The decision of the English Commercial Court in Great Station Properties v UMS Holding Limited on 20 December 2017 was notable for arbitration practitioners on two counts. First, it showed the court’s willingness to order a worldwide freezing order (WFO) to aid the enforcement of an arbitral award and judgment of the court, and second it showed that findings of fact in an arbitration could amount to sufficient evidence for the court to grant an interim measure.
English courts have typically been pro arbitration in their stance, including in matters involving the enforcement of arbitral awards. The judgment in this case serves as a demonstration that this approach remains in place and extends to the reliance on findings of fact made by an arbitral tribunal as evidence.
In October 2017, the English Commercial Court issued a judgment upholding a US $305 million award following a challenge under section 68 of the English Arbitration Act 1996 (AA 1996) to the award of the arbitral tribunal (UMS Holding Ltd v Great Station Properties SA). As a consequence of this failed challenge, permission was granted to the claimants to enforce the award as a judgment of the court. Following the respondents’ failure to satisfy the judgment debt or make any proposals for payment of such, the claimant sought a WFO to aid enforcement of the award and judgment.
The location of assets and convenience of the court
The English courts have a wide discretion to grant freezing orders, and in appropriate circumstances it may issue a WFO to cover assets situated outside of the jurisdiction of the court. In considering the appropriateness of such an award in the present case, the court was faced with the facts that none of the respondents’ assets were located in England and that the claimants had initiated proceedings in Cyprus to register and enforce the English judgment.
Despite these facts, Teare J concluded that it did not follow that the English courts could not grant a WFO merely because there is an “explanation for the registration and enforcement proceedings in Cyprus”, as opposed to England. Furthermore, as the “court ha[d] given permission for the Award to be enforced as a judgment of the court” and it was “in the public interest that the judgment of the court be respected and enforced”, a WFO was a “means of ensuring, so far as that is possible, that the judgment will be enforced.”
Findings of fact in an arbitration
In order to grant a freezing order, an English court must establish a real risk of the dissipation of the assets of the respondent. The point of interest for arbitration practitioners here is that the court felt able to make such a finding on the basis of findings of fact by the tribunal in arbitration, and further that the court was not required to make its own findings or place scrutiny on those of the tribunal.
In rendering the arbitral award, the tribunal had found the existence of an “illicit scheme”, whereby an owner of the respondents had deliberately harmed the interests of the claimants. The scheme used companies controlled by the owner of the respondents to ensure that profits that ought to have been shared with the claimants were instead paid to those companies within his control. This finding of an illicit scheme was the primary basis upon which the claimants’ sought the WFO.
In establishing the real risk of dissipation of the respondents’ assets necessary to grant a WFO, Teare J concluded that he had “no doubt that the findings of the arbitrators [of the illicit scheme] amount to solid evidence of a risk of dissipation” and therefore there was “solid evidence of a real risk that assets will be dissipated”.
Implications for practitioners
First, the English courts may be willing to grant WFOs even in cases where another jurisdiction may be more appropriate if, in so doing, a judgment of an English court is enforced and respected, despite the absence of assets located in the UK and despite the fact that proceedings are initiated elsewhere. However, as a note of caution, it is worth remembering the decision in Cruz City 1 Mauritius Holdings v Unitech Limited et al, where the court decided that it had no jurisdiction to grant a WFO to enforce a London arbitration award where the defendants, inter alia, had no presence or assets within the jurisdiction. Although the judgment primarily concerned the Chabra principles (TSB Private Bank International SA v Chabra), Males J noted the “need for caution applies… when the Chabra defendant is a foreigner with no presence or assets within the jurisdiction”. Practitioners should be mindful, therefore, that there may be circumstances where interim remedies will not be available for the enforcement of arbitral awards.
Secondly, the court may accept findings of fact by the tribunal as sufficient evidence of the risk of dissipation in relation to an application for a freezing order (or for that matter other interim measures). As a result, applicants seeking the enforcement of an award may draw some comfort from the fact that they may be able to rely on findings of fact by the tribunal in support of applications for interim measures. Given that by the time the tribunal renders its award it will have a much fuller perspective of the factual intricacies of the dispute, parties will likely want to consider the benefit of requesting the tribunal to make affirmative findings on issues such as risk of dissipation, as a potential aid to prospective enforcement proceedings.