An English freezing order (previously known as a Mareva injunction) is a court order that restricts the respondent(s) to the order from dealing with their assets. It is intended to prevent defendants from making it more difficult for the applicant to enforce a court judgment against them by disposing of their assets.
It is important to realise that a freezing order may apply to third parties (i.e. individuals or businesses other than the respondents) if they are notified of the order by the applicant. Such third parties are generally persons who could be in a position to assist the respondents to breach the terms of the freezing order. For example, the applicant for the freezing order will usually notify banks that the respondent holds accounts with, and for that reason banks are among the most frequent recipients of English freezing orders. The applicant might also notify other third parties, including the respondent’s suppliers, customers or other creditors. So even if you are not named as a respondent to the order, you may still be expected to comply with the order if you are given notice of it by the applicant.
The English court may also have specified that the freezing order should apply on a worldwide basis, meaning that it will apply to the respondent’s assets wherever they are in the world (not just those that are in England). In that case, the applicant may choose to notify third parties who have operations outside the UK (e.g. a non-UK branch of a bank), in order to try to prevent the respondents from disposing of their non-UK based assets.
In some cases failure to comply with the freezing order may put you in breach of the “penal notice” at the front of the order, leaving you liable to prosecution in England for contempt of court, which is punishable by a fine, seizure of assets or even imprisonment. If you are resident or incorporated outside of the UK and are notified of an English freezing order, you should seek advice from lawyers as soon as possible.
There are a number of things in respect of which you may need to take advice:
- Jurisdiction: Generally speaking you will only be bound by the freezing order on the basis that you are a third party with notice of it, if the English court has jurisdiction over you. For businesses, this will usually only be the case if you have a place of business, or place where you carry out activities, in England (even if you also have operations elsewhere in the world). If you are a third party to the order, and you are not a person over whom the English court has jurisdiction, you are unlikely to be required to comply with a freezing order merely because you have been given notice of it by the applicant.
- Local enforcement of the freezing order in your jurisdiction: It may be that the applicant applies to the courts in your jurisdiction to seek their assistance to enforce the English freezing order, through whatever orders may be available from the courts in your jurisdiction. The standard form of freezing order provides that the freezing order is not binding on third parties who are not subject to the English court’s jurisdiction until the freezing order has been registered (where necessary), recognised and enforced in the local court. However, the applicant may well have undertaken to the English court not to take such steps to enforce the English freezing order outside the UK in this way, without first seeking the English court’s permission. You may therefore need to check whether any such permission has been sought or obtained by the applicant from the English court.
- Other lawful excuses for non-compliance: There may be other lawful reasons why you may not be required to comply with the order. For example, if you are overseas you are usually permitted to ignore the freezing order if complying with it would put you in breach of the law of the jurisdiction in which you are located. That could be the case if you are a bank and freezing the respondent’s bank account would be a breach of local banking regulations, for example.
- Disclosure: Third parties have no obligation to disclose information about the respondent's assets, unless the court has ordered this. Any such disclosure by a bank in the absence of a court order, for example, may well breach the bank's duty of customer confidentiality.
- Costs: The applicant will have given an undertaking to the court in England to pay your reasonable costs of dealing with the freezing order if you are given notice of it by the applicant, and that undertaking should be listed in a schedule to the order. One matter you should consider therefore is whether you are entitled to be reimbursed by the applicant for your costs of dealing with the order, including any fees you incur seeking legal advice about the order.
Receiving notice of a freezing order can be a concerning and unfamiliar event, particularly if you are operating a business outside of the UK. That may be especially the case if the order is accompanied by a letter from a law firm demanding in strident terms your urgent compliance. However, the English courts are very experienced at issuing these kinds of orders, and the orders that are made invariably seek to balance, as fairly as possible, the interests of the applicant in freezing the assets, with the interests of third parties, who are often merely caught up in a situation not of their making.
Third parties to the order are entitled to apply to the English court to vary or discharge the freezing order or for directions as to the order's effect. An application for directions may be helpful if you are in doubt as to the scope of your obligations under the order. Provided the application is made reasonably, it is standard practice to order the applicant to pay the third party's costs on an indemnity basis, subject to the third party proving that the costs were reasonably incurred.
Given the above, English freezing orders contain a number of safeguards for third parties, about which it would be prudent for you to seek advice about as soon as possible if you receive one of these orders, whether you are located inside or outside the UK.