Collins, Territorial Reach of Mareva Injunctions

Law Quarterly Review

1989

Article

THE TERRITORIAL REACH OF MAREVA INJUNCTIONS

Lawrence Collins.

Cases: Babanaft International Co SA v Bassatne [1990] Ch. 13 (CA (Civ Div))

Haiti v Duvalier [1989] 2 W.L.R. 261 (CA)

Derby & Co Ltd v Weldon (No.1) [1989] 2 W.L.R. 276 (CA)

Keywords: Assets; Disclosure; Extraterritoriality; Mareva injunctions

Abstract: Recent cases.

*262 "... some situations, which are nowadays by no means uncommon, cry out--as a matter of justice to plaintiffs--for disclosure orders and Mareva type injunctions covering foreign assets of defendants ..." [FN1]

I. INTRODUCTION: THE RESTRICTIVE APPROACH

IF it is mainly a matter of subjective impression that today there is a greater tendency than in the past for debtors to default, or for those in a fiduciary position to abuse their trust, it is certain that the widespread abolition of exchange controls and the growth of offshore havens for cash and securities have made it easier for defaulters involved in international business to make themselves judgment proof, and for dishonest fiduciaries to enjoy the illegal fruits of breaches of trust. This piece is intended to examine one way in which the English courts have sought to combat this problem, by extending the Mareva injunction to assets abroad. Such is the pace of these developments that the Court of Appeal rendered, within the space of a month or so in the summer of 1988, three separate and fully reasoned decisions (reversing its previous practice) that Mareva injunctions and ancillary disclosure orders could, and in some cases should, be granted in relation to assets abroad. In the course of the judgments the Court of Appeal raised, and (at least in part) decided some fundamental questions about the jurisdiction of the English court and the enforceability of its orders abroad. The three decisions were Babanaft International Co. S.A. v. Bassatne, [FN2] Republic of Haiti v. Duvalier [FN3] and Derby & Co. Ltd. v. Weldon (No. 1). [FN4] In each of these cases injunctions were granted restraining the disposal of assets abroad; in the first case the injunction was granted in aid of enforcement of a judgment of the English court which had been granted against the defendants; in the second it was granted in aid of proceedings pending against the defendants in France; and in the third it was granted in aid of proceedings pending against the defendants in England.

*263 It is not the purpose of this article to provide an exhaustive statement of the Mareva practice, nor to deal with all of its international implications. [FN5] It is merely necessary to note, by way of introduction, that since 1975 the English courts have exercised a jurisdiction to grant injunctions (which have come to be called Mareva injunctions, after an early decision [FN6]) to restrain a defendant from removing his assets from the jurisdiction pending trial. As formulated prior to the decisions discussed here, the relevant principle was that a Mareva injunction could be granted if the plaintiff could show that he had a good arguable case on the merits of the action, that the defendant had assets within the jurisdiction, and that there was a real risk that a judgment in favour of the plaintiff might be unsatisfied because (for example) the defendant might remove the assets from the jurisdiction. [FN7]

The creation of the Mareva jurisdiction was not so much a step forward as the rectification of an omission or error which had stemmed from a line of authority, of which perhaps the oddest was the decision in Lister & Co. v. Stubbs, [FN8] to the effect that, except in proprietary claims in the strict sense, it was not possible to restrain the disposal of funds in the hands of a defendant prior to judgment. In Lister & Co. v. Stubbs a foreman had admittedly taken bribes or secret commissions from a dye-stuff supplier and invested them in land and other investments. His employers failed to obtain an interlocutory injunction restraining him from parting with them on the ground that, despite the breach of fiduciary duty, the property did not belong to the plaintiffs, who had only a monetary claim. The Mareva jurisdiction brought the English common law (and those jurisdictions which follow it) into line with the practice of civil law countries (the saisie-conservatoire and similar remedies) and of the United States (the writ of attachment), and provided a remedy where one should always have been available. It is at least understandable (though not fully justifiable) why a note of self-congratulation crept into the judgments of the Court of Appeal in the 1970s and 1980s. For example, the Mareva innovation is, it has *264 been said, "one of the most imaginative, important, and, on the whole, most beneficent of modern times." [FN9]

In 1977, in The Siskina [FN10] the House of Lords gave only mild support to the Mareva jurisdiction in a decision to which it will be necessary to revert. What is clear from that decision is that the juridical basis of the Mareva injunction is the statutory power now contained in section 37(1) of the Supreme Court Act 1981 to grant an injunction "in all cases in which it appears to the court to be just and convenient to do so." Section 37(3) gives express statutory recognition to the Mareva jurisdiction by providing that the power of the court under section 37(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 cases where he is not, domiciled, resident or present within that jurisdiction."

The reference to "assets within that jurisdiction," i.e. in England and Wales, makes it necessary to refer to the object of section 37(3), which was to ensure that a defendant who was within the jurisdiction was not in a more favourable position than a person outside the jurisdiction. Several of the early Mareva cases had seemed to suggest that the injunction was available only where the defendant was outside the jurisdiction, [FN11] but even before section 37(3) was enacted to remove this discrimination the courts had held that the Mareva jurisdiction applied even to defendants within the jurisdiction. [FN12] It should be noted that the abolition of exchange controls in 1979 made the disposal abroad of English assets owned by English-based defendants much easier than it had been in the days of stringent (though frequently broken) exchange controls.

Two other aspects of the Mareva jurisdiction are relevant in the present context. First, in Bekhor & Co. v. Bilton [FN13] the Court of Appeal held that the court had power under what is now section 37 of the Supreme Court Act 1981 to order the defendant to provide information about his assets. As Ackner L.J. put it, the court has "power to make all such ancillary orders as appear to the court to be just and convenient to ensure that the exercise of the *265 Mareva jurisdiction is effective to achieve its purpose." [FN14] This power is frequently and usefully used to find (and sometimes, in the strict sense, trace) assets which might otherwise be hidden or spirited out of the jurisdiction without the knowledge of the plaintiff.

The second general point is that it has frequently been said that the Mareva injunction does not operate as an attachment on property, but is relief in personam, which restrains the owner of the assets from dealing with them. [FN15] In Z Ltd. v. A-Z [FN16] Lord Denning M.R., however, suggested that the Mareva injunction operated in rem just as the arrest of a ship does, and like the old process of foreign attachment in England [FN17] and in the United States, [FN18] and like the saisie-conservatoire of civil law countries, it had the effect of attaching any effects of the defendant within the jurisdiction. In Babanaft [FN19] Kerr L.J. recognised that Lord Denning's statements might well have gone too far, but accepted there could be no doubt that Mareva injunctions had a direct effect on third parties who were notified of them and who held assets comprised in the order.

The reason for the effect on third parties is the principle that a person who, knowing of an injunction, aids and abets the party enjoined in committing a breach of it, is guilty, not of a breach of the injunction, but of a contempt of court tending to obstruct the course of justice. The principle was established when one Edwin Murray was committed to prison for a month for putting on a boxing context at 53 Fetter Lane knowing that the under-lessee had been enjoined from holding on the premises boxing contests which had been advertised under the name of meetings of the Queensberry Sports Club Ltd. [FN20] It was firmly applied in the context *266 of Mareva injunctions to banks in Z Ltd. v. A-Z, [FN21] when in a judgment of enormous practical importance for the commercial community, Lord Denning M.R. said [FN22]:

"... once a bank is given notice of a Mareva injunction affecting goods or money in its hands, it must not dispose of them itself, nor allow the defendant or anyone else to do so--except by the authority of the court. If the bank or any of its officers should knowingly assist in the disposal of them, it will be guilty of a contempt of court. For it is an act calculated to obstruct the course of justice ... As soon as the bank is given notice of the Mareva injunction, it must freeze the defendant's bank account. It must not allow any drawings to be made on it ... The reason is because, if it allowed any such drawings, it would be obstructing the course of justice--as prescribed by the court which granted the injunction--and it would be guilty of a contempt of court."

Throughout the early history of the Mareva jurisdiction it was stated to apply, or assumed to apply, to cases where the defendant had assets within the jurisdiction, and where there was a real risk that the assets might be removed abroad or otherwise dissipated. [FN23] This assumption underlies the reference in section 37(3) of the Supreme Court Act 1981 to the jurisdiction to grant an 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" (emphasis added).

The assumption also explains one aspect of the decision in The Bhoja Trader. [FN24] In that case buyers of a vessel were pursuing a claim (by arbitration in England) against sellers for breach of the sale contract. The buyers sought to prevent the sellers from calling upon, or obtaining the fruits of, a bank guarantee given by a London branch of a French bank to secure part of the price. The injunction to restrain the sellers from calling upon the bank under the guarantee was refused in conformity with the principle that the court will not normally interfere with "the life blood of commerce" such as letters of credit and bank guarantees. [FN25] The court, however, would have imposed an injunction on the fruits of the guarantee, i.e. any payment actually made by the bank to the sellers, but for the fact that the guarantee provided for payment in Greece. Thus, although the obligations under the bank guarantee were situate in *267 England (because they had been given by a bank in London) the fruits of the guarantee would have been cash situate in Greece, because "in no real sense was the asset constituted by the right to demand payment in Greece ever within the jurisdiction." [FN26] The result of The Bhoja Trader is commercially sound. The whole point of the seller's insistence on a bank guarantee for part of the price would have been wholly frustrated if, by alleging breach of warranty, the buyer would have been able to prevent payment of the guaranteed portion of the price. There is perhaps a confusion in the decision between the situs of the guarantee (England) and of the proceeds (Greece), but for present purposes it is sufficient to point out that the decision assumes, rather than decides, that the Mareva jurisdiction applies only to assets in England.

