ENFORCING ARBITRATION AWARDS: INJUNCTIONS AND .WFO: the definition & history A worldwide...

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  • ENFORCING ARBITRATION AWARDS:

    INJUNCTIONS AND PENAL SANCTIONS

    KINGSMAN ASIA SUGAR CONFERENCE

    SEPTEMBER 2016

    Suzanne Meiklejohn, Associate

    T: +65 6411 5346

    suzanne.meiklejohn@hfw.com

  • WFO: the definition & history

    A worldwide freezing order is an interim injunction that restrains a

    party from disposing of or dealing with its assets.

    Usually with ancillary disclosure obligations requiring a defendant to

    reveal the value and location of its assets.

    Key part of claimant/ creditor's armoury. Also for awards.

    English law remedy, available in other jurisdictions.

    Until 1975, arrest and freezing of assets reliefs were restricted to

    post-judgment cases.

    In 1975, in the case of Mareva Compania Naviera SA v

    International Bulk Carriers SA, the Court of Appeal decided that:

    "If it appears that the debt is due and owing and there is a danger that

    the debtor may dispose of his assets so as to defeat it before judgment

    the Court has jurisdiction in a proper case to grant an interlocutory

    judgment so as to prevent him disposing of those assets."

  • WFO requirements

    To issue WFO the court must be satisfied that:

    1. The court has jurisdiction;

    2. The applicant has an arguable underlying case;

    3. There is a real risk of dissipation of assets; and

    4. That in view of all the circumstances it is just and convenient to grant

    the injunction.

  • Jurisdiction

    1. English Court or Arbitration jurisdiction clause in the contract, or

    2. Assets in jurisdiction

    Similar provisions in Singapore, Hong Kong

    English Court's jurisdiction

    S37(1) of the Senior Courts Act 1981:

    "The High Court may by order (whether interlocutory or final) grant an injunctionin all

    cases in which it appears to the court to be just and convenient to do so."

    S37(3) of the Senior Courts Act 1981:

    "The power of the High Court under subsection (1) () shall be exercisable in cases

    where that party is, as well as in cases where he is not, domiciled, resident or present

    within that jurisdiction.

    44(1) of the Arbitration Act 1996:

    "Unless otherwise agreed by the parties, the court has for the purposes of and in relation

    to arbitral proceedings the same power of making orders () as it has for the purposes

    and in relation to legal proceedings."

  • A good arguable case

    The Niedersachsen [1983] 2 Lloyd's Rep. 600:

    "A good arguable case is no doubt the minimum which the plaintiff must show

    in order to cross what the judge rightly described as the threshold for the

    exercise of the jurisdiction."

    I consider that the right course is to adopt the test of a good arguable case,

    in the sense of a case which is more than barely capable of serious argument,

    and yet not necessarily one which the Judge believes to have a better than 50

    per cent chance of success.

  • Real risk of dissipation

    There is a sufficient risk of dissipation if it can be shown that:

    (i) there is a real risk that a judgment or award will go unsatisfied, in the sense of a real risk

    that, unless restrained by injunction, the defendant will dissipate or dispose of his assets other

    than in the ordinary course of business; or

    (ii) that unless the defendant is restrained by injunction, assets are likely to be dealt with in

    such a way as to make enforcement of any award or judgment more difficult, unless those

    dealings can be justified for normal and proper business purposes...

    per Flaux J, in Congentra AG v Sixteen Thirteen Marine SA [2008] EWHC 1615 (Comm).

    Considerations include:

    Is the defendant evasive?

    What is the nature of the assets?

    Are they easily disposable?

    What is the defendant's financial standing ?

    Credit history?

    How long has the defendant been trading for?

    Where is the defendant domiciled?

  • Just and convenient

    Above all the court must be satisfied that in all the circumstances it

    is "just and convenient" to grant the injunction.

    Thus, WFO is unlikely to be granted or continued if it

    disproportionately affects the defendant

    Pressurefast Ltd v Hall and Brushett Ltd, Court of Appeal Transcript No 336 of 1993:

    In my judgment.... it is plain ... that its effect has exerted considerable hardship on

    the defendants, going beyond merely preventing them from disposing of their assets

    so as to defeat the plaintiffs' claim. The interference with their lives and businesses,

    so long as the injunction was imposed, in my judgment went beyond what was

    appropriate for the legitimate protection of the plaintiffs.

