Freezing orders and the enforcement of arbitral awards against foreign non-parties

3 December, 2014

Cruz City 1 Mauritius Holdings v Unitech Ltd & ors. [2014] EWHC 3704 (Comm)

The Commercial Court dismissed the application brought by Cruz City 1 Mauritius Holdings (“Cruz City”) who sought to obtain freezing orders on the basis of English proceedings that had been commenced to enforce an arbitration award against, among others, non-parties to the original arbitration (Unitech Residential Resorts Limited (Defendant 4), Nectrus Limited (Defendant 5), Nuwell Limited (Defendant 6), Technosolid Limited (Defendant 7), and Unitech Overseas Limited (Defendant 8)). These five Defendants are subsidiaries of the award debtor, have no presence or assets within the jurisdiction and are incorporated in India, Cyprus and the Isle of Man.

Mr Justice Males upheld the challenge by the five Defendants to the Court’s jurisdiction and concluded there was no gateway that allowed an application for “Chabra” relief to be served out of the jurisdiction on a person who was not a party to the arbitral proceedings. More generally, the Judge considered whether applications could be made against persons who were not parties to arbitral proceedings under s. 44 of the Arbitration Act 1996, which sets out the English court’s powers to grant relief in aid of arbitrations. He concluded that the “better view” was that there was no power to grant any relief against a non-party to the arbitration under s. 44 of the Arbitration Act 1996, irrespective of whether that person was located within or outside the jurisdiction.

In any case, Mr Justice Males also held that the English court lacked the jurisdiction to grant the relief sought by Cruz City by operation of Article 31 of the Brussels Regulation. Article 31 regulates the grant of provisional relief against defendants domiciled in EU Member States, and requires there to be a “real connecting link” between the subject matter of the measures sought – in the case of a freezing order, assets – and the territorial jurisdiction of the English court. In the case of the three Cypriot Defendants, their lack of any assets in the jurisdiction meant that there was no real connecting link, and as such jurisdiction was denied as a matter of European law. In the case of the other Defendants incorporated in India and the Isle of Man, the Court decided to decline to exercise its jurisdiction as a matter of discretion.

Graham Dunning QC and James Willan successfully appeared for the Fourth and Sixth to Eighth Defendants (instructed by Taylor Wessing LLP)

James Collins QC and Professor Dan Sarooshi successfully appeared for the Fifth Defendant (instructed by Hugh Cartwright & Amin)

Read the full text of the judgment.