Freezing Injunctions in Fraud Cases - Recent Cases

A freezing injunction (formerly known as a "Mareva" injunction) restrains a party from dealing with its assets. They are frequently used in fraud cases to safeguard the proceeds of the fraud until trial.

The English Courts' powers to grant freezing injunctions are more extensive than in most other jurisdictions and they are seen by some to allow a fundamentally draconian procedure. However, an increasingly flexible interpretation of the modern and global application of freezing injunctions is evident in the following Court of Appeal decisions.

In Bank of China v IBM LLC and others [2001] EWCA 1933, it was recommended that the so-called 'Baltic proviso' be adopted into the standard form of the worldwide freezing injunction to enable third parties to the freezing order, such as banks or similar institutions with overseas branches, to comply with what they reasonably believe to be their obligations under the laws of the country where the assets are located.

In Halifax Plc v Rupert Sydney Chandler [2001] EWCA Civ 1750, it was held that the standard provision set out in freezing injunctions which allows the exemption of a sum specified by the court at the time of the freezing injunction, representing the reasonable legal expenses of the person the subject of the freezing order, ought to include such expenses relating to other actions with a real prospect of success on foot at the time of the order.

Incorporating the 'Baltic proviso'

In the Bank of China case, the Bank of China obtained a worldwide freezing injunction in aid of proceedings in the USA against companies and individuals associated with John Chou and his wife Sherry Liu, who were alleged to have defrauded the bank in the USA by various means. Chou and Liu had a historical relationship with a third party, the Union Bank of Switzerland (UBS), which had a branch in London. UBS was served with the worldwide freezing injunction, to which it responded (as it always did when presented with a worldwide freezing injunction) with an application for a variation of the freezing order to include what has become known as the 'Baltic proviso' (derived from Baltic Shipping v Translink [1995] 1 Lloyd's Rep 673). The order was varied by David Steel J to include the Baltic proviso, which states, inter alia, that nothing in the order should, in respect of assets outside England and Wales, prevent UBS from complying with 'what it reasonably believes to be its obligations, contractual or otherwise...