To freeze worldwide, or not to freeze worldwide: that is the question

27 July 2018

Commercial court decides against granting a WFO in support of a foreign arbitral award.

In Eastern European Engineering Ltd v Vijay Construction (Proprietary) Ltd [2018] EWHC 1539 (Comm), Eastern European Engineering Ltd (EEEL) applied to the Commercial Court in London for a WFO (WFO) against Vijay Construction (Vijay) in support of an ICC arbitral award.

EEEL had entered into six contracts with Vijay relating to the construction of a resort in the Seychelles. The contracts were governed by Seychelles law and provided for ICC arbitration seated in Paris. Before the construction work was finished, EEEL terminated the contract because of alleged delays and defects. EEEL commenced an ICC arbitration, and the sole arbitrator later held that EEEL had validly terminated each of the construction contracts and ordered Vijay to pay EEEL damages plus interest and costs amounting to approximately €18 million. Vijay did not pay.

Prior to this application, there had been a number of other proceedings commenced either to enforce or challenge the award in France, England and the Seychelles, including applications for injunctive relief.

In England, EEEL applied for a WFO to restrain Vijay from removing from England and Wales any assets in the jurisdiction and disposing of, dealing with or diminishing the value of its worldwide assets up to €18 million. Vijay argued that the court lacked jurisdiction to grant a WFO because:

  1. the only claim contained in EEEL’s arbitration claim form was a claim to enforce the award and the claim form was served out of the jurisdiction without permission;
  2. the seat of the arbitration was not in England and Wales and so the court could not make such an order in aid of execution of a foreign arbitral award; and
  3. the court should not exercise its discretion to grant the order.

The court considered that it did have jurisdiction to grant a WFO but in exercising that discretion the case for a WFO was not made out, holding that:

  1. There was only a very limited link to this jurisdiction: both parties were Seychellois, the subject matter of the contract was in the Seychelles, the contracts were governed by Seychellois law and Paris was the seat of the arbitration. Furthermore, Vijay’s assets in England and Wales were very minor compared to the assets in the Seychelles.
  2. The Seychellois Court of Appeal had recently discharged a freezing injunction and a similar order in England and Wales would be inconsistent with an order of the primary court in relation to those assets. Furthermore, the Seychellois courts remained empowered to grant future injunctive relief over assets in the Seychelles and, as such, the English court should defer to those courts.
  3. If the English court granted a WFO, there would be a risk of conflicting and inconsistent orders.

The judge did, however, consider that it was appropriate to grant a domestic freezing order over the limited assets in the jurisdiction because he was satisfied that there was solid evidence that there was a real risk that any judgment would go unsatisfied, because the assets were movable and Vijay had expressly stated in evidence that it would rather not pay the award and would allow itself to be wound up.