Below is an abridged version of the article which will soon be published in its entirety in the Brazilian Arbitration Review by Kluwer Law International.

Known as the “nuclear weapon” of a litigator’s arsenal, worldwide freezing orders have generated a lot of contentious work for practitioners. Akin to U.S. President Donald Trump, the English court could also boast that they have a “big nuclear button” which works. 

The recent case of Great Station Properties v UMS Holding [2017] EWHC 3330 (Comm) is a helpful example of how the English courts approach the question of risk of dissipation of assets before granting a WFO in support of arbitration proceedings. The case also reinforces a relatively recent trend followed by the English courts on the presence of assets within the jurisdiction.

Background

By an award dated 9 May 2016, an arbitral tribunal had ordered UMS Holding Limited and others (the ”Respondents”) to pay about US$ 301 million to Great Station Properties S.A. and others (the ”Claimants”). Subsequently Respondents sought to have the award set aside by the English courts on “serious irregularities” grounds (s. 68(2)(a) of the English Arbitration Act 1996). They eventually failed and as a consequence of the failed challenge to the Award, permission was granted to enforce the Award as a judgment of the High Court (Great Station Properties v UMS Holding [2017] EWHC 2398 (Comm)

Because the Respondents did not satisfy the judgment debt, the Claimants sought a Worldwide Freezing Order (”WFO”) to aid enforcement of the award and judgment (section 44 of the Arbitration Act 1996 and section 37 of the Senior Courts Act).

The court ultimately granted the WFO and the following summarises the interesting points reached.

The objective risk of dissipation:

• Diversion of profits qualifies as dishonest behaviour and dishonesty can be a sufficient criteria to create the risk of dissipation but it is not necessary.
• No actual dissipation is required.
• The facts relied upon to create the risk of dissipation need not be contemporaneous to the proceedings.
• The combination of (i) the transfer of assets through the substitution of bearer certificates, objectively rendering future dissipation easier and harder to identify; and (ii) the lack of probity demonstrated by providing state authorities incorrect information as to the ownership of a company qualified as “an objective risk of dissipation of assets”.
• It did not matter that the transfer of assets was not ill-motivated and that the providing of false information was to protect the Respondents’ interests from harmful and discriminatory actions from a state as long as it created an objective risk of dissipation.

To seek to prevent a WFO from being granted:

• The fact that enforcement proceedings have been started abroad is not necessarily a compelling argument.
• The fact that the Respondents have no assets within the jurisdiction is not necessarily a compelling argument, especially when the WFO is sought where a judgment debt has already been obtained.