Freezing Orders: how are they enforced around the world? England and Wales perspective

A freezing order, also known in some common law jurisdictions as a Mareva injunction, is an interlocutory injunction which restrains a respondent from disposing of, or dealing with, their own assets. It’s a draconian remedy but a necessary tool in a litigator’s arsenal to prevent the moving, hiding or dissipation of assets.

This is the first in a series of articles which explore the enforcement of freezing orders in key jurisdictions around the world, including in England and Wales, Switzerland and the Middle East (specifically ADGM/DIFC). Read the second (Switzerland) here. Whilst each jurisdiction enforces freezing orders in their own distinct way, the underlying rationale for enforcement remains the same; to ensure the terms of the relevant order are complied with.

We start by considering the position in England & Wales.

Overview of freezing orders

The power to grant a freezing order in England and Wales derives from the equitable powers of the High Court and is a civil remedy. In order to obtain a freezing order, the applicant must establish the following:

• A good arguable case;
• The existence of assets belonging to or under the control of the respondent against which judgment could be enforced;
• A real risk that the respondent will dissipate those asserts and the judgment will be left unsatisfied if the order is not given; and
• That the order is just and convenient.

There are, generally speaking, two types of freezing order an English court can make: (1) a domestic only (confined to assets within the jurisdiction of England and Wales only) and (2) a Worldwide Freezing Order (“WFO”) which, as the name suggests, has both territorial and extra-territorial effect (insofar as the English courts are concerned). There are model forms (i.e. a standard form of court order) that applies to both that ought to be used as a general starting point. Freezing orders can be obtained prior to the commencement of court proceedings, during court proceedings, or post-judgment. In practice, however, applications are normally made before proceedings are commenced to ensure there are assets against which to enforce a judgment. As such, applications are usually made ex-parte (which means without notice being given to the respondent) to prevent the respondent from having the opportunity to put assets out of the reach of the applicant. Applications for freezing orders can be (and usually are) accompanied by requests for ancillary orders i.e. disclosure orders, which if granted, will compel a respondent to give full disclosure of their (worldwide) assets (nature, value and location etc) and/or to supply documentary proof e.g. bank statements etc. These ancillary powers can be extremely powerful and can increase the effectiveness of a freezing order to aid the overall asset recovery strategy.

The quid pro quo is that there is a requirement for the applicant to provide (i) full and frank disclosure to the court when making an application (referring to all of the relevant facts and materials to which a respondent would refer were it in attendance), as well as (ii) a cross-undertaking in damages, which would be called upon to compensate the respondent if it transpires that the freezing order was wrongly granted and that the respondent has suffered losses as a result of that circumstance. A respondent can apply, or the court can order on its own volition, that this cross undertaking be “fortified” i.e. by a payment into court of a lump sum or the provision of security by obtaining a bank guarantee equal to the respondent’s estimated losses. Fortification is more likely if the applicant has limited assets within the jurisdiction or genuine solvency concerns that could call into question their ability to pay the cross undertaking if later called on to do so. In certain conditions the court even has the power to order the applicant to provide asset disclosure.  

The assets covered by the freezing order can be both tangible and intangible assets provided they are not perishable.

Application outside of the jurisdiction

If a respondent’s assets are located around the world, it may be necessary to obtain a WFO. To enforce a WFO outside of England and Wales, the Court’s permission is required, as reflected in the standard form order. The court will consider all the relevant circumstances of the case to ensure the benefit to the claimant is proportionate to the cost and inconvenience of the defendant having to defend proceedings in jurisdictions outside of England and Wales.

The recognition and enforcement of an English WFO abroad will be a matter of local law in the foreign country the applicant is seeking to enforce in. Importantly, some civil law jurisdictions do not recognise freezing orders and will not allow the enforcement of an English WFO.

As to the recognition and enforcement of foreign WFOs in the UK; the position has become more complicated following the UK’s withdrawal from the European Union (“Brexit”). Legal advice on the specific facts of each case should always be sought but, generally speaking, since 1 January 2021 onwards (when Brexit took legal effect), the previous EU mutual recognition and enforcement regulations (the Recast Brussels Regulation EU 1215/2012 and Brussels Regulation EU 44/2001 (together “Brussels”) and Lugano Convention 2007 (“Lugano”)) ceased to apply in England and Wales except for limited transitional measures i.e. for proceedings initiated prior to that date. Although England and Wales has adopted a new regime intended to largely mirror Brussels and Lugano - the Hague Convention 2019 (“Hague”) - Hague does not apply to interim measures like WFOs. This means that unless and until further domestic legislation is implemented, recognition and enforcement of English WFOs in EU/EEA or vice versa is no longer uniform and straightforward procedures that existed under Brussels and/or Lugano but reverts to the position which already applied to non-EU states.

