High Court grants freezing order in support of arbitration award based on findings in such proceedings

• United Kingdom

• Financial services disputes and investigations
• Litigation and dispute management - Freezing Orders

05-02-2018

Great Station Properties SA & Anr v UMS Holdings Limited & Ors [2017] EWHC 3330

Facts of the case

– the Applicants (“As”) and the Respondents (“Rs”), which were owned by an individual (“G”) had joint interests in multiple companies, including a Ukraine-based Not for Profit Organisation (“NPO”). The commercial relationship between the As and Rs broke down, and the As brought an arbitration claim. The As alleged that the Rs had perpetrated an illicit scheme with the NPO, diverting property and opportunities away from the NPO to two companies associated with G

– the arbitral tribunal found that the Rs had deliberately harmed the interests of the As and awarded them in excess of USD 300M. The Rs contested the award before the English court and lost

– this application concerned an application, by the As, for a worldwide freezing order (“WFO”) to aid enforcement of the award and judgment

The decision

– Teare J granted the WFO, finding that:

– there was no need to establish a “good arguable case” as the As already had the benefit of an arbitration award and judgment in their favour

– there was, based on the findings of fact in the arbitration, a real risk of dissipation. Teare J noted that this risk was further increased by solid evidence of (i) the lack of probity of G in his dealings with certain state authorities (notwithstanding his motivation for doing so) and (ii) the substitution of bearer investment certificates for shares which made dissipation easier

– Teare J was not persuaded by arguments by the Rs that the WFO would restrict their flexibility and their ability to raise or maintain access to financing, a particular concern in this case because of the effect of the Russian/Ukrainian conflict on business. Teare J held that when weighed against the fact that the As have an unsatisfied award and judgment for over USD 300M in circumstances where there is solid evidence of a real risk of dissipation, the balance of convenience comes down “firmly in favour”of granting the WFO

Analysis and practical advice

– the case is a reminder that a freezing order can be granted to aid the enforcement of an arbitration award as well as after judgment. In fact, it may be more readily granted after than before judgment because: (i) it maybe easier to infer a risk of dissipation and (ii) factors which are said to weigh against the making of a freezing order (e.g. delay, the absence of assets in the jurisdiction or the presence of related proceedings) have less weight where judgment has already been obtained

– Teare J noted that “in circumstances where judgment has been given and there is solid evidence of a real risk of dissipation, there would have to be particularly strong grounds for refusing freezing order relief”