Foreign freezing order cannot be enforced within the jurisdiction until any appeal against registration of the order is determined

Katharine Lammiman

In Cyprus Popular Bank Public Co Ltd v Vgenopoulos and others, the High Court held that a freezing order granted by another EU Member State does not become immediately fully effective and enforceable once a registration order is made by the English court.  It becomes enforceable only if no appeal is brought in respect of the registration order within two months of its being made, or on determination of any such appeal.  The court also held that service of the freezing order on, and/or notice of its terms to third parties amounted to “measures of enforcement” of the freezing order, which were prohibited from being taken while an appeal was possible or pending by Article 47(3) of the 2001 Brussels Regulation.

Background

In 2012, the claimant, a Cypriot bank, brought proceedings in the District Court of Nicosia, Cyprus against various defendants for breach of trust, conspiracy and other wrongs.  The claimant obtained a worldwide freezing order on an interim basis up to the value of €3,790 million in the case of the first two defendants and €1,500 million in the case of the third defendant.  The Nicosia court rejected the defendants’ challenges to the order and issued a final judgment, which had the effect of making the order a final worldwide freezing order which was to remain in force until the completion of the Cyprus proceedings.   The freezing order specified that it did not affect anybody outside the jurisdiction, save that it would affect persons to whom it had been determined applicable by the courts of a country which had jurisdiction over that person or over the assets of that person.

In February 2015, the claimant applied to the English High Court to register the Cypriot freezing order as a judgment pursuant to Article 38 of the 2001 Brussels Regulation, so it could be enforced as a judgment of the English court.  A registration order was granted.  In February 2016, the claimant wrote to Union Bancaire Privée notifying them of the freezing order.  The defendants appealed against the registration order and sought declaratory relief over the meaning and intention of the order. They argued that the Cypriot freezing order was not fully effective and enforceable immediately on the making of the registration order, and would only become so following determination of their appeal.  They also argued that the definition of “measures of enforcement” in Article 47(3) of the 2001 Brussels Regulation included service of a freezing order and/or notification of its terms to third parties, and therefore such steps were from being taken while an appeal was possible or pending.

High Court’s decision

Mr Justice Picken held that the Cypriot freezing order did not become immediately effective and enforceable on the making of the registration order, but would only do so on the determination of the defendants’ appeal against the registration order.  In view of the fact that the order was a worldwide freezing order, Picken J also held that measures of enforcement included service of the freezing order on, and/or notification of its terms to, third parties in order to give effect to the terms of the order as a judgment of the English High Court.

Enforceability of the freezing order

The judge commented that, if measures of enforcement could not be taken in respect of the Cypriot freezing order, common sense dictated that it was not, in any real or practical sense, enforceable.  As an application for a registration order was made without notice (so the other side would not be aware of the decision until after it had been made), it was “obvious” that the decision could not be fully effective and enforceable until the expiry of the time limit for an appeal or the determination of any appeal.

Picken J noted that although Article 47(3) prohibited a claimant from taking measures of enforcement pending an appeal, it expressly permitted the taking of “protective measures” against the property of the party against whom enforcement was sought, for example, applying to the English court for a freezing order.  This meant that the claimant had an “appropriate level of protection” pending an appeal, and could safeguard its position – provided, of course, that the claimant could persuade the court to grant it the protective relief.  Given this, there could be no justification for a claimant using the registration procedure under Article 38 as a “short cut” to obtaining a freezing order from the English court.  It could not be right for a claimant to be able to achieve the immediate freezing of UK bank accounts by obtaining a registration order without, pending an appeal, having to persuade the English court that it ought itself to grant a freezing order on conventional grounds.

The judge rejected the claimant’s argument that it was “illogical” and “absurd” to require it to seek a further freezing order from the English court in support of a freezing order which, as a consequence of the registration order, had itself become an order of the courts of England and Wales.  He referred to the cases of Calzaturificio Brennero S.A.S v Wendel GmbH Schuhproduktion International (Case 258/83) and Banco Nacional de Comercio Exterior SNC v Empresa De Telecommunicaciones De Cuba SA [2007] EWCA Civ 662 as demonstrating that there was “nothing remarkable” in the claimant having to apply for a freezing order as a protective measure in support of a “judgment” which was itself a freezing order.

“Measures of enforcement”

Picken J agreed with the defendants that the claimant had effectively enforced the terms of the Cypriot freezing order and the registration order by serving those orders on Union Bancaire Privée and seeking its compliance with them – in effect, insisting on the immediate freezing of accounts at the bank in the face of immediate proceedings for contempt.  As the underlying “judgment” was a worldwide freezing order, what the claimant had done amounted to a measure of enforcement as defined in Article 47(3).  It was “artificial and wrong” to limit the meaning of measures of enforcement to measures which involved obtaining further orders from the court.

In Brennero, the Advocate General observed that “enforcement is the carrying out of the original judgment“.  A freezing order is given effect to as against third parties (such as banks), and so enforced, by service of the order on such third parties.  That was demonstrated here by Union Bancaire Privée’s decision to freeze its accounts.  Clearly, by serving the Cypriot freezing order on the bank, the claimant had carried that order out.

Comment

This case demonstrates the limited effect of worldwide freezing orders and the importance, where the defendant has assets in other EU Member States, of seeking additional relief from the courts of those Member States in the form of “protective measures”.  As Picken J clearly states in his judgment, the claimant in this case would have been better off seeking separate relief from the English court rather than seeking to enforce the original Cypriot worldwide freezing injunction.

Cyprus Popular Bank Public Co Ltd v Vgenopoulos and others [2016] EWHC 1442 (QB)

Post By Katharine Lammiman (2 Posts)

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