice of Law’ (1991) 39 AmJCompL 249Google Scholar, 255.

40 L Brilmayer, ‘Related Contracts and Personal Jurisdiction’ (1988) 101 HarvLRev 1444.

41 For an explanation of the quasi-proprietary nature of freezing orders, see the section V.B.1.

42 Sterk (n 37).

43 See Fentiman, R, International Commercial Litigation (2nd edn, Oxford University Press 2015)Google Scholar.

44 For the purposes of English common law rules of jurisdiction, a distinction must be made between the existence of jurisdiction and the exercise of jurisdiction. The rules regarding the former are concerned with the power of the national courts to adjudicate the case, whereas the latter rules determine whether the court will exercise its power to adjudicate the case.

45 Michaels, R, ‘Two Paradigms of Jurisdiction’ (2006) 27 MichJIntlL 1003Google Scholar.

46 ibid 1045–8.

47 Strauss, AL, ‘Beyond National Law: The Neglected Role of International Law of Personal Jurisdiction in Domestic Courts’ (1995) 36 HarvIntlLJ 373, 414–15Google Scholar.

48 ibid 415.

49 Mills (n 5) 7. See also Beale, J, ‘Jurisdiction of a Sovereign State’ (1923) 36 HarvLRev 241Google Scholar, 241 who states that ‘the sovereign cannot confer jurisdiction on his courts or his legislature when he has no such jurisdiction according to the principles of international law’.

50 Strauss (n 47) 416–23. For a contrary view, see M Akehurst, ‘Jurisdiction in International Law’ (1973) 46 BYBIL 145, 176–7 who concludes that ‘[i]n practice the assumption of jurisdiction by a State does not seem to be subject to any requirement that the defendant or the facts of the case need have any connection with that State; and this practice seems to have met with acquiescence by other States … (apart from the well-known rules of immunity for foreign States, diplomats, international organizations, etc.) customary international law imposes no limits on the jurisdiction of municipal courts in civil trials’.

51 Strauss (n 47) 416.

52 Under the English common law rules of jurisdiction, personal jurisdiction depends on lawful service of the claim form on the defendant.

53 See, on the in personam operation of injunctive relief in general, Paterson, JM, Kerr on Injunctions (6th edn, Sweet and Maxwell, 1927)Google Scholar.

54 Mann (n 33) 146. See also: Mann, FA, ‘The Doctrine of Jurisdiction Revisited after Twenty Years’ (1984-III) 186 Recueil des Cours 19Google Scholar (reproduced in Mann, FA, Further Studies in International Law (Clarendon Press 1990)Google Scholar; McLachlan, C, ‘Transnational Applications of Mareva Injunctions and Anton Piller Orders’ (1987) ICLQ 669, 676CrossRefGoogle Scholar.

55 Motorola v Uzan (No 2) [2003] EWCA Civ 752, [114].

56 British South Africa Co v Cia de Moçambique [1893] AC 602.

57 See Mackinnon v Donaldson, Lufkin & Jenrette [1986] Ch. 482, Societe Eram Shipping Co Ltd v Cie Internationale de Navigation et al [2004] 1 AC 260, and Parbulk II AS v PT Humpuss (The Mahakam) [2011] EWHC 3143 (Comm). For similar criticism of the use of the concept of subject-matter jurisdiction, see T Hartley, ‘Jurisdiction in Conflict of Laws – Disclosure, Third-Party Debt and Freezing Orders’ (2010) LQR 194, 197.

58 [1986] Ch 482.

59 ibid 493.

60 For evidence of confusion arising from the application of Hoffmann J's reasoning in the context of freezing injunctions, see ICF Spry, Equitable Remedies (9th edn, Thomson Reuters, Australia 2013) who seems to suggest that, in the light of Mackinnon, ‘subject-matter jurisdiction’ may be required where a freezing injunction is sought in respect of assets located abroad. For judicial application of the concept in the context of freezing injunctions, see Parbulk II AS v PT Humpuss (The Mahakam) [2011] EWHC 3143 (Comm).