In the following years the practice developed of making disclosure orders in aid of Mareva injunctions, whereby the defendant was ordered to make disclosure of assets outside the jurisdiction as well as assets within it. [FN27] It also came to be established practice that a defendant who wished to vary a Mareva injunction so as to allow him ordinary living expenses had to justify the variation by (inter alia) making disclosure of all his assets, including overseas assets. [FN28] In Bayer v. Winter [FN29] Hoffmann J., in allowing information obtained under an Anton Piller Order [FN30] to be used for proceedings abroad, indicated [FN31] (obiter) that, if funds in England were inadequate to meet a plaintiff's claim, the policy of the Mareva injunction, to prevent disposal of assets to frustrate execution, would suggest that the court should try to make its ultimate judgment effective by assisting the plaintiff to take steps to prevent disposal in foreign jurisdictions.

The decision of the Court of Appeal in Ashtiani v. Kashi [FN32] represents the high-water mark of the view that the Mareva jurisdiction does not extend to foreign assets. This was primarily a decision about disclosure of assets in aid of the Mareva jurisdiction. All parties were Iranian citizens. The defendant brought proceedings in the United States, and succeeded in recovering a large sum of *268 money, to part of which the plaintiffs laid claim. Subsequently, the defendant agreed to pay substantial sums of money to the plaintiffs, and on that agreement the plaintiffs sued. The defendant said that the agreement was entered into as a result of misrepresentation and under duress and without consideration. The defendant was resident in England and was served in England. The Mareva injunction granted by Hirst J. restrained the defendant from disposing of assets within the jurisdiction, and ordered the defendant to disclose the full value of his assets within and without the jurisdiction, identifying the nature of all such assets and their whereabouts. The defendant then disclosed the existence of bank accounts in various foreign countries, including Guernsey, Belgium and Luxembourg. The plaintiffs then obtained orders in those countries freezing the defendant's disclosed bank accounts in those countries.

The Court of Appeal, in unreserved judgments, upheld the order of Sir Neil Lawson discharging Hirst J.'s order. The court consisted of Dillon, Neill and Nicholls L.JJ. [FN33] The leading judgment was delivered by Dillon L.J., who thought that the basis of the Mareva jurisdiction was "clearly limited to assets within the jurisdiction." [FN34] The limited territorial approach to the grant of Mareva injunctions "as a matter of practice" was confirmed by the reference in section 37(3) of the Supreme Court Act 1981 to assets within the jurisdiction, which, he thought, clearly indicated the scope of the practice of the courts in exercising the Mareva jurisdiction. Neill L.J. said that it was clear from the way in which the jurisdiction had been exercised since 1975 that Mareva injunctions were limited to restraining the dealing by a defendant with assets within the jurisdiction, and that this limitation was consistent with section 37(3) of the Supreme Court Act 1981. Nicholls L.J. agreed with both judgments.

Dillon L.J. justified the result on four grounds: first, it could very well be oppressive to the defendant that, as a result of an order of an English court, his assets everywhere should be frozen, or he should be subjected to applications for seizure orders in many other jurisdictions; secondly, it was difficult for an English court to control or police enforcement proceedings in other jurisdictions, and it was not very desirable that the English courts should attempt to control such foreign proceedings, and the difficulties were underlined where the plaintiffs were not resident *269 within the jurisdiction of the English court; thirdly, the comment of Lord Roskill in Home Office v. Harman [FN35] that this involved an invasion of privacy applied with the fullest force to an order on an individual or a company to disclose all his, or its, assets throughout the world; fourthly, it had been many times laid down that the object of a Mareva injunction was not to give the plaintiff security for the amount of his claim in advance of judgment in the action; and, if there was an order for disclosure of foreign assets, that might lead to the plaintiff obtaining security in some foreign jurisdiction.

It cannot be said that any of these reasons is compelling. It is inherent in the nature of the Mareva jurisdiction that an unscrupulous plaintiff may use it to oppress the defendant. No one with any experience of its operation in practice can doubt that abuses occur. [FN36] But it is no objection to the provision of a remedy that some plaintiffs may abuse it; it is for the courts to be alert to abuses in individual cases, and to devise means to avoid them. Similarly, the whole point of obtaining a disclosure order may be to freeze the assets in foreign jurisdictions, and the fact that in some cases it may cause hardship is no ground for denying it in all cases. It is also true that it is difficult to enforce and police injunctions against foreigners relating to assets abroad. But again that is no reason for excluding the remedy altogether in cases where justice requires it. It is also true that an invasion of privacy may be involved, but it is always involved in a Mareva disclosure order, or in an Anton Piller order, or in any discovery order, but that is no reason for refusing such orders. Nor should the fact that the plaintiff may obtain security in some foreign jurisdiction be a bar to the exercise of jurisdiction. The reason of policy why the Mareva injunction does not give security is that otherwise it would undermine the doctrine of equality of creditors in English law. Thus in normal cases the defendant will be entitled to pay his trade creditors, [FN37] and even if the plaintiff succeeds in obtaining a final judgment the Mareva injunction will not avail him against secured creditors, [FN38] and he will rank equally with the other unsecured creditors in bankruptcy. There is, however, no reason in principle why a plaintiff should be prevented from obtaining security over assets where the lex situs gives the creditor security.

Three further points emerge from the judgments. First, it is clear from the judgments of Dillon and Neill L.JJ. that their remarks are *270 primarily directed to the ordinary type of Mareva case where the plaintiff's claim on the substance of the action is for debt or damages, and is not a claim to trace assets. Dillon L.J. said that "where ownership of assets, by tracing or otherwise, is in question, a different approach is warranted ..." and that section 37(1) of the Supreme Court Act 1981 could obviously cover an injunction in respect of foreign assets where title to those assets was in question. [FN39] Thus where liquidators sued a director of an English company for fraud and breach of trust, the Court of Appeal upheld an order restraining him from disposing of shares in foreign companies and ordering him to disclose information about the operation of foreign companies and trusts. [FN40] It is not, however, clear from the report whether the claim was strictly of a proprietary nature (i.e. whether the foreign assets represented the company's property). A clearer case is Guinness plc v. Saunders and Ward, [FN41] where it was alleged that Ward had unlawfully received £5.2 million from Guinness and transferred it abroad. Sir Nicolas Browne-Wilkinson V.-C. made an order requiring Ward to make full disclosure of all dealings with the money, and to bring it under the control of his English solicitors.

The second general point to be made about Ashtiani v. Kashi is that, although some passages may be taken to have laid down a rule of law that there is no jurisdiction to grant Mareva injunctions in relation to foreign assets, there are strong indications in the judgments of Dillon and Neill L.JJ. that they accepted that the court had jurisdiction under section 37 of the Supreme Court Act 1981 to grant such injunctions, although disclosure orders relating to foreign assets would not be granted as a matter of practice or discretion except on what Dillon L.J. described as "special grounds." One of the main objects, from the plaintiff's point of view, of a disclosure order relating to foreign assets is the opportunity it affords him of attaching those assets in the foreign jurisdiction, and this is precisely what had happened in Ashtiani v. Kashi. Dillon L.J. expressed the view that:

"if in a future case disclosure of foreign assets is in a proper case ordered on special grounds ... prima facie at any rate the plaintiffs should be required to give an undertaking not to use any information disclosed without the consent of the defendant or the leave of the court." [FN42]

*271 II. LATER DEVELOPMENTS

The Mareva jurisdiction has, despite some early setbacks, been adopted widely in the Commonwealth, [FN43] and there have been several decisions on its territorial scope. A survey of the practice shows that the restrictive approach exemplified by Ashtiani v. Kashi has not been adopted in the Commonwealth. Ballabil Holdings Pty. Ltd. v. Hospital Products Ltd. [FN44] was a decision of the Court of Appeal of New South Wales, rendered before Ashtiani v. Kashi. The defendant company was being sued for damages for misrepresentation in connection with the sale of certain businesses to the plaintiff. It removed assets from New South Wales to, it seems, the United States, on the day after proceedings were commenced. On the same day a Mareva injunction was granted, restraining disposal of money or other assets (both in New South Wales and outside) which were the product of any of the transactions between the plaintiff and defendant. On the next day an interim receiver of the assets of the defendant company was appointed. At first instance Rogers J. held that a Mareva injunction could, and should, be granted, in the light of the transnational nature of international business and the ease with which the transfer of assets was daily effected, for to restrict the remedy to locally based assets would be to invite an undesirable restraint on the court's power to ensure that its orders were not stultified. In the Court of Appeal, Priestley J.A. agreed with Rogers J., but the majority (Street C.J. and Glass J.A.) rested this part of the decision on the much narrower ground that the court had jurisdiction to make orders in personam against a defendant in relation to assets abroad, when those assets were in New South Wales when the action commenced and had since been removed. In their view it was not necessary to decide the wider question of the territorial scope of the Mareva jurisdiction.

It is not clear from the report of the decision in Ballabil whether the assets had been removed to a foreign country, or to another part of Australia, and there is no doubt that a court in a federal system might, in an appropriate case, be more prepared to make orders in relation to property in other parts of the federal state than in relation to property in politically foreign countries. Thus in Coombs & Barei Construction Pty. Ltd. v. Dynasty Pty. Ltd. [FN45] the South Australian court granted a Mareva injunction in relation to *272 the defendant's assets outside South Australia, when the evidence was that the bulk of his assets was in other parts of Australia. Millhouse J. approved the approach of Rogers J. in Ballabil and added that it was absurd for the purposes of the Mareva jurisdiction that other Australian states should be regarded as foreign countries.

