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 injunction…in 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 IBG’s 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.

Cargill had no interest in arrest.

Transclear was acting for their own

account.

High Court

(Field J)

Yes.

Wide interpretation of “agent”:

“…parties such as sub-charterers or

sub-sub-charterers or receivers to

whom Cargill, by sub-letting the vessel,

had delegated or sub-delegated the

performance of its responsibilities

under the charterparty can be Cargill’s

agents for the purposes of the proviso,

irrespective of the precise contractual

relationship existing between the

delegate and the party above him in

the contractual chain.”

Yes and No.

Need to show more than just causal

link between act and arrest. Must

concern acts done “…in the course of

the performance by the delegate of

the delegated task” .

Transclear’s arrest of the cargo &

vessel was not in performance of any

delegated responsibility.

But - IBG’s failure(s) to unload within

lay days / to pay demurrage / secure

the claim were “plainly arguable”

causes of the arrest.

The “Global Santosh” – Court of Appeal

Were Transclear and/or IBG

“Charterers’ agents”?

Were their acts within scope of

provision?

Court of

Appeal

Yes.

Endorsed High Court’s wide

definition of “agent.”

Both Transclear and IBG were

“agents” for the purposes of the

clause.

Yes.

Reversed Field J’s finding in respect of

Transclear.

No wording in the clause limiting the

relevant acts of a relevant actor, other

than the causation test.

Endorsed Rix J in “DORIC PRIDE”:

“…a basic distinction…entirely familiar to

owners and charterers, [is] between

those matters which lie upon the

owners’ side of responsibilities,

essentially the vessel and crew, which

the owners have to provide to the

charterers, and those matters relating

to the charterers’ employment of the

vessel and crew for their trading

purposes, which lie upon the other side

of the line…”

The “Global Santosh” – The Supreme Court

Were Transclear and/or

IBG “Charterers’ agents”?

Were their acts within scope of provision?

Supreme

Court

Yes.

Accepted High Court and

Court of Appeal’s wide

definition of “agent.”

Both Transclear and IBG were

“agents” for the purposes of

the clause.

No.

Rejected both the approaches of Field J and

Court of Appeal. Upheld decision of Tribunal.

IBG’s delay in discharging was in no sense the

(vicarious) exercise of a right of Cargill, nor

was it a breach of an obligation on Cargill, as

Cargill did not have to procure discharge within

a given time. Cargill’s responsibility extended

only to actual performance of cargo operations,

not the failure to do so.

Likewise, IBG incurring, and Transclear

enforcing, a liability under a sale contract was

not the exercise of any time charterparty right.

Disagreed with COA “sphere of responsibility”

approach, in respect of matters arising from

trading agreements.

Conclusion

Liabilities often not clear cut

Clauses may require a more detailed analysis to

determine where liability/responsibility lies.

Ultimately, this gives Charterers scope to avoid liabilities

it may otherwise have faced on a simply “division of

responsibility” approach.

Lawyers for international commerce

hfw.com

Thank you