Freezing orders enforceable across the EU against third parties not involved in original proceedings

Written on 22 Sep 2016

The CJEU has held that a third party affected by a freezing order granted in the UK, but which was not a party to those proceedings, cannot resist enforcement of that order in another Member State on public policy grounds.

What was the dispute about?

The reference to the CJEU related to a freezing order obtained in the English High Court by Recoletos Limited against various individuals. As is usual, under the order, Recoletos was responsible for serving notice on any person affected by the order, who would then have the right to apply to the English High Court to appeal against its terms.

Recoletos subsequently applied to the Latvian courts to recognise and enforce the order. That application was resisted and ultimately appealed up to the Latvian Supreme Court by Mr Meroni, a Swiss lawyer who was the representative and manager of the frozen property. Mr Meroni objected to the enforcement on the basis that his property rights were infringed, despite him not being party to the English proceedings. Mr Meroni argued that this was contrary to the public policy exception under Article 34(1) of the 2001 Brussels Regulation (the original proceedings having been issued before the Recast Brussels Regulation came into force). The Latvian Supreme Court referred this question to the CJEU.

What did the CJEU decide?

The CJEU held that it was not contrary to the public policy exemption under Article 34(1) or the right to a fair trial for an order to be enforced against a third party that was not party to the original proceedings.

The court reiterated that the public policy exception “must be interpreted strictly… and may be relied upon only in exceptional cases.” The Brussels Regulation (as with the Recast Brussels Regulation) does not allow a court in which enforcement is sought to review the merits of a foreign judgment (Articles 36 and 45(2)). That court may not review any findings of law or fact, and may not refuse to recognise or enforce a judgment on the basis of a difference between the laws of the Member State in which judgment was obtained and that in which enforcement is sought. The public policy exception can only be relied on where recognition of the judgment would constitute “a manifest breach of a rule of law recognised as essential in the legal order of the Member State in which enforcement is sought…”.

In this case, it was clear that the contested order only had legal effect on a third party once they had been given notice of it, and they then had the right to appeal that order in the original court. If the courts in which enforcement was sought were able to review the third party’s rights, they may need to assess the merits of the judgment, which would be contrary to Articles 36 and 45(2) of the Brussels Regulation.

It followed that the enforcement of the English freezing order could not be resisted on public policy grounds.

What does this mean for those seeking to enforce freezing orders?

One of the main benefits of a English freezing order is that it applies not only to defendants but to anyone in a position to control or deal with assets that have been frozen. They must have been given notice of the freezing order, which will typically be the applicant’s responsibility, and will have the right to object to it. The CJEU’s judgment in this case means, though, that where a freezing order is enforced in another EU jurisdiction, there will be very limited grounds for resisting enforcement in that jurisdiction.