In Yandil Holdings Pty. Ltd. v. Insurance Co. of North America [FN46] plaintiffs in an insurance claim abandoned at trial what was apparently a fraudulent claim, and an order for costs was made against them. A disclosure order, requiring an affidavit as to its assets, including assets out of the jurisdiction, was made, pending taxation of costs and the levy of execution. Rogers J. thought that the reference by Dillon L.J. in Ashtiani v. Kashi to "special grounds" in which disclosure of foreign assets might be required was completely inconsistent with the tenor of the rest of Dillon L.J.'s judgment. But he accepted the suggestion by Dillon L.J. that the person obtaining the benefit of the order should undertake not to use the information without the consent of the other parties or the leave of the court.

In Hong Kong, Ashtiani v. Kashi was not followed in Asean Resources Ltd. v. Ka Wah International Merchant Finance Ltd., [FN47] where a Mareva injunction was granted, pending trial, restraining the disposal of shares in a Singapore company, and a receiver was appointed. Sears J. treated Dillon L.J.'s judgment in Ashtiani v. Kashi as deciding that there was jurisdiction to grant an order relating to foreign assets, but that in practice the order was not to be granted, and went on: "I confess I do not understand the learned judge when he says that. If I have jurisdiction over foreign assets there must be instances where that jurisdiction will be exercised. Otherwise, the jurisdiction of the court is rendered completely powerless." [FN48]

Yandil Holdings was a case of an order for disclosure in aid of a costs order following judgment. The order for costs had not yet ripened into a judgment, since taxation of costs had to be done before there was a judgment for the amount of the costs. In two cases in England orders for disclosure of foreign, as well as English, assets were made after judgment had been given against defendants. In Interpool Ltd. v. Galani [FN49] a judgment had been entered for over $8 million against Galani, who was then resident *273 in France. When he came to England, the French judgment was registered by the judgment creditors in England under the Foreign Judgments (Reciprocal Enforcement) Act 1933. [FN50] Under R.S.C. Order 48 a judgment debtor may be examined as to his assets, and the principal question was whether this power was limited to debts situate within the jurisdiction. The Court of Appeal accepted that Ashtiani v. Kashi was authority for the proposition that a Mareva injunction should be limited to assets within the jurisdiction and that any ancillary order for discovery should be similarly restricted. But that had no reference to the question whether a judgment debtor could be examined as to assets abroad. Accordingly the judgment debtor would be compelled to answer questions about foreign assets. In Maclaine Watson & Co. Ltd. v. International Tin Council (No. 2) [FN51] the plaintiffs were judgment creditors of the International Tin Council in a substantial sum. They wished to execute the judgment but had no information about the Council's assets. R.S.C. Order 48 was held by Millett J. not to apply to an unincorporated association, [FN52] but he ordered disclosure of assets under the general power of section 37(1) of the Supreme Court Act 1981 to grant an injunction (including a mandatory injunction) where it was just and convenient to do so. The Court of Appeal affirmed the decision and held, applying Interpool Ltd. v. Galani, that there was no doubt that Millett J. had jurisdiction to order disclosure of the International Tin Council's assets outside the jurisdiction, as well as those within it.

It will be seen below that the approach to injunctions may be different in cases where judgment has already been given against the defendant from the position where the plaintiff has a good arguable case (or better) which has not gone to trial. In Deutsche Schachtbau v. R'as Al Khaimah National Oil Co. [FN53] an interlocutory injunction was granted following an order nisi on a foreign arbitration award under section 26 of the Arbitration Act 1950 to restrain disposal of assets of the award debtor. Sir John Donaldson M.R. (as he then was) suggested that, although it had been convenient to refer to the injunction as a Mareva injunction, it was doubtful whether it fell into that category:

"The Mareva innovation ... lay in giving a plaintiff some degree of protection before he became a judgment creditor and in anticipation that he would become one. Judgment creditors had little need of new protection since they were usually adequately protected by their right to levy execution. *274 ... And where they were not, the court has intervened by injunction to prevent the payment to and receipt by the judgment debtor of an asset in circumstances in which it would not otherwise have been available to the judgment creditor in satisfaction of the judgment debtor ..." [FN54]

III. BABANAFT AND AFTER

Such was the background in 1988 when the Court of Appeal was invited to consider the principles of the territorial scope of the Mareva injunction: section 37(3) of the Supreme Court Act 1981 had been enacted on the apparent understanding that the injunction was concerned with assets within the jurisdiction; there was clear authority in the Court of Appeal that it was limited to assets within the jurisdiction, at any rate prior to judgment being given against the defendant; and there was clear dissatisfaction in Commonwealth jurisdictions with that result.

The facts of each of the cases are striking. In Babanaft International Co. S.A. v. Bassatne [FN55] the judgment debtors were two Lebanese nationals; one lived mainly in Switzerland and the other mainly in Greece. After a long trial, judgment had been given against them for $15 million. They owned property in various countries (including England) through a network of companies which, in the words of Vinelott J., [FN56] were "incorporated in jurisdictions--Panama, Liberia, and the Dutch Antilles--in which it is difficult for outsiders to obtain information about their ownership, control and assets." This is because in these countries shares in companies are generally bearer shares, whose ownership it is impossible to trace, and directors are generally nominees (such as local lawyers).

In Republic of Haiti v. Duvalier [FN57] the defendants were "Baby Doc" Duvalier, who was President of Haiti from 1971 to 1986, and various members of his family. The Republic of Haiti alleged in proceedings in France that the Duvalier family had embezzled $120 million (at least) from the Republic. [FN58] It was found that there was a "plain and admitted intention of the defendants to move their assets out of the reach of courts of law." The only connection of *275 the case with England, it seems, was that the defendants had used an English firm of solicitors to hold bank accounts and foreign securities (in each case abroad) on behalf of the defendants.

In Derby & Co. Ltd. v. Weldon (No. 1) [FN59] the plaintiffs claimed that the defendants were personally responsible for the insolvency of a group of companies which had caused a loss to the second plaintiffs (of which the defendants were directors) of some £34 million. The court found that there were grounds for supposing that the defendants had acted dishonestly and that they had the ability to lock away assets in inaccessible overseas companies; and that there was a very real risk that assets in England and abroad would, by the use of foreign companies, nominee directors, bearer shares and the like, remain hidden or be spirited away, so as to render any future judgment useless.

Thus in Babanaft judgment had already been given; in Republic of Haiti proceedings on the substance of the case were pending not in England, but in France; and in Derby & Co. Ltd. v. Weldon (No. 1) proceedings were pending in England, and the restraint on disposal of assets was sought before trial. In each of the cases injunctions covering assets worldwide were granted, but subject to important conditions. In Babanaft the Court of Appeal made an order which was restricted to the defendants and was subject to a proviso to make it clear that third parties (such as banks) should not be affected by the order. Kerr L.J. thought that it would have been more appropriate that the qualification should be that the order should not affect third parties unless and to the extent that it was enforced by the courts of the states in which any of the defendants assets were located. In Republic of Haiti the Court of Appeal made a similar worldwide Mareva, but added a proviso in terms similar to those suggested by Kerr L.J. in Babanaft. In Derby & Co. Ltd. v. Weldon (No. 1) the worldwide Mareva was also granted, in which the limitation suggested by Kerr L.J. was dealt with by the plaintiffs giving to the English court an undertaking in terms which would preclude them from making any application to a foreign court to enforce the order without first obtaining leave from the English court.

The starting point for any discussion of the jurisdictional limits on Mareva injunctions must be section 37(1) of the Supreme Court Act 1981, [FN60] which gives the court power to "grant an injunction ... in all cases in which it appears to the court to be just and convenient to do so." On its face this power is unlimited, and in the absence of authority there would have been grounds for *276 arguing that once the court had in personam jurisdiction over the defendant, an injunction of any type might (in the discretion of the court) be granted whenever justice required it. But there is very substantial authority which puts severe limits on the jurisdiction. Not long after the passage of the Judicature Act 1873 it was held that the court had no power to grant an interlocutory injunction except in protection of some legal or equitable right. [FN61] It was the application of this principle which led to the unfortunate decision in The Siskina, [FN62] where the House of Lords held that it was powerless to restrain the dissipation of a fund in England which represented the only asset of the defendant, when the proceedings on the substance of the case were pending abroad. In the South Carolina case [FN63] Lord Brandon (with whom Lord Bridge and Lord Brightman concurred) re-affirmed the principle that, although the terms of section 37(1) of the 1981 Act were very wide, the power conferred by it had been circumscribed by judicial authority dating back many years. He suggested that the power to grant injunctions was, subject to two exceptions, limited to two situations: the first was to prevent the actual or threatened invasion of a legal or equitable right; the second was to prevent behaviour (actual or threatened) which was unconscionable. The two exceptions were: first, the case where an injunction was granted to restrain the commencement or continuance of proceedings in a jurisdiction which was not the appropriate one; the second exception, given statutory recognition by section 37(1) of the Supreme Court Act 1981, may have been the Mareva injunction. But Lord Goff (with whom Lord Mackay agreed) said:

"I am reluctant to accept the proposition that the power of the court to grant injunctions is restricted to certain exclusive categories. That power is unfettered by statute; and it is impossible for us now to foresee every circumstance in which it may be thought right to make the remedy available." [FN64]

