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Freezing orders are known as the ‘nuclear’ option, so be well-prepared before applying for one
The successful application to the English High Court for a worldwide freezing order against Syrian businessman Tarif Akhras has sparked interest in the legal community, partly because of its size (it relates to an outstanding payment on two large commodities shipments of $26m (£16m)) and partly because it was granted on top of an existing European sanctions order. This shows the court’s preparedness to grant injunctions on top of sanctions in appropriate cases.
The courts have become more circumspect about granting freezing orders and this one, secured on behalf of commodities giant Archer Daniels Midland, was no exception.
So, is it time to lower the hurdles that need to be cleared to secure these measures? In the present climate, where payment defaults are at their highest since the credit crunch started and the flow of business is being stymied, so slowing the recovery, should more be done to make these powerful measures more readily available?
Let’s recap. Applications for freezing orders can be made either before a case has started, as it is being heard or, in the case of our recent order, during the arbitration proceedings. The two main hurdles to overcome to secure an application are first, the requirement to establish you have a good, arguable case in the UK, and second – and this is the tricky bit – the need to show a real and present risk that the defendant’s assets will be dissipated if the order is not granted so there is a risk the judgment or arbitration award will not be capable of being enforced. Is there a history of the defendant’s evasive behaviour? Is there evidence that previous judgments have not been paid?
There is a good reason why freezing orders are often referred to as ‘nuclear weapons’: a decision of one UK judge sitting in London is enough to put into effect a freeze on a defendant’s assets throughout the world. That’s a lot of destructive energy packed into one small device. And because the element of surprise is so important (otherwise a non-payer could simply tuck assets away in a nice deep bunker somewhere unknown before the court can get a proper look at them), applications are heard in the first instance with only one party before the judge.
This challenges the principle of natural justice that both parties should be heard at the same time. The affected party has no notice of the impending detonation. Judges are quite rightly reluctant to rush to grant an order and will need serious persuasion that it is urgent and appropriate to proceed without notice to the other side.
The aftershock can be devastating too: the defendant has a short time in which to declare all their assets worldwide to the court – rarely more than seven days and often as little as 48 hours. This is an onerous requirement.
Also, they only have a short time before a further hearing is scheduled between the parties.
Freezing orders are serious weapons. However, our experience is that the courts will and do grant them when an application has been properly researched, prepared and advanced.
Parsons and Swart worked together to secure the injunction on behalf of Archer Daniels Midland