Asset Tracing and Enforcement Update | July 2017

Written on 17 Jul 2017

We hope that you find the latest edition of our Asset Tracing and Enforcement update informative.

The update highlights some recent legal developments that are likely to be relevant to international lawyers dealing with difficult asset tracing and enforcement issues. In particular, we mention difficulties arising from multiple sets of proceedings being pursued internationally and means of pursuing the individuals behind corporate judgment debtors.

We also include a link to the UK Chapter of the latest edition of ‘Enforcement of Judgments and Arbitral Awards in Commercial Matters’ (published by Thompson Reuters), which we have authored.

Service abroad | attempts to avoid the Hague Service Convention procedures – update

In our December update we discussed an English High Court decision that allowed service of proceedings on a Russian resident individual at our offices in London, circumventing the provisions of the Hague Service Convention.

Since then, we sought and obtained permission to appeal the decision. The appeal has now taken place and judgment has been granted The appeal judgment overturns the decision of the Master to allow service by an alternative method in England (instead of requiring service under the Hague Service Convention in Russia). The appeal judge confirmed that where the defendant is resident outside the jurisdiction, permission to allow service outside the jurisdiction must first be obtained before the court can consider whether or not to allow service by an alternative means, even if that involves service within the jurisdiction. The appeal judge also determined that the reasons for allowing service by an alternative method in this case were not sufficiently exceptional and that the Master had not properly applied the test.

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Claims against directors where judgments are being evaded by a company

In the recent case of Marex Financial Limited v Carlos Sevilleja Garcia, Marex alleged that, between the date of the judgment and it obtaining a freezing order, the defendant, who Marex claimed was the controller and shadow director of the two judgment debtor companies, had stripped the companies of their assets, transferring some $9.5 million to himself. Two points of interest came out of the interim hearing on jurisdiction:

  • The judge was supportive of the claimant bringing the claim on the basis of an “economic tort”, of knowingly inducing and procuring another to act in violation of rights under a judgment; and
  • The judge was also prepared to allow parallel proceedings in England against the director, despite the fact that there were already insolvency proceedings underway in the BVI in relation to the judgment debtor.

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The importance of compliance with undertakings given to the court when pursuing proceedings in multiple jurisdictions

The judge in this English court case emphasised that freezing orders are a draconian remedy and that when a party obtains a freezing order “it is incumbent upon it to progress the proceedings expeditiously, unless the Court sanctions delay. A failure to do so is an abuse of process.” In this case the judge was critical even of a day’s delay in issuing the claim after the freezing order had been granted. To avoid the risk of being criticised, an undertaking to the court to take an action “as soon as practicable” should be taken literally. The judge was also critical of the claimant’s decision to put English proceedings “on hold” while bankruptcy proceedings were pursued in Turkey, given that the freezing order was granted in support of the English proceedings.

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Post-Brexit | mutual recognition and enforcement of UK and EU judgments

Following the official notification by the United Kingdom of its intention to implement Article 50(3) of the Treaty on European Union, the EU and the UK now have less than two years to negotiate the conditions of their future relationship. Among numerous issues to address, it is in both sides’ interests to ensure there remains an effective legal framework for mutual recognition of judgments.

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Practical Law guide | Enforcement of Judgments and Arbitral Awards in the UK

We have recently authored the UK chapter of Practical Law’s ‘Enforcement of Judgments and Arbitral Awards in Commercial Matters Global Guide’. This provides a detailed explanation of the approach of the English courts to enforcement of foreign judgments and arbitral awards and can be accessed here.

In a user-friendly question and answer format, the chapter gives a structured overview of key practical issues concerning enforcement of judgments and arbitral awards in this jurisdiction, including the legal framework, legal formalities and interim remedies available.