What, then, are the limitations, if any, on the power to grant Mareva injunctions? In the first place, the defendant must be subject to the personal jurisdiction of the court. This does not mean that the defendant must be in England. Indeed, most of the early Mareva cases involved defendants who were outside England, and section 37(3) of the Supreme Court Act 1981 was enacted to *277 confirm that the remedy was available with regard to the defendants within the jurisdiction. But if the defendant is outside the jurisdiction the case must be one in which it is open to the English court to assume jurisdiction under Order 11, e.g. because the contract on which the plaintiff sues is governed by English law. [FN65] The second jurisdictional limitation is that the remedy is not available, subject to one important statutory exception, where the defendant has assets in England, but the defendant is abroad, has not submitted to the jurisdiction, and the case does not otherwise come within Order 11, rule 1(1). This is the essence of the decision in The Siskina, [FN66] where it was held that where the substance of the dispute between the parties is pending in a foreign court, the court cannot enjoin removal of English assets: the fact that an injunction is sought "ordering the defendant to ... refrain from doing anything within the jurisdiction" does not bring the case within what is now Order 11, rule 1(1)(b). But where the main proceedings are (or are to be) pending in another State which is a party to the 1968 Convention, or in the courts of another part of the United Kingdom, the court may grant a Mareva injunction. [FN67]

It has often been said that a plaintiff who seeks Mareva relief must give some grounds for believing "that the defendant has assets here." [FN68] But this is merely a description of the normal case, and is based on the assumption that the Mareva injunction applies solely or primarily to assets within the jurisdiction. It should not follow, for example, that if the remedy may be sought legitimately in relation solely to foreign assets the plaintiff must, as a necessary pre-condition to the obtaining of an order covering the foreign assets, also show that the defendant has assets within the jurisdiction. Such a condition would be contrary to the principle that the injunction is in personam and would make no sense. [FN69]

If the defendant is subject to the personal jurisdiction of the English court, and provided that the case has some appropriate connection with England, there is no reason in principle why an English injunction should not be granted, restraining the disposal of assets abroad. This proposition depends on the simple point that

"in granting injunctions the Court operates in personam. The person to whom its orders are addressed must be within the reach of the Court or amenable to its jurisdiction ... As a *278 consequence of the rule, that in granting an injunction the Court operates in personam, the Court may exercise jurisdiction independently of the locality of the act to be done, provided the person against whom relief is sought is within the reach and amenable to the process of the Court. That jurisdiction is not founded upon any pretension to the exercise of judicial or administrative rights abroad, but on the circumstance of the person to whom the order is addressed being within the reach of the Court." [FN70]

A striking example of the exercise of this power is Acrow (Automation) Ltd. v. Rex Chainbelt Inc. [FN71] In that case an English company, Acrow, manufactured equipment under patent licences from a United States corporation, S.I. Inc. Part of the equipment consisted of a chain, which was manufactured by another United States corporation, Rex Chainbelt Inc., and sold by Rex direct to Acrow, but not on the basis of any long term contract. When disputes arose between Acrow and S.I. Inc., the latter directed Rex Chainbelt not to supply further chains to Acrow. In proceedings in England, S.I. Inc. were served outside the jurisdiction under Order 11: the licence agreement was governed by English law and contained a submission to the jurisdiction of the English courts. Rex Chainbelt were joined as defendants (probably as necessary or proper parties) and submitted to the jurisdiction by the then current procedure of entry of unconditional appearance. An injunction was granted against S.I. Inc., restraining them from impeding Acrow in the manufacture and sale of the equipment, but it took no part in the proceedings, and continued to urge Rex not to supply chains to Acrow. The Court of Appeal granted an interlocutory injunction restraining Rex Chainbelt Inc., and its English subsidiary, Rex Chainbelt Ltd., from obeying the directions of S.I. Inc. purporting to prohibit them from supplying chains to Acrow, and a mandatory injunction requiring Rex Chainbelt to use all reasonable endeavours to supply the chains to Acrow. The English connections of the case were strong, and the English court had personal jurisdiction over both sets of defendants, but the court was directing Rex, a United States company which manufactured in, and sold from, the United States to disregard the instructions of another United States company, and to use its best endeavours to make supplies from the United States to an English customer, which it was not contractually bound to make.

Thus there is no reason in principle why an English injunction should not restrain a person properly before the court from the *279 disposal of assets abroad. The effect of Babanaft International Co. S.A. v. Bassatne [FN72] was to confirm that this general principle applied to Mareva injunctions. The decision in Ashtiani v. Kashi, [FN73] to which both Neill and Nicholls L.JJ. had been party, was treated as a decision on the practice in relation to the exercise of the discretion, and not as a decision on the limits of the jurisdiction of the court. As Neill L.J. put it [FN74]

"There is abundant authority for the proposition that, where a defendant is personally subject to the jurisdiction of the court, an injunction may be granted in appropriate circumstances to control his activities abroad. Thus, for example, a party to an action may be restrained from commencing or continuing an action in a foreign court. ... The decision of this court in Ashtiani v. Kashi is authority for the proposition that, where a Mareva injunction is granted before judgment, the injunction should be limited to assets within the jurisdiction of the court ... I was a party to the decision in Ashtiani v. Kashi and I remain of the opinion that it accurately reflected the way in which the jurisdiction to grant Mareva injunctions had been exercised and developed in England in the period between the original decision in Mareva Compania Naviera S.A. v. International Bulkcarriers S.A. in June 1975 and June 1986. I am satisfied, however, that the court has jurisdiction to grant a Mareva injunction over foreign assets, and that in this developing branch of the law the decision in Ashtiani v. Kashi may require further consideration in a future case."

Babanaft was a case where the injunction was sought after judgment at trial, and therefore strictly any remarks on the position before judgment were obiter. Kerr L.J. concluded that, so far as jurisdiction was concerned (although different considerations might apply in the case of the exercise of the discretion) there was jurisdiction to make the order relating to foreign assets as well before, as after, judgment. Neill L.J., while restricting most of his judgment to the position after judgment, seems to have accepted that there was no relevant difference, as regards jurisdiction, between post-judgment orders and pre-judgment orders.

Republic of Haiti v. Duvalier [FN75] was a pre-judgment case, but one of a very special kind, since the ultimate trial was to take place not in England, but in France, and the injunction was sought in aid of *280 the French proceedings. The only connection with England was that it was alleged that the defendants used English solicitors to hold property on their behalf abroad. In the light of the decision in Babanaft, counsel for the defendants conceded for the purposes of argument in the Court of Appeal that the court had power to restrain a defendant who was not resident in England from dealing with assets out of the jurisdiction. But since the issue went to the jurisdiction of the court, Staughton L.J. thought that it ought to be examined. Staughton L.J. agreed with the view expressed in Babanaft that Ashtiani v. Kashi was a decision based on settled practice, rather than on any restriction on the powers of the court. He concluded that, if the point had not been conceded, he would have agreed with the views expressed obiter in Babanaft that there was jurisdiction to grant a Mareva injunction, pending trial, over assets worldwide. In answer to the argument for the defendants that it was wrong in principle to order persons not resident in England as to what they should or should not do out of the jurisdiction, Staughton L.J. pointed to the fact that "there have been many cases where parties out of the jurisdiction have been subjected to an injunction as to their conduct abroad--for example as to commencing or continuing proceedings there, or bringing children back to this country." [FN76]

Derby & Co. Ltd. v. Weldon (No. 1) [FN77] was the first case to raise the question in the typical pre-judgment case. In the event, the Court of Appeal treated the question as settled by Babanaft and Republic of Haiti v. Duvalier. It seems to have been conceded that the court had jurisdiction, and May and Parker L.JJ. accepted that it had. Nicholls L.J. concluded [FN78]:

"It is now established that under Section 37 of the Supreme Court Act 1981 the English court has jurisdiction to make a Mareva 'restraint' order in respect of assets outside England and Wales, both before judgment [citing Republic of Haiti] and after judgment [citing Babanaft]."

Subject to what is said below about the exercise of the contempt power, the grant of an injunction in relation to assets abroad cannot be said to be an exorbitant assertion of jurisdiction. It is sometimes said that an exorbitant jurisdiction is one which foreign courts will not recognise. [FN79] But this concept of exorbitant jurisdiction *281 is surely too wide. Apart from cases covered by the 1968 Convention an English court will not recognise a foreign judgment unless the defendant is present in the foreign country or has submitted to its jurisdiction, but it could not reasonably be said that every other basis of jurisdiction (e.g. tort committed within the jurisdiction) was to be regarded as exorbitant. In the present context an exorbitant exercise of jurisdiction is one which, in the phrase of Nadelmann, is "jurisdictionally improper," [FN80] or one which goes beyond what is internationally acceptable. The classic case is Article 14 of the French Civil Code, which allows a French national to sue any foreigner in the French court, whether or not the case has any connection with France. [FN81] For an English court to enjoin a person properly subject to its jurisdiction from disposing of assets abroad cannot in this sense be regarded as exorbitant. Perhaps Republic of Haiti v. Duvalier goes to the very edge of what is permissible. For the sole connection of England with that case was the presence in England of solicitors with access to the foreign assets. The exercise of jurisdiction can be justified on the basis that the solicitors could be treated as agents of the defendants, and the relevant information was located in England.

