Using English Freezing Orders and the interaction with Foreign Enforcement and avoiding pitfalls of Breach of Undertaking

The Khan Partnership LLP Commercial Litigation team examines the use of English Freezing Orders and the interaction with Foreign Enforcement and avoiding pitfalls of Breach of Undertaking

Using English Freezing Orders and the interaction with Foreign Enforcement and avoiding pitfalls of Breach of Undertaking

The Khan Partnership LLP Commercial Litigation team examines the use of English Freezing Orders and the interaction with Foreign Enforcement and avoiding pitfalls of Breach of Undertaking

Ordinarily an English Freezing Order will contain an undertaking from the claimant to restrict foreign enforcement that it will not "without the permission of the court seek to enforce this order in any country outside England and Wales or seek an order of a similar nature including orders conferring a charge or other security against the Respondent or the Respondent's assets”.

Adhering to the terms of such an undertaking is essential.  Failure to comply with undertakings contained in a Freezing Order is one of four grounds upon which the Court may discharge a Freezing Order on the application of the respondent or an interested third party (other grounds being an inordinate delay by the applicant in seeing an order; a failure by the applicant to comply with their duty of full and frank disclosure; or that the order in a particular case is “oppressive”). Although foreign enforcement undertakings have become universal in English Freezing Orders in the past 20 years, There is unfortunately very limited law on what constitutes a breach of such a foreign enforcement undertaking.

The position is concisely summarised in Gee on Commercial Injunctions at para. 23-019that:

“In Derby & Co Ltd v Weldon (No.1),[1] Nicholls LJ referred to the undertaking provided in that case by the plaintiff, the purpose being to retain control over enforcement of the Mareva [freezing] injunction abroad. One concern is that the plaintiff might use the order to obtain an order abroad which gave him security for the claim which was not a purpose of Mareva relief. Another is that the defendant should not be burdened with having to deal with foreign enforcement proceedings which might be oppressive or unfair because of the need to deal with multiple sets of proceedings instead of a single set of proceedings in England. The words in brackets in undertaking (10) in the example freezing order go wider than controlling direct enforcement of the Mareva relief, because if adopted they preclude the claimant from seeking abroad an order of a similar nature including an order conferring a charge or other security. The main concern underlying the undertaking is an inappropriate or oppressive extension of the worldwide freezing injunction through its enforcement abroad or its duplication. It is not directed at precluding the pursuit of different and independent rights to security that may be available abroad, such as a right to arrest a ship[2].”

As such, if the rights pursued outside England and Wales are different and independent rights to security, they are not captured by the wording of the Foreign Enforcement Undertaking and therefore will generally not be considered a breach. This was s clarified by Hamblen J at paragraphs [50] and [53] of his decision in F v M [2013] EWHC 895 (Comm):

“50 The focus of concern there expressed is that leave to enforce a WFO abroad should not be given if it is to have a more far reaching effect than the order made here and that information pertaining to that issue should be provided to the Court. That is understandable in the context of an application for leave to enforce a WFO. The English court would not want its order to be used to wider and different effect than it considers appropriate in making such orders. Those concerns do not, however, arise where what is sought to be done is to obtain an order abroad of a different nature. Whilst the foreign court may well wish to have regard to the fact that there is a WFO in deciding whether to make its own order, whether or not it is appropriate for it to exercise its own independent jurisdiction to make such an order is a matter for it rather than the English court. That jurisdiction does not depend upon or derive from the making by the English court of the WFO.

53 The fact that many of the Dadourian guidelines are inapt to the pursuit of an independent right to security abroad lends some support to the Claimant's case that the permission requirement is focused on the seeking of permission to enforce a WFO abroad or obtaining similar relief abroad. The main concern underlying the undertaking is an inappropriate or oppressive extension of the WFO through its enforcement abroad or its duplication. It is not directed at precluding the pursuit of different and independent rights to security that may be available abroad.”

For the Court to determine whether the Foreign Enforcement Undertaking has been breached, the key question is whether the nature of the remedies sought and obtained are “similar to” the Freezing Order, by reference to the Foreign Enforcement Undertaking. A finding of breach of the Foreign Enforcement Undertaking would only be made if it could be established that the applicant had sought an order of a similar nature abroad (including an order conferring a charge or other security), which is an inappropriate or oppressive extension of the worldwide freezing injunction through its foreign duplication or enforcement. However, if it can be established that the relevant foreign enforcement process is made in pursuit of different and independent rights to security that may be available abroad, this will not be considered a breach of the Foreign Enforcement Undertaking by the Court.

As such, whether or not a breach of the Undertaking can be established will be an issue that turns on foreign law. Evidence should be adduced in relation to the legal processes pursued in the relevant jurisdictions governed by other systems of law, and the juridical nature of the relief that has been sought in those jurisdictions.

The nature of the remedies sought and obtained in the relevant jurisdiction must be shown to be an inappropriate or oppressive extension of the Freezing Order to the extent that the Freezing Order has been duplicated or made effective by that further process. If the Court finds that a breach of the Foreign Enforcement Undertaking has been made, as noted at [41] of F v M, this may well result in discharge of the Freezing Order.  

Should you require any further information or advice, please contact The Khan Partnership LLP Commercial Litigation team on 0207 612 2530 or info@thekhanpartnership.com.


[1] [1990] Ch. 49 at 59.

[2] Re LMAA Arbitration [2013] EWHC 895 (Comm)