What Is A Freezing Injunction?
Where a claimant can show a good arguable claim to be entitled to money from a defendant
and there is a real risk that the defendant will remove assets from the jurisdiction, or deal with them so as to render them unavailable or untraceable, the court may grant an injunction to restrain the defendant from removing them from the jurisdiction, or from dealing with the assets (whether located within the jurisdiction or not).The freezing order represents an important tool in the armoury of the commercial litigator, which if successful can often result in an early "knock out blow" within litigation against a party who would otherwise seek to evade the enforcement of a judgment obtained against them.
Lord Donaldson, Master of the Rolls, graphically described freezing orders as "one of the law's two "nuclear" weapons"; the other being Anton Pillar Order or search order. And it was because of the drastic nature of freezing orders that led the courts to place a number of procedural safeguards for respondents in relation to these orders.
Mareva Compania Naviera SA v International Bulk Carriers SA (The Mareva) attempted to stop the increasingly sophisticated and complicated schemes to make the tracing of assets difficult. These schemes included switching assets between offshore companies, hiding assets in offshore trusts and transferring large amounts of cash by electronic transfer from one country to another. Often this resulted in creditors obtaining a judgment first only to later discover that assets had been removed from the jurisdiction and creditors then having to unravel what had happened, perhaps through a series of different jurisdictions and entities.
The freezing order is granted for an important but limited purpose: to prevent a defendant dissipating his assets with the intention or effect of frustrating enforcement of a prospective judgment. They are not a proprietary remedy. They are not granted to give a claimant advance security for his claim; although in practice they may have that effect. They are not an end in themselves. They are a supplementary remedy, granted to protect the efficacy of court proceedings, domestic or foreign.
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