Foreign WFOs can, in principle, be “recognised” (n.b. not in the technical definition in Brussels or Lugano) in England and Wales by initiating a new Part 8 claim and making an application under section 25 Civil Jurisdiction and Judgments Act 1982 (CJJA). This is an ancillary statutory jurisdiction granting powers for the English courts to grant interim relief in aid of the foreign substantive proceedings including both freezing orders and ancillary (disclosure) orders. The power remains discretionary; applicants will, not only, have to meet the stringent tests set out at (1)-(4) above (e.g. good arguable case, just and convenient, real dissipation risk, assets in jurisdiction etc) but also establish whether it is “inexpedient” for the English court to grant relief or not. The question of “expediency” is a question of fact in each case but case law has established the following principles:

• It will rarely be appropriate for the court to exercise jurisdiction to grant a freezing order where a defendant has no link to this jurisdiction i.e. has no assets in England and Wales nor owes any allegiance to the English court by the existence of in personam jurisdiction over them (e.g. domicile or residence). Protective measures should normally be left to the foreign court where the assets are to be found or where the respondent resides unless there are “exceptional circumstances”;
• Where there are assets in England and Wales (or reason to believe there are) but no in personam jurisdiction it will often be appropriate to grant a domestic freezing order only;
• Where there are both assets and in personam jurisdiction then a WFO may be granted subject to further discretionary measures:
  • If the applicant has already applied and failed to obtain a freezing order in the primary jurisdiction it will not be appropriate for the English courts to intervene;
  • If the making of the order will interfere with the management of the case in the foreign court e.g. is inconsistent or overlaps with a foreign domestic order it will not be appropriate for the English courts to intervene;
  • If there is a policy in the primary foreign jurisdiction to not grant WFOs or ancillary orders it will not be appropriate for the English courts to intervene;
  • If there is a danger that the English order will create any confusion or disharmony or risk of conflict with a foreign court order it will not be appropriate for the English courts to intervene;
  • More generally, if there is a risk of any jurisdictional challenge or conflict it will not be appropriate for the English courts to intervene; and
  • In the event disobedience/breach of the order is to be expected, is the English court making an order it cannot enforce? If so, it will not be appropriate to intervene.

Enforcement within the jurisdiction

Once a freezing order has been obtained domestically or internationally, it then needs to be served, and this should be done as soon as possible after the hearing. The applicant should aim to effect personal service of the freezing order so that it can then be enforced and ultimately weaponised (if not complied with) by committal proceedings. It should be served on both the respondent(s) and any third parties who are known or believed to hold assets on their behalf, including banks. The Court can give permission for alternative service, for example by email, which may be necessary where the Defendant is deliberately evading service.

Banks are often third parties to freezing orders as they typically have systems in place for freezing accounts when they are notified of such an order. It is advisable to serve the freezing order on the Bank before the individual respondent to reduce the chances of the respondent transferring funds before the bank has been able to freeze the account. The effect of a freezing order is that it revokes the customer mandate to the extent of the order. In addition to freezing the defendants’ bank accounts, it may also be possible to put a charge on any property owned by the defendant at the land registry, or over any other property (excluding perishable goods) which should be set out in the order. This will help ensure that an eventual Judgment can be enforced in favour of the applicant and there will be assets which could be used to satisfy the Judgment debt.

Once a freezing order has been granted, it is advisable to monitor the respondent(s) to ensure there is compliance. It is often necessary to raise queries in relation to disclosure in inter-partes correspondence, make formal requests to the court for further information, and seek permission to cross-examine the respondent(s).

If there have been serious breaches of the freezing order (and not simply a technical breach where it might be considered disproportionate to seek to enforce the order) then the principal method of enforcing a freezing order in England and Wales is by bringing committal proceedings for contempt of court pursuant to Civil Procedure Rule 81. The rationale is that a breach of a freezing order is considered an attack on the administration of justice which usually merits an immediate prison sentence.

There are strict procedural requirements in respect of committal proceedings, including that they can only be brought against a person on whom the order, containing a penal notice in accordance with the rules, has been personally served. This demonstrates the importance of ensuring the penal notice is correctly and prominently displayed on the order. There must also be a deliberate or wilful breach of the freezing order, which much be established beyond reasonable doubt (i.e. the criminal standard of proof).

Naturally a corporate entity that is subject to a freezing order cannot be imprisoned. However, a committal order can be made against any director or other officer provided the injunction was served personally on that individual. In addition to imprisonment, other penalties the court can impose includes a fine and confiscation of assets.

Aside from committal proceedings, alternative methods of enforcement include writs of sequestration and bench warrants. A writ of sequestration enables the defendant’s property to be seized and retained until they comply. On the other hand, a bench warrant can be issued to secure the defendant’s attendance at court, which means the defendant can be arrested and held in custody until the hearing.

Potential Challenges

Following the making of the order, it is possible for a respondent to apply for a discharge of a freezing order. The defendant would have to establish one or more of the following grounds in order to be successful in its application:

The order is oppressive

The applicant has failed to comply with its duties of full and frank disclosure to the court

There has been an inordinate delay by the applicant

The applicant has failed to comply with its undertaking.

Summary 

As will be evidenced from above, obtaining a freezing order is only the first step, and before that first step is taken, it is important to consider (a) whether the freezing order can achieve its aims (i.e. to protect sufficient assets that would satisfy the applicant’s losses) and (b) ultimately whether the threat of enforcing the penal notice on the order will have the desired effect on the respondent.

Further consideration will need to be given to whether the freezing order should be a domestic order or a WFO, and which jurisdictions are likely to be involved and the associated requirements. Failure to consider enforcement and longer term strategy at an early stage may render the freezing order ineffective, and  absence of careful planning may put the respondent on notice and/or otherwise encourage the further dissipation or hiding of assets. A carefully thought through strategy surrounding the application for a freezing order is, therefore, imperative. 

*Disclaimer: this article is not to be relied upon as legal advice. The circumstances of each case differ and legal advice specific to the individual case should always be sought.