  • Consequences of ignoring a WFO: Contempt of Court

    WFOs carry a penal notice to enforce compliance . An example is

    as follows:

    "If you disobey this Order, you may be held to be in contempt of

    court and any of your directors or officers or those exercising control

    over your affairs may be imprisoned or fined or their assets may be

    seized and you may be fined or your assets may be seized. Any

    person who knows of this Order and does anything that helps or

    permits any Defendant to breach the terms of this Order may also

    be held to be in contempt of court and may be imprisoned, fined or

    have their assets seized."

    Thus, not only the defendant (including its directors, officers and

    persons otherwise in control) but also third parties who aid a breach

    of a WFO may be found in contempt of court.

    Under the Contempt of Court Act 1981 the court has powers to

    impose a sentence of up to 24 months.

  • Penal notice

    In order to be able to bring contempt of court proceedings against

    the defendant it is crucial that the penal notice is clearly visible on

    the first page and is brought to the defendant's attention.

    For this reason, especially in the case of evasive defendants, it is

    crucial to apply for service by alternative means such as email since

    physical service may be difficult to give effect to.

  • Conclusion benefits of WFOs

    WFOs preserve assets for enforcement purposes;

    WFOs require the defendant to disclose details of its assets and

    thus enforcement proceedings can be targeted at known assets;

    Freezing injunctions affect the defendant materially as they can be

    served on banks or trading partners;

    Freezing injunctions also create disclosure obligations on directors

    and officers of the Defendant which are enforceable by the courts

    contempt mechanisms.

    WFOs are rigorously policed by the English court. Failure to comply

    with a freezing order may result in contempt of court proceedings.

    The maximum sentence for contempt of court is 2 years

    imprisonment. Related common law jurisdictions such as

    Singapore and Hong Kong have similar provisions.

    Appropriate jurisdiction clauses in the contract are key for access to

    this remedy available.

  • LIMITS ON CHARTERERS LIABILITY

    SIGNIFICANCE OF THE GLOBAL

    SANTOSH

    KINGSMAN ASIA SUGAR CONFERENCE

    SEPTEMBER 2016

    Adam Richardson, Senior Associate

    T: +65 6411 5327

    adam.richardson@hfw.com

  • Charterers liabilities

    A simple division of responsibility?

    .or, a more detailed investigation?

    Responsibility for acts/omissions of Charterers agents

    Who are Charterers agents?

    Which acts/omissions are Charterers responsible for?

    Liabilities often not clear cut

  • The Global Santosh : A surprising decision for

    Charterers

    NYK Bulkship

    (Atlantic) N.V.

    (NYK)

    Cargill

    International S.A.

    (Cargill)

    Sigma Shipping Ltd

    Transclear SA

    (Transclear)

    IBG

    Investment Ltd

    (IBG)

    Background

    NYK time chartered MV GLOBAL SANTOSH to

    Cargill;

    Cargill sub-chartered vessel to Transclear, assumed

    to be voyage charter;

    Transclear sold cargo of cement to IBG;

    IBG named as notify party on B/L.

    Dispute

    Discharge delayed at Port Harcourt due to

    congestion caused by IBGs equipment;

    IBG liable to pay demurrage to Transclear;

    Transclear arrested cargo (and by mistake court

    also ordered arrest of the vessel) to secure

    demurrage claim;

    Arrest caused further delay.

  • The Global Santosh Relevant Provisions

    Clause 49: Capture, Seizure, Arrest

    Should the vessel be captured or seizured [sic] or detained or

    arrested by any authority or by any legal process during the

    currency of this Charter Party, the payment of hire shall be

    suspended until the time of her release, unless such capture or

    seizure or detention or arrest is occasioned by any personal act or

    omission or default of the Charterers or their agents

    Key questions:

    1. Were Transclear and/or IBG agents for the purpose of the

    clause?

    2. If so, were their acts within the scope of the provision?

  • The Global Santosh First Instance

    Were Transclear and/or IBG

    Charterers agents?

    Were their acts within scope of

    provision?

    Tribunal

    (majority)

    No.

    Transclear was a sub-contractor.

    No.