Three Part Series: UK Freezing Orders Against A Foreign State, Part Three

• Published date: 09 June 2023
• Subject Matter: Litigation, Mediation & Arbitration, Transport, Marine/ Shipping, Arbitration & Dispute Resolution
• Law Firm: Steptoe & Johnson
• Author: Mr Thomas Innes, Steven Davidson, Michael Baratz, Molly Bruder Fox and Alex Green

First Tuesday Update is our monthly take on current issues in commercial disputes, international arbitration, and judgment enforcement. This month, we return to the final part of our series examining whether the English courts can issue a worldwide freezing order against a foreign state in support of efforts to enforce an arbitral award or foreign judgment.

In our previous updates, we covered the procedure in England to enforce arbitral awards and foreign judgments against foreign states (link), and whether the rules on state immunity from execution bar the grant of a freezing order against a state (link). Today's update addresses the principles that otherwise govern the grant of such orders (proceeding on the assumption that state immunity can be overcome). Much of this discussion will also be relevant to those interested in freezing orders against non-state entities.

Introduction

To recall, a freezing order is a form of injunction by which an English court can restrain a debtor from disposing of or dealing with their assets until such time as the award/judgment is paid/enforced. This can apply to assets both within England and Wales and abroad. It is a powerful tool to support an enforcement strategy. However, the creditor must overcome various hurdles to obtain such an order. Below, we address the test applied by the courts, and how it may be satisfied in circumstances where the debtor is a foreign state.

The Test Applied by the Courts

In order to obtain a freezing order, the applicant must convince the court that it is "just and convenient" to grant the order.

Per the Privy Council's judgment in Broad Idea, the applicant will need to show that:

1. the applicant has already been granted or has a good arguable case for being granted a judgment or order for the payment of a sum of money that is or will be enforceable through the process of the court;
2. he respondent holds assets ... against which such a judgment could be enforced; and
3. there is a real risk that, unless the injunction is granted the respondent will deal with such assets (or take steps which make them less valuable) other than in the ordinary course of business with the result that the availability or value of the assets is impaired and the judgment is left unsatisfied."¹

Further Considerations

The courts have developed various further principles in applying this test, discussion of which falls beyond the scope of this note. However, for present purposes, the following points should be noted.

First, it is typical for a freezing order to freeze assets up to a specified value (i.e. the value of the award/award being enforced). However, in the context of an order against a state, diplomatic property is unlikely to be caught for reasons of...