In the case of Eastern European Engineering Ltd. vs. Vijay Construction (Proprietary) Ltd.  EWHC 1539 (Comm), the English Commercial High Court (QB) addressed the issue of whether the English Court can grant worldwide freezing order pursuant to Civil Procedure Rules (CPR) 25.1(1)(f) and/or Section 37 of the Senior Courts Act 1981 and/or the inherent jurisdiction of the Court in the enforcement of award proceedings. Detailed analysis given below:
A Seychelles company (EEEL) entered into several construction contracts with another Seychelles company (Vijay) each of these contracts were governed by Seychelles law, and contained an ICC arbitration clause providing that the seat of any arbitration should be Paris. The Contract was terminated by EEEL for alleged delays and defects in the works performed by Vijay. The termination of the contracts gave rise to disputes between the parties, in particular as to the lawfulness of the termination. Each party claimed that it was entitled to be compensated by the other.
EEEL commenced arbitration and the arbitrator issued a partial award concluding that he had jurisdiction to determine EEEL’s claims. Thereafter, the arbitrator published a final award and held that EEEL had validly terminated each of the construction contracts and ordered Vijay to pay EEEL damages plus interest and costs in an amount in excess of the amount claimed.
Applicable Legal Principles
Section 101 of the English Arbitration Act
“101 Recognition and enforcement of awards.
(1) A New York Convention award shall be recognised as binding on the persons as between whom it was made, and may accordingly be relied on by those persons by way of defence, set-off or otherwise in any legal proceedings in England and Wales or Northern Ireland.
(2)A New York Convention award may, by leave of the court, be enforced in the same manner as a judgment or order of the court to the same effect.
As to the meaning of “the court” see section 105.
(3)Where leave is so given, judgment may be entered in terms of the award.”
“25.1.—(1) The court may grant the following interim remedies
(f) an order (referred to as a “freezing injunction (GL)”)—
(i) restraining a party from removing from the jurisdiction assets located there; or
(ii) restraining a party from dealing with any assets whether located within the
jurisdiction or not;”
Section 37 of the Senior Courts Act 1981
“37 Powers of High Court with respect to injunctions and receivers.
(1) The High Court may by order (whether interlocutory or final) grant an injunction or appoint a receiver in all cases in which it appears to the court to be just and convenient to do so.
(2) Any such order may be made either unconditionally or on such terms and conditions as the court thinks just.
(3) The power of the High Court under subsection (1) to grant an interlocutory injunction restraining a party to any proceedings from removing from the jurisdiction of the High Court, or otherwise dealing with, assets located within that jurisdiction shall be exercisable in cases where that party is, as well as in cases where he is not, domiciled, resident or present within that jurisdiction.
(4) The power of the High Court to appoint a receiver by way of equitable execution shall operate in relation to all legal estates and interests in land; and that power—
(a) may be exercised in relation to an estate or interest in land whether or not a charge has been imposed on that land under section 1 of the M1Charging Orders Act 1979 for the purpose of enforcing the judgment, order or award in question; and
(b) shall be in addition to, and not in derogation of, any power of any court to appoint a receiver in proceedings for enforcing such a charge.
(5) Where an order under the said section 1 imposing a charge for the purpose of enforcing a judgment, order or award has been, or has effect as if, registered under section 6 of the M2Land Charges Act 1972, subsection (4) of the said section 6 (effect of non-registration of writs and orders registrable under that section) shall not apply to an order appointing a receiver made either—
(a) in proceedings for enforcing the charge; or
(b) by way of equitable execution of the judgment, order or award or, as the case may be, of so much of it as requires payment of moneys secured by the charge.”
Proceedings in relation to the Award in France, Seychelles and England
There have been a variety of proceedings commenced either to enforce or to challenge the Award in France, Seychelles and England. France was the seat of the arbitration, and its courts had supervisory jurisdiction over the arbitration. On EEEL’s application, the Tribunal de Grand Instance de Paris recognised the Award and declared it executory in France. Vijay filed appeals before the Cour d’Appel de Paris seeking to have both the Arbitrator’s partial award and the Award cancelled and annulled which were dismissed. Vijay filed a further appeal against the Cour d’Appel decision in the Cour de Cassation.