IV. EFFECT ON THIRD PARTIES

The problem of the propriety of the assumption of jurisdiction arises, as Kerr L.J. recognised in Babanaft, if the injunction is intended to affect third parties outside the jurisdiction. [FN82] The effect on third parties is, as indicated earlier in this paper, [FN83] crucial for the effectiveness of the Mareva jurisdiction. For a defendant (especially a foreign defendant) may not respect the terms of the injunction, and even where the defendant is in England the threat of committal, fine or sequestration against a defendant may not be enough to deter breaches, especially where the plaintiff does not have (as he usually will not have) full knowledge of the existence and location of the relevant assets. A bank which allows the defendant to remove or dissipate assets in breach of a Mareva injunction is guilty of contempt, and that is invariably sufficient, in the domestic context, to freeze the money held by the bank.

But, as the facts of Babanaft show, serious problems of international jurisdiction arise when the Mareva injunction relates *282 to property abroad. After the injunction had been granted by Vinelott J. [FN84] 47 entities, including numerous banks, in various countries were informed of it, and in correspondence solicitors for the judgment creditors suggested that foreign banks were bound by the English order, and that officers of a branch in London might be responsible for breaches of the injunction in foreign jurisdictions, and it was possible that these breaches might be punishable by proceedings for contempt.

It is clear that what led the Court of Appeal in Babanaft to exclude third parties from the operation of an order affecting foreign assets was the belief that it would be wrong for the English court to subject acts abroad to the principle that those who aid and abet a breach of an English injunction are guilty of contempt of court. [FN85] Kerr L.J. thought that an unqualified Mareva injunction over foreign assets would involve an exorbitant assertion of jurisdiction over third parties outside the jurisdiction of the English court. [FN86] For Neill L.J.

"it is wrong in principle to make an order which, though intended merely to restrain and control the actions of a person who is subject to the jurisdiction of the court, may be understood to have some coercive effect over persons who are resident abroad and who are in no sense subject to the court's jurisdiction." [FN87]

and Nicholls L.J. said [FN88]:

"It would be wrong for an English court, by making an order in respect of overseas assets against a defendant amenable to its jurisdiction, to impose or attempt to impose obligations on persons not before the court in respect of acts to be done by them abroad regarding property outside the jurisdiction. That, self-evidently, would be for the English court to claim an altogether exorbitant, extra-territorial jurisdiction."

There can be no doubt that for an English court to treat as punishable acts of contempt acts done abroad by a foreigner, not subject to the personal jurisdiction of the English court, would be wholly exorbitant, and contrary to the comity of nations. But it is very doubtful whether the English court would have jurisdiction, even under English law, to treat them as contempt. For it is well established that aiding and abetting the breach of an injunction is a civil contempt. [FN89] It is equally well established that a proceeding for *283 civil contempt is criminal or quasi-criminal. "A criminal contempt is one which takes place in the face of the court, or which prejudices a fair trial and so forth. A civil contempt is different. A typical case is disobedience to an order made by the court in a civil action ... Although this is a civil contempt, it partakes of the nature of a criminal charge. The defendant is liable to be punished for it. He may be sent to prison. The rules as to criminal charges have always been applied to such a proceeding." [FN90]

Nor can there be any doubt that (to quote a recent Consultation Paper of the Law Commission) "in general, the criminal jurisdiction of the English court is limited to acts done in England." [FN91] There is criminal jurisdiction to try a secondary party for aiding and abetting a crime committed in England even if the accused was abroad when he played his part, but only (it seems) if he is a British citizen. [FN92] But it has already been seen that the liability of a third party who assists in the breach of an injunction is not for breach of the injunction but for a contempt of court tending to obstruct the course of justice. Clearly, in the case of civil contempt the general principle of territoriality cannot be applied without qualification. Thus, a defendant who is ordered to convey foreign land, or to refrain from instituting foreign proceedings, may be punishable for acts done, or omitted to be done, abroad, if he refuses to convey the land (or conveys it to a third party), or if he institutes the foreign proceedings in breach of the injunction. The applicable principle must be that the English court has power, under English law, to punish parties to litigation or persons otherwise subject to its jurisdiction, who disobey its orders, wherever the act of disobedience takes place.

The simplest case at one end of the spectrum is that of an English defendant who is subject to an English injunction relating to acts to be done, or not done, abroad. No doubt that defendant is subject to the contempt power of the English court. At the other end is a third party who is wholly abroad and who acts wholly abroad. It should not matter whether he knows of the injunction. Thus if the House of Lords had not discharged the injunction restraining the liquidator of Laker Airways Ltd. from suing British *284 Airways and British Caledonian in the Washington District Court, [FN93] the liquidator (an English accountant) would have been in contempt of court if he had continued with the United States proceedings. But it cannot seriously be suggested that Judge Greene, the United States District Judge, who was well aware of the English injunction, would have been in contempt of the English court for aiding and abetting the breach; nor, it is suggested, could the liquidator's United States lawyers have been held in contempt. [FN94] Thus if a worldwide Mareva injunction is granted, and the defendant has deposits with the Commercial Bank of Ruritania in Ruritania, and the bank has no branch in London, then, irrespective of its knowledge of the injunction, the bank and its officers will not be in contempt of the English court if they allow the defendant to remove the deposits.

The difficult case is that of the third party who is subject to the personal jurisdiction of the English court, but who acts abroad. Some examples will illustrate the point. First, a firm of English solicitors holds assets abroad on behalf of the defendant. If, knowing of the injunction, the firm allows the defendant to dispose of the assets the solicitors will be in contempt. [FN95] Secondly, the defendant has deposits with the Cayman Islands branch of an English bank; knowing of the injunction, officers of the bank in London instruct the Cayman Islands branch to transfer the deposits to Panama. In these circumstances the London bank and its officers would be in contempt, because they have knowingly facilitated the breach of the injunction. Thirdly, the defendant has deposits with the Cayman Islands branch of an English bank, and with the Cayman Islands branch of a United States bank with a branch in London. The defendant instructs the two banks in the Cayman Islands to transfer the deposits to Switzerland, and these instructions are addressed to, and acted upon by officers of the two banks in the Cayman Islands, who know of the injunction.

Thus far the Court of Appeal has not formulated a general solution to the problem of third parties resident or present in the jurisdiction who act outside it. Instead the problem has been dealt with by express limitation in the order of its effect on third parties. In Republic of Haiti v. Duvalier [FN96] the court adopted a distinction *285 (which it accepted was unsatisfactory) between natural and juridical persons. The order was to apply to the acts abroad of individuals resident in England, but not to the acts abroad of corporations such as banks. The object of the order was to prevent the defendants' English solicitors from dealing with funds abroad, and its effect was to avoid putting into contempt English banks with foreign branches, or foreign banks with an English branch, in respect of movements of funds abroad. In Derby & Co. Ltd. v. Weldon (Nos. 3 and 4) [FN97] Lord Donaldson M.R. thought that the distinction between natural and juridical persons was not-justifiable, and the court fashioned an order which was designed, in part, to give a justification to an English bank which might wish to support the court in its efforts to prevent the defendant from frustrating the due course of justice. The Court of Appeal gave the order extraterritorial effect as regards persons who were subject to the jurisdiction of the court, and who had been given written notice of the order at their residence or place of business within the jurisdiction, and who were "able to prevent acts or omissions outside the jurisdiction of this court which assist in the breach of the terms of this order." A full analysis of the effect of such an order on banks abroad would be beyond the scope of this article, but it is sufficient to point out that it could raise severe problems of international law and policy if, for example, it is to be suggested that the English head office of Lloyds Bank is "able to prevent" payments out of its Cayman Islands or Hong Kong branch. Such an order might place greater responsibilities on the head office of Lloyds Bank in London in relation to accounts held at those branches abroad than it would on (say) the London branch of Citibank in relation to accounts held in the very same countries.

It is suggested that where English banks, or foreign banks with branches in England, act wholly abroad (without the connivance or assistance of bank officers in London) they will not be guilty of contempt, even though they are, in principle, subject to the in personam jurisdiction of the English court. The reason is to be found in the distinction between personal jurisdiction and subject matter jurisdiction. In an important judgment in a different context (that of the subpoena power) Hoffmann J. showed that it did not follow from the fact that a person was within the jurisdiction that there was no territorial limit to the things which it could order a person to do: Mackinnon v. Donaldson Lufkin Corp. [FN98] In that case it was held that it would be an excess of jurisdiction for the English court to order the London branch of a United States bank to *286 produce documents held at its head office in New York which were unrelated to the business of its London branch. Although that case concerned the power to subpoena documents from the New York head office of a New York bank with a branch in London, the principle applies equally to documents held in a foreign branch by an English bank. It follows from the principles of that judgment that the court should not apply the contempt power to banks in relation to business outside the jurisdiction. Consequently, it would be an exorbitant exercise of jurisdiction to apply the power to acts of banks and their officers abroad, irrespective of their knowledge of the injunction, even if they have a head office or branch in London, provided that the officers of the head office or branch in London are innocent of any complicity. [FN99]

V. DISCLOSURE ORDERS

Because there are severe practical limitations on the effectiveness of a restraint order over foreign assets, the valuable remedy is, in many cases, likely to be a disclosure order, ancillary to a Mareva injunction relating to foreign assets. If compliance with the disclosure order can be enforced, then the plaintiff can apply for an attachment in the foreign jurisdiction or for the Mareva injunction to be recognised or enforced in the foreign jurisdiction. As noted earlier, in Ashtiani v. Kashi [FN1] the Court of Appeal decided that it would normally be wrong to order disclosure of foreign assets (except for the purpose of tracing assets in proprietary claims). The Court of Appeal also indicated that where on "special grounds" disclosure might be ordered, the plaintiff should be required to give an undertaking not to use any information disclosed without the consent of the defendant or the leave of the court. The apparent reason for requiring such an undertaking was that without it it might be oppressive to the defendant that, as a result of an order of the English court, his assets abroad might be frozen, or he should be subjected to applications for seizure orders in many other jurisdictions; and, in addition, that if there were an order for disclosure of foreign assets that might lead to the plaintiff obtaining security (which was not the object or effect of a Mareva injunction) in some foreign jurisdiction.