61 For Hoffmann J's concerns about sovereignty, see especially [1986] Ch 482, 494.

62 For the details of this proposal, see section VI.B.1 of this article.

63 See Parbulk II AS v PT Humpuss (The Mahakam) [2011] EWHC 3143 (Comm). Similarly, in Masri v Consolidated Contractors International (UK) Ltd [2009] QB 450, the concept of subject-matter jurisdiction was also equated with sufficient connection.

64 [2011] EWHC 3143 (Comm) [98].

65 ibid, [95].

66 ibid.

67 This is especially true in cases involving the defendant's conduct relating to his assets located abroad. See, for example, Royal Bank of Scotland Plc v FAL Oil Company Ltd [2012] EWHC 3628 (Comm) and, more recently, Eastern European Engineering Ltd v Vijay Construction (Proprietary) Ltd [2018] EWHC 1539 (Comm).

68 This interpretation of the concept of subject-matter jurisdiction is consistent with that adopted by Briggs (n 4) 169–71.

69 [2012] 1 AC.208.

70 British South Africa Co v Cia de Moçambique [1893] AC 602.

71 See K Gray, ‘Property in Thin Air’ (1991) 50 CLJ 252.

72 Cretanor Maritime Co Ltd v Irish Marine Management Ltd (The Cretan Harmony) [1978] 1 WLR 966.

73 Energy Venture Partners Ltd v Malabu Oil and Gas Ltd [2014] EWCA Civ 1295, [52].

74 [1990] 1 WLR 1139.

75 ibid, 1151C-E.

76 Browne-Wilkinson, N, ‘Territorial Jurisdiction and the New Technologies’ (1991) 25 IsraelLRev 145Google Scholar.

77 Cruz City 1 Mauritius Holdings v Unitech Limited [2014] EWHC 3131 (Comm), [50] per Males J. This was a case where a receiver was appointed post-judgment in respect of the defendants’ assets located abroad in support of a worldwide freezing order.

78 [2010] EWCA Civ 1141 (a case where a receivership order was made in support of a freezing injunction because, inter alia, the assets were difficult to trace and there was inadequate disclosure).

79 ibid, [14].

80 Wilson, JL, ‘Three if by Equity: Mareva Orders & the New British Invasion’ (2005) 19 St John's Journa: Legal Comment 673Google Scholar, 709 and 735 (fns omitted). In support of his thesis, Wilson refers, inter alia, to Crawford's description that the effect of a freezing injunction is similar to a ‘conditional attachment’: Crawford, J, ‘Execution of Judgments and Foreign Sovereign Immunity (1981) 75(4) AJIL 820CrossRefGoogle Scholar.

81 [2006] EWCA 399.

82 [2015] EWHC 3700 (Comm). For a different-but-related issue of whether it is possible for the claimant to seek orders from the foreign court of a different nature (such as arrest of a vessel) in addition to the English order, see Re LMAA Arbitration [2013] EWHC 895 (Comm) where the court arguably took a claimant-friendly stance in that the claimant was not in breach of an undertaking not to seek ‘an order of a similar nature’ under the worldwide freezing order by arresting a vessel and thereby obtaining security abroad. An analogy could be made with the liberal approach of the US Court of Appeals for the Fifth Circuit in The Belcher Company of Alabama Inc. v M/V Maratha Mariner 724 F.2d 1161 (5th Cir 1984) (action in rem for the arrest was allowed despite parallel ‘in personam’ proceedings in the Netherlands).