In Seychelles proceedings EEEL sought orders that the Award should be recognised in Seychelles, and that it should be declared and made executory and enforceable there. Vijay resisted recognition and enforcement on five grounds, namely: (1) that the Seychelles court had no power to enforce the Award under statute or common law; (2) the Arbitrator did not have jurisdiction to hear the arbitration on the merits of the dispute; (3) the Arbitrator violated due process by accepting a third report by an expert of EEEL; (4) that EEEL had bribed, blackmailed and harassed a potentially material witness; and (5) that the Arbitrator had failed to deal with an issue arising from Vijay’s submissions concerning Article 1230 of the Civil Code of Seychelles Act. The Seychelles court allowed enforcement of the Award in Seychelles. Vijay appealed against this decision to the Seychelles Court of Appeal. The Court of Appeal found in Vijay’s favour on one ground, and did not address any of Vijay’s other grounds of appeal. The ground on which the Court of Appeal found in favour of Vijay was that there was no legal basis for recognising and enforcing an award in Seychelles under the New York Convention. The Court of Appeal reasoned this on the basis that section 4 of the Courts Act did not enable the Seychelles Supreme Court to exercise the same power as possessed by the High Court in England to recognise and enforce an award under the New York Convention.
In England EEEL made a without notice application, pursuant to Section 101 of the English Arbitration Act, 1996, for leave to enforce the Award in the same manner as a judgment and for judgment to be entered in terms of the Award which was granted. Vijay applied to set aside this order and in the alternative for a stay of execution of the order pending the determination by the Cour d’Appel de Paris of Vijay’s then pending appeal against the decision of the Tribunal de Grand Instance de Paris.
EEEL sought a worldwide freezing order against Vijay pursuant to CPR 25.1(1)(f) and/or Section 37 of the Senior Courts Act 1981 and/or the inherent jurisdiction of the Court to restrain Vijay whereas Vijay argued that the English court has no jurisdiction to make a worldwide freezing order in aid of execution of an arbitral award because no claim for such an order had been included in EEEL’s Arbitration Claim Form. Vijay further contended that even if the court had discretion to grant worldwide freezing relief it should not do so. Where the role of the English court is to enforce in support of another jurisdiction, then only in an exceptional case would the court make an order which extended beyond its own territorial jurisdiction. Furthermore any discretion should be exercised consistently with the principles applicable to s. 44 Arbitration Act 1996 and Section 25 Civil Jurisdiction and Judgments Act, 1982 (CJJA).
Relying on the decision of Court of Appeal in Rosseel N.V. v Oriental Shipping Ltd  1 WLR 1387, the Court held that it has jurisdiction to grant a worldwide freezing order, and has a discretion as to whether or not to do so. The Rosseel (Supra), was an appeal from a refusal by the first instance judge to grant worldwide Mareva relief in support of an arbitration award which had been obtained in New York. The Court of Appeal dismissed the appeal. Lord Donaldson MR said, that it might very well be that the court had jurisdiction to grant the relief sought, but upheld the judge’s exercise of discretion.
The Court observed that that a claim for ancillary relief such as a freezing order did not need to be included in an Arbitration Claim Form seeking recognition and enforcement of an award pursuant to Section 101 of the English Arbitration Act, 1996 in order for the court to have jurisdiction to make such an order.
With regard to Section 25 of CJJA, the Court cited Motorola Credit Corp v Uzan (No. 2)  1 WLR 113 wherein it was laid down that the court has to consider the following five matters:
- whether the making of the order will interfere with the management of the case in the primary court, eg where the order is inconsistent with an order in the primary court or overlaps with it;
- whether it is the policy in the primary jurisdiction not itself to make worldwide freezing/disclosure orders;
- whether there is a danger that the orders made will give rise to disharmony or confusion and/or risk of conflicting inconsistent or overlapping orders in other jurisdictions, in particular the courts of the state where the person enjoined resides or where the assets affected are located;
- whether at the time the order is sought there is likely to be a potential conflict as to jurisdiction rendering it inappropriate and inexpedient to make a worldwide order; and
- whether, in a case where jurisdiction is resisted and disobedience is to be expected, the court will be making an order which it cannot enforce
In light of the above five principles, the Court concluded that it would not be appropriate in the facts and circumstances of this case to grant a worldwide freezing order.
Further, as it was conceded by Vijay that the English court had jurisdiction to grant a freezing order limited to assets within England and Wales, the Court considered it as appropriate to make a domestic freezing order.
The Court has drawn following conclusions
- That the court has jurisdiction to grant a worldwide freezing order, and has discretion as to whether or not to do so. That exercise of discretion, however, must take into account, as a highly significant matter, the circumstances in which the English court is being asked to act.
- That that this is a case in which it is not appropriate to grant a worldwide freezing order.