After Ashtiani v. Kashi, the Court of Appeal held that in postjudgment cases it was appropriate to order disclosure of foreign *287 assets, [FN2] and in neither case did the court extract an undertaking not to use the information disclosed as a basis for seeking attachments abroad. Babanaft was also a post-judgment case, in which oral examination of assets worldwide was ordered. There was, however, no appeal from the disclosure order. Nevertheless Kerr L.J. ventured the suggestion that the view of Dillon L.J. in Ashtiani v. Kashi that the court should require an undertaking not to use the information disclosed without its consent was not as a general rule correct; otherwise, Kerr L.J. thought, the intended effect of Article 24 of the 1968 Convention, to allow assets to be frozen, and freezing orders to be recognised, throughout the Convention States, could be frustrated. But Neill and Nicholls L.JJ. adhered to the view with which they had concurred in Ashtiani v. Kashi. In particular Nicholls L.J. thought that an order for disclosure, whether before or after judgment, could easily have unforeseen results which would be unjust to the defendant; one example was that the information might be used to found jurisdiction on the substance of the case (or indeed of another case) in a foreign country; and there was therefore a need for the court to control strictly the use made of the information overseas. This could be effected by the court specifying in the disclosure order the uses which could be made of the information in foreign countries; or by an undertaking not to use the information without obtaining the consent of the court. [FN3]

Nicholls L.J. also suggested that, if the plaintiff were not resident within the jurisdiction, the court would normally need to be satisfied that it had a sufficient degree of control over the plaintiff to secure compliance with the undertaking. But in Republic of Haiti v. Duvalier [FN4] Staughton L.J., whilst not dissenting from the principle, thought that it would be wrong in the circumstances of the case to order the Republic of Haiti to give security. In that case an undertaking had been given to the judge not to use the information without the consent of the court, and the consent of the court had been sought and granted on a number of occasions.

The final result was reached in Derby & Co. Ltd. v. Weldon (No. 1), [FN5] where, the court indicated that in general plaintiffs should undertake, or it should be a condition of the order, that the decision as to whether any action should be taken abroad in *288 respect of foreign assets should be left to the English court. In the view of Nicholls L.J., in the context of the disclosure order,

"reasonable protection for the defendants is being built into the order to ensure that the information compulsorily disclosed is not misused and that it does not lead to the defendants being harassed or oppressed by having to face litigation, brought by financially more powerful parties, in overseas courts throughout the world." [FN6]

VI. FOREIGN EFFECTS

This section will consider the effect abroad of provisional measures such as Mareva injunctions, particularly in the light of the 1968 Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters, which has been law in the United Kingdom since the Civil Jurisdiction and Judgments Act 1982 came into force on January 1, 1987. In his important judgment in Babanaft Kerr L.J. agreed with Neill and Nicholls L.JJ. that the effect of the Mareva injunction should be limited in its effects on third parties. But he would have preferred a formula which restricted its effect on third parties, not absolutely, but merely "unless and to the extent that it is enforced by the courts of the state in which the assets are situated." Kerr L.J. himself recognised that in some foreign jurisdictions there might be no practical difference between his solution and the unconditional proviso favoured by the majority. Thus some foreign courts might in any event enforce English orders in ways which would affect third parties holding assets of the defendant, and to that extent the Babanaft proviso might in practice prove to be nugatory. In Republic of Haiti v. Duvalier Kerr L.J.'s version of the proviso was adopted, although Staughton L.J. doubted whether it conferred any additional benefit on the plaintiffs: until the order was enforced it would not operate on third parties, and after it was enforced the addition might well not be needed. But, he added, it might encourage the courts of other countries to enforce the English order; and if it had that effect, it would be desirable.

Kerr L.J. suggested that his formula reflected the current international approach, and was consistent with the policy behind the 1968 Convention. The key to the proper exercise of any extraterritorial jurisdiction lay in the question whether there was international reciprocity for the recognition and enforcement of a Mareva injunction purporting to operate on the defendant's assets abroad. In his view there was international reciprocity in the light of the 1968 Convention, which applied in most of the EEC States *289 and was soon to be extended to EFTA States. Article 24 of the 1968 Convention allowed application to be made to the courts of a Contracting State for provisional or protective measures: this was so whether or not the main proceedings on the substance were pending in that State. But the effect of the 1968 Convention was that the courts of State A had a duty to recognise and enforce the provisional or protective orders made by a court in a State which purported to have effect in State A.

Article 24 of the 1968 Convention provides:

"Application may be made to the courts of a Contracting State for such provisional measures, including protective, measures as may be available under the law of that State, even if, under this Convention, the courts of another Contracting State have jurisdiction as to the substance of the matter."

A full discussion of Article 24 and its role under the 1968 Convention [FN7] would be out of place in this paper, but for present purposes it is important to note two aspects. First, Article 24 authorises (but does not require) a Contracting State to grant provisional remedies even if the substance of the case is pending in another Contracting State. The accession of the United Kingdom led to a change in the law in order to provide for this power. This was necessary because of the unfortunate decision of the House of Lords in The Siskina [FN8] that a Mareva injunction could not be granted in order to preserve a fund in England while the substance of the matter proceeded abroad, even though freezing the fund in England was the only way in which the plaintiffs could hope to collect on their judgment. Section 25(1) of the Civil Jurisdiction and Judgments Act 1982 gives the English court power to grant interim relief where proceedings within the scope of the 1968 Convention have been, or are to be, commenced in another Contracting State or in another part of the United Kingdom. Section 25(3) allows this power to be extended by Order in Council to cases where proceedings are, or are to be, pending in other countries, but no Order in Council has yet been made. Accordingly, the English court may grant a Mareva injunction over persons subject to its personal jurisdiction not only where the substance of the action is pending in England, but also where it is pending in another Contracting State or in another part of the United Kingdom.

The second general point is that, although the 1968 Convention is by no means unique in providing that a State may grant provisional measures when the substance of the case is assigned to *290 another jurisdiction, it is unusual in not requiring judgments or orders to be final before they can be enforceable in other Contracting States. Thus by contrast with the bilateral Conventions concluded by the United Kingdom, the 1968 Convention provides for enforcement not only of orders which are not final, but of orders which do not merely provide for the payment of money. As a result, protective or provisional orders granted in one Contracting State may be capable of recognition and enforcement in other Contracting States.

The enforcement abroad of orders made in one Contracting State under Article 24 has been the subject of two decisions of the European Court of Justice: De Cavel v. De Cavel (No. 1) [FN9] and Denilauler v. Couchet Freres. [FN10] In the present context these cases are more important for what they did not decide than for what they did decide. In each of these cases the European Court of Justice was concerned with the enforcement in Germany of a French court order which purported to affect assets situate in Germany.

In De Cavel a French family court made an order in the course of French divorce proceedings. The French order purported to freeze furniture and other property in the couple's flat in Frankfurt, and also the contents of a safe hired by the wife in a Frankfurt bank, and the wife's account in a bank in Frankfurt. In Denilauler, in the course of proceedings in France by a French company against a German company for the purchase price of goods, the president of the court made an ex parte order authorising the freezing of the German company's accounts at the Société Générale Alsacienne de Banque at Frankfurt. In each of the cases the European Court held that the French order was not enforceable in Germany, but on grounds wholly unconnected with the fact that the French orders purported to reach assets in Germany. In De Cavel the court held that, because the 1968 Convention did not apply to questions of status and matrimonial rights in property, it equally did not apply to orders authorising provisional measures in the course of divorce proceedings. In Denilauler the court held that the recognition and enforcement provisions of the Convention did not apply to ex parte orders which were intended to be enforced without prior service.

*291 But in neither case did the court suggest that the French orders might not be capable of recognition and enforcement merely because they purported to apply to property in Germany. In De Cavel the French court appears to have exercised jurisdiction to order the putting under seal of property in Germany and the attachment of a bank account in Germany on the basis that it had jurisdiction over the divorce proceedings. [FN11] Observations were filed by the German and United Kingdom Governments, and by the Commission, but none of them took any point on the power of the French court in relation to assets in Germany.

In Denilauler the saisie-conservatoire was ordered by the French court under Article 48 of the French Code of Civil Procedure (ancien). [FN12] But under Article 48 the basis of jurisdiction is either (a) the domicile of the defendant; or (b) the situs of the property attached. The defendant was a German company, which, it seems clear, was not domiciled in France; and the property was situate in Germany, because, under French law (and the same principle applies in England) the fact that the bank was French did not affect the situs of the account, which was held at a German branch. It is therefore by no means certain that the French court had jurisdiction under French law to make an attachment of property in Germany. The question of the legitimacy of the French order, either under French law or in terms of the Convention, was not touched on in the written submissions of the Governments of the United Kingdom and Italy, or of the Commission, but it seems from the opinion of Advocate General Mayras that, during the oral hearings, the United Kingdom government expressed the view "that under the Brussels Convention no provisional or protective measure, whether adopted ex parte or in adversary proceedings, can have extra-territorial effect." [FN13] As indicated above, the European Court did not advert to this question, and decided that the French order was not enforceable in Germany because the enforcement provisions of the Convention did not apply to ex parte orders of that type. But the court also said [FN14]:

"The courts of the place or, in any event, of the Contracting State, where the assets subject to the measures sought are located, are those best able to assess the circumstances which may lead to the grant or refusal of the measures sought or to the laying down of procedures and conditions which the *292 plaintiff must observe in order to guarantee the provisional and protective character of the measures ordered."