83 The significance of the distinction is further diluted in light of the decision of the New York court to recognize and enforce English default judgments resulting from non-compliance with an English freezing injunction in CIBC Mellon Trust Co. v Mora Hotel Corp., 100 N.Y. 2d 215, 222 (2003). See, also, the decision of the Swiss Federal Supreme Court in ATF 4A.366/2011 (31 October 2011), which ‘confirms the assumption that a party in the possession of a WFO [worldwide freezing injunction] has a legitimate interest in obtaining a declaration of enforceability from a Swiss court’: M Scherer and S Nadelhofer, ‘Possible Enforcement of Worldwide Freezing Orders in Switzerland’ <http://kluwerarbitrationblog.com/blog/2012/03/23/possible-enforcement-of-worldwide-freezing-orders-in-switzerland/>; S Giroud, ‘Do You Speak Mareva? How Worldwide Freezing Orders Are Enforced in Switzerland’ (2012/2013) 14 Yearbook of Private International Law 443.

84 [1999] 1 Lloyd's Rep 159, 160.

85 ibid 161.

86 527 US 308 (1999). For a critique of the majority's reasoning see Capper, D, ‘The Need for Mareva Injunctions Reconsidered’ (2005) 73 FordhamLRev 2161Google Scholar; Collins, L, ‘United States Supreme Court Rejects Mareva Jurisdiction’ (1999) 115 LQR 601Google Scholar.

87 729 N.E.2d 683 (N.Y. 2000).

88 ibid, 689 per Levine J.

89 See, in general, Slaughter, A-M, ‘Sovereignty and Power in a Networked World Order’ (2004) 40 StanJIntlL 283Google Scholar (arguing that ‘[s]tates can only govern effectively by actively cooperating with other states and by collectively reserving the power to intervene in other states’ affairs’). See also Parrish, AL, ‘Reclaiming International Law from Extraterritoriality’ (2009) 93 MinnLRev 815Google Scholar (arguing that international problems should be solved by resort to international law and international instruments rather than by means of extraterritorial application of national law); Simon, AM and Waller, SW, ‘A Theory of Economic Sovereignty: An Alternative to Extraterritorial Jurisdictional Disputes’ (1986) 22 StanJIntlL 337Google Scholar.

90 See, inter alia, British Nylon Spinners Ltd v Imperial Chemical Industries Ltd [1952] 2 All ER 780; Rio Tinto Zinc Corporation v Westinghouse Electric Corporation [1978] 1 All ER 434; X AG v A bank [1983] 2 All ER 464; Libyan Arab Foreign Bank v Bankers Trust [1989] 1 QB 728.

91 Lister & Co v Stubbs (1890) 45 Ch.D. 1.

92 See Bianchi, A, ‘Unity v. Fragmentation: The Customary Law of Jurisdiction in Contemporary International Law’ in Meessen, KM (ed), Extraterritorial Jurisdiction in Theory and Practice (Kluwer Law International 1996)Google Scholar at 74 where he explains that there is a disagreement over this issue (for example, Oppenheim takes the view that priority should be given to the principle of territoriality).

93 F Saranovic, ‘Rethinking the Scope of Freezing Injunctions’ (2018) 37 CJQ 383.

94 Thus, the proposed framework is different from the European Account Preservation Order (EAPO), which essentially involves the harmonization of the substantive preconditions for granting freezing injunctions: see Reg (EU) No 655/2014 of the European Parliament and of the Council of 15 May 2014 establishing a European Account Preservation Order procedure to facilitate cross-border debt recovery in civil and commercial matters.

95 On international judicial co-operation, see Schlosser, P, ‘Jurisdiction and International Judicial and Administrative Co-Operation’ (2000) 284 Recueil des CoursGoogle Scholar.

96 [2012] UKSC 35.

97 See, for some examples in the context of other interim injunctions, Raks Holdings AS v Ttpcom Ltd [2004] EWHC 2137 (Ch); AAH Pharmaceuticals Ltd et al v Pfizer Ltd & another [2007] EWHC 565 (Ch).

98 Lawful service of the claim form in England or lawful service of the claim form out of the jurisdiction would satisfy this requirement.

99 [2014] EWHC 3131 (Comm).