The court explained that the courts where the assets are situate are those best able to lay down procedures and conditions (which in the English context would mean cross-undertakings and security) designed to guarantee the provisional and protective character of the measures. But the effect of the actual decision of the court is that measures of this kind affecting assets outside the territory of the court ordering them will be entitled to recognition and enforcement in other Contracting States provided that the orders are notified to the defendant and provided the defendant is given the opportunity inter partes to resist them. There is a basic inconsistency which may be capable of being explained (as is often so in the judgments of the European Court) only as the incorporation in the judgment of a minority view in the court.

There can be little doubt, however, that by implication the decisions in De Cavel (No. 1) and Denilauler accept in principle that (a) a court in a Contracting State may exercise jurisdiction under Article 24 in relation to assets abroad; (b) provided the case is within the scope of the Convention and the defendant has contested it and failed, an order made under Article 24 will be entitled to recognition and enforcement in other Contracting States.

In Babanaft, therefore, Kerr L.J. accepted that it was implicit in the decisions of the European Court in De Cavel v. De Cavel (No. 1) and Denilauler v. Couchet Freres that extraterritorial orders akin to Mareva injunctions, made by the courts in one Convention State and purporting to operate on assets located in another Convention State, would be recognised and enforced by the courts of the latter State if they fell within the scope of the 1968 Convention and satisfied certain requirements designed to protect the defendant against whom the orders were made. These cases showed that a pre-judgment Mareva injunction granted by an English court in aid of English proceedings, freezing specific assets of a defendant located in the territory of any Convention State, was entitled to recognition and enforcement by the courts of that State if the English proceedings fell within the scope of the 1968 Convention, and did not fall within any of the exceptions, and the order was made inter partes, or at any rate after the defendant had had an opportunity to resist the application of the order.

The implications of these decisions, Kerr L.J. thought, were that: (a) there was no reason why the English court should refrain from granting inter partes pre-judgment Mareva injunctions in cases falling within the 1968 Convention in relation to assets situated in the territories of other Convention States (and eventually in the *293 territories of all or most of the EFTA States); (b) there could be no question of such orders operating directly upon the foreign assets by way of attachment, or upon third parties, such as banks, holding the assets. The effectiveness of such orders for these purposes could only derive from their recognition and enforcement by the local courts, as should be made clear in the terms of the orders to avoid any misunderstanding suggesting an unwarranted assumption of extraterritorial jurisdiction. But if the orders fulfilled the requirements of the Convention, then the local courts would be bound to recognise and enforce them; apart from any EEC or EFTA connection there was no jurisdiction (as opposed to discretionary) ground which would preclude any English court from granting a pre-judgment Mareva injunction over assets situated anywhere outside the jurisdiction, which were owned or controlled by defendants subject to the jurisdiction of the English court, provided that the order made it clear that it was not to have any direct effect upon the assets or upon any third parties outside the jurisdiction, save to the extent that the order might be enforced by the local courts. Whether an order which was qualified in this way would be enforced by the courts of States where the defendant's assets were situated would depend on the local law. The essence of the reasoning of Kerr L.J. is that the two judgments of the European Court implicitly accept that a jurisdiction to order provisional measures in foreign countries is not of itself an exorbitant jurisdiction; accordingly, the extension of the Mareva injunction to foreign assets is not exorbitant. Further, the fact that such orders are capable of recognition and enforcement in foreign countries provides a mechanism for simultaneously limiting their effect on third parties and providing an avenue for making them effective as against third parties in foreign countries. [FN15]

It cannot be regarded as finally settled that Mareva injunctions affecting assets abroad, even after inter partes hearings, are enforceable under the 1968 Convention. [FN16] It is clear from the *294 report of the arguments, and from the opinions of the Advocates-General in De Cavel (No. 1) and Denilauler that the legitimacy of the extra-territorial effect of provisional measures was not fully considered, or perhaps considered at all. Nor do the judgments consider the question whether it would be legitimate for the courts of State A to make orders in relation to assets in State B, when the courts of State A are not seised of the substance of the matter. In both De Cavel (No. 1) and Denilauler the French courts which made the orders were the courts which were dealing with the substance of the case. [FN17] In Republic of Haiti v. Duvalier the English court was not the court which was seised of the substantive proceedings. The sole connection with England was the presence of the firm of solicitors through which foreign assets were held. It is very doubtful whether such an order would be capable of recognition abroad.

VII. PRACTICAL IMPLICATIONS

With varying degrees of emphasis, all three decisions indicate that Mareva injunctions and disclosure orders relating to foreign assets should be granted rarely or only in exceptional circumstances. [FN18] This may perhaps be regarded as inevitable lip-service to caution and restraint which naturally accompanies an innovation the implications of which have yet to be thought through. First, it is clear that an injunction will be more readily granted in tracing or proprietary claims, and even Ashtiani v. Kashi recognised that an order affecting foreign assets might be appropriate in such cases. Strictly, perhaps, an injunction in such a type of case should not be classified as a Mareva injunction. What emerges from both Republic of Haiti v. Duvalier and Derby & Co. Ltd. v. Weldon (No. 1) is that it may sometimes be difficult to determine whether the nature of the claim is proprietary. In Republic of Haiti the difficulty was exacerbated by the fact that the substantive proceedings were pending in France, and the Court of Appeal therefore had to consider whether the claim was proprietary in the light of the French proceedings, which in turn no doubt might have looked to Haiti law to determine whether the owner of the assets was the Republic or the Duvalier family. The court thought that the action in France was not in itself a proprietary claim; ownership of assets would be asserted only when the assets were found. In Derby & *295 Co. Ltd. v. Weldon (No. 1) the Court of Appeal made it clear (especially in the judgment of Nicholls L.J.) that it was not the role of the court at the interlocutory stage to determine complex questions of law or fact as to whether the claim was proprietary or not. If there was a seriously arguable case that the plaintiffs had a proprietary interest under a trust the court had jurisdiction to require them to order the defendants to provide information. It should follow that in those circumstances a less exacting standard should apply in the exercise of the discretion to grant restraining and disclosure rules. In practice, this means that it will be easier to obtain the order in cases of fraud or breach of fiduciary duty, and the courts will not, it is hoped, need to resort to purely conceptual distinctions between tracing claims in the strict sense and claims for breach of fiduciary duty, which led to such unfortunate decisions as Lister & Co. v. Stubbs. [FN19]

Secondly, it is also very clear from the decisions that an order relating to foreign assets will more readily be granted if the order is made after judgment than before. [FN20] It should follow that there will be other differences in the exercise of the discretion after judgment. Thus after the plaintiff has obtained judgment, and is therefore ex hypothesi bound to recover if there are assets available (subject to any question of appeal) there is no reason in principle why he should have to give the usual cross-undertaking in damages, still less security for the cross-undertaking. [FN21] This conclusion is obvious if there is no stay of execution pending appeal, and there seems to be no reason why, if there is a stay of execution (which is only given in exceptional circumstances [FN22]), the judgment creditor should not be adequately and unconditionally protected. Nor, despite the view of Neill and Nicholls L.JJ. in Babanaft to the contrary, is there any reason in principle why, after judgment, a disclosure order (whether under R.S.C. Order 48 or ancillary to the injunction) should be subject to an undertaking not to use the information without the consent of the court. The whole purpose of the order is to aid execution, and measures of execution at any rate should be permitted freely until the judgment is satisfied.

The final, and very serious, problem is the effectiveness of these orders. It is, of course, true that the court is reluctant to make *296 orders which would be ineffective to achieve what they set out to do. [FN23] But it is well established that the fear that the defendant will not obey an injunction is not a bar to its grant. In Castanho v. Brown & Root (U.K.) Ltd. [FN24] Lord Scarman, answering the point that to grant an injunction to restrain foreign proceedings would be useless, a mere brutum fulmen, cited with evident approval the well-known passage in Re Liddell's Settlement Trusts [FN25]:

"It is not the habit of this court in considering whether or not it will make an order to contemplate the possibility that it will not be obeyed."

It would be wrong to speculate on the effectiveness of the orders made in the recent Court of Appeal decisions, because they were made in the context of litigation which is, or may be, continuing. But, in general, it cannot be said that those who are judgment debtors, or who are, on solid grounds, alleged to be in breach of fiduciary duty, are those who are most likely to obey court orders unless they are forced to obey, or have an interest in obedience. Nor are those who, on solid grounds, are alleged to have spirited assets away to, or secreted funds in, offshore companies and havens, the most likely candidates for obedience and candour in the execution of Mareva injunctions and ancillary disclosure orders. The problem is exacerbated when the defendant is outside the jurisdiction and is not easily amenable to the exercise of the contempt power. The mere presence of assets within the English jurisdiction which are capable of sequestration is not sufficient to secure effectiveness, for there would be no need for a worldwide Mareva injunction if the domestic assets were sufficient to meet the claim, and the remedy of sequestration is therefore no deterrent to a determined defendant. In practice the remedy is likely to be most effective where the defendant is an individual present within the jurisdiction (or a company with offices within the jurisdiction) or if the defendant has a real interest in defending the substance of the English action or (as the case may be) in appealing the English judgment. It is possible that these are the only cases in which the remedy will be effective, and this may be regarded as a cynical, but realistic, conclusion.

Each of the decisions shows that in appropriate cases the court may regard the remedy as one which will wholly or partially achieve its object. In Babanaft the court no doubt took account of *297 the connection of the defendants with England, and of their interest in pursuing an appeal, and of the fact that they were complying with a disclosure order; in Republic of Haiti there were English solicitors who would be bound by the order; and in Derby & Co. Ltd. v. Weldon (Nos. 1 and 3) the defendants were connected with England and were vigorously contesting the substance of the allegations against them. [FN26]

In those cases where an effective order can be made, it is likely to be the disclosure order which will be the most useful in practical terms. If proper disclosure is made of assets abroad, the plaintiff will be in a position to make an application in the relevant foreign court for an attachment. If the foreign court is in a 1968 Convention Contracting State, it is likely that the courts of that State will exercise an Article 24 jurisdiction to make provisional orders in aid of proceedings in England. If the State is not a Contracting State, then the same result will follow in those countries which would allow an attachment to be made in aid of proceedings pending in other jurisdictions; it may be that the number of such countries will be very small, and that in most countries it will be necessary to start fresh, parallel proceedings on the substance and obtain security in those proceedings.

The practical consequence is that it is really the Mareva injunction which is ancillary to the disclosure order, rather than the traditional relationship in which it was the disclosure order which was ancillary to the Mareva injunction. For the disclosure order will be the main remedy in England, and the Mareva injunction will, in the words of Nicholls L.J. in Babanaft, be a "holding" injunction, to give the plaintiff time to apply to the relevant foreign court for appropriate orders of attachment or the like. [FN27] Then an undertaking in the form required in Derby & Co. Ltd. v. Weldon (No. 1), or a variant of it, will give the English court the power to control the plaintiff's exercise of its right to seek attachments in foreign countries, in order to prevent tactical harassment of a defendant and to limit the plaintiff's security. It is not likely to make much difference whether in the foreign country the plaintiff seeks recognition and enforcement of the English order, or makes a fresh application to the foreign court. It is only in countries which are parties to the 1968 Convention that an English interlocutory injunction would be capable of recognition and enforcement; in those countries it would depend on cost and convenience whether it would be more *298 appropriate to seek a fresh order; in other countries the only remedy would be a fresh application.

VIII. SUMMARY AND CONCLUSIONS

It may be helpful to summarise the operation of the Mareva injunction in the international context:

1. A Mareva injunction may be granted if the plaintiff has a good arguable case on the substance of the claim, and can show that there is a real risk that the defendant will defeat execution of any ultimate judgment by disposing of, or hiding, his assets. [FN28]

2. The defendant must be amenable to the personal jurisdiction of the English court, and must therefore be present within the jurisdiction, or submit to the jurisdiction, or the case must come within R.S.C. Order 11, rule 1(1) or rule 1(2).

3. A Mareva injunction, even in respect of assets within the jurisdiction, cannot be granted if the defendant is outside the jurisdiction, and does not submit, on the sole ground that a Mareva injunction is sought "ordering the defendant to do or refrain from doing anything within the jurisdiction" (R.S.C. Order 11, rule 1(1)(c)). [FN29]

4. If, however, proceedings are pending in another State which is a party to the 1968 Convention, or in another part of the United Kingdom, the English court may grant interim relief, [FN30] including a Mareva injunction, even if the substantive proceedings are not pending in England and even if the English court would have no jurisdiction over such substantive proceedings. In such a case, service outside the jurisdiction would be effected, without leave, under R.S.C. Order 11, rule 1(2). [FN31]

5. The court has jurisdiction to make an order affecting assets abroad (and it may do so even if there are no assets in England [FN32]) but the exercise of the jurisdiction is in the discretion of the court and will be exercised with particular caution. It will be more readily exercised if the injunction is sought after final judgment has been given against the defendants, or if the claim is a proprietary claim.

6. The court may also make a disclosure order relating to assets abroad; prior to judgment it will be ancillary to a *299 Mareva injunction, [FN33] and after judgment it will normally be made under R.S.C. Order 48. [FN34]

7. The injunction will not normally be granted unless it is made clear that it is not to affect third parties (other than those subject to the jurisdiction of the English court) in respect of acts outside the jurisdiction; nor will the order (and ancillary disclosure order) normally be made unless the plaintiff undertakes that no attachment proceedings will be taken abroad without the consent of the English court.

This paper began by indicating that the Mareva injunction was developed to fulfil a function which in civil law countries was affected by such remedies as the saisie-conservatoire, and in the United States by the remedy of attachment. The creation of the disclosure order, and the extension of the Mareva injunction to assets abroad, has meant that the Mareva injunction goes far beyond the scope of saisie or attachment, which are forms of execution (akin, in the case of debts, to garnishment) and are (subject to the effect of the curious French decisions considered by the European Court in De Cavel (No. 1) and Denilauler) strictly territorial in operation. But the extension of the Mareva jurisdiction to assets abroad is, it is suggested, justifiable in terms of international law and comity provided that the case has some appropriate connection with England, that the court does not purport to affect title to property abroad, and that the court does not seek to control the activities abroad of foreigners who are not subject to the personal jurisdiction of the English court.

LAWRENCE COLLINS. [FNa1]

FN1. Kerr L.J. in Babanaft International Co. v. Bassatne [1989] 2 W.L.R. 232, at p.247 (C.A.).

FN2. [1989] 2 W.L.R. 232 (Kerr, Neill and Nicholls L.JJ.).

FN3. [1989] 2 W.L.R. 261 (Fox, Stocker and Staughton L.JJ.).

FN4. [1989] 2 W.L.R. 276 (May, Parker and Nicholls L.JJ.). The important decision in Derby & Co. Ltd. v. Weldon (Nos. 3 and 4) [1989] 2 W.L.R. 412 (C.A.) was rendered after this article was ready for press, but it has been possible to incorporate references to it. The court consisted of Lord Donaldson M.R. and Neill and Butler-Sloss L.JJ.

FN5. Some of them are discussed in Collins (1981) 1 Yb.Eur.L. 249; see also McLachlan (1987) 36 I.C.L.Q. 669. For the extraterritorial reach of Anton Piller orders (on which see n.30, infra) see Altertext Inc. v. Advanced Data Communications Ltd. [1985] 1 W.L.R. 457; cf. Cook Industries Inc. v. Galliher [1979] Ch. 439. On ancillary relief in matrimonial cases see Hamlin v. Hamlin [1986] Fam. 11 (C.A.).

FN6. Mareva Compania Naviera S.A. v. International Bulkcarriers S.A. [1975] 2 Lloyd's Rep. 509 (C.A.), following Nippon Yusen Kaisha v. Karageorgis [1975] 1 W.L.R. 1093 (C.A.).

FN7. See especially Rasu Maritima S.A. v. Pertamina [1978] Q.B. 644 (C.A.); Third Chandris Shipping Corp. v. Unimarine S.A. [1979] Q.B. 654 (C.A.); Z Ltd. v. A-Z [1982] Q.B. 558 (C.A.); Ninemia Corp. v. Trave GmbH [1983] 1 W.L.R. 1412 (C.A.), and for the practice generally Gee and Andrews, Mareva Injunctions: Law and Practice (1987).

FN8. (1890) 45 Ch.D. 1. See also Mills v. Northern Railway of Buenos Ayres Co. (1870) 5 Ch.App. 621; Robinson v. Pickering (1881) 16 Ch.D. 660.

FN9. Deutsche Schachtbau v. R'as al Khaimah National Oil Co. [1987] 3 W.L.R. 1023, at p.1036, per Sir John Donaldson M.R., revd. on other grounds [1988] 3 W.L.R. 230 (H.L.).

FN10. The Siskina v. Distos Compania Naviera S.A. [1979] A.C. 210.

FN11. See, e.g. Rasu Maritima S.A. v. Pertamina [1978] Q.B. 644 (C.A.); The Agrabele [1979] 2 Lloyd's Rep. 117.

FN12. See Bekhor & Co. v. Bilton [1981] Q.B. 923, at pp.936-937 (C.A.), and cases cited there.

FN13. [1981] Q.B. 923 (C.A.).

FN14. At p.940. See also Z Ltd. v. A-Z [1982] Q.B. 558 (C.A.). In a tracing claim it had been held that an order could be made against a bank to give discovery of accounts held for allegedly fraudulent defendants: Bankers Trust Co. v. Shapira [1980] 1 W.L.R. 1274 (C.A.). See also A v. C [1981] Q.B. 956.

FN15. See, e.g. Cretanor Maritime Co. Ltd. v. Irish Marine Management Ltd. [1978] 1 W.L.R. 966 (C.A.); Iraqi Ministry of Defence v. Arcepey Shipping Co. S.A. (The Angel Bell) [1981] Q.B. 65; Derby & Co. Ltd. v. Weldon (Nos. 3 and 4) [1989] 2 W.L.R. 412 (C.A.).

FN16. [1982] Q.B. 558, at p.573 (C.A.).

FN17. For the history of foreign attachment, which became obsolete in England by the late nineteenth century, but thrived in the United States see the discussion by the U.S. Supreme Court in Ownby v. Morgan, 256 U.S. 94, at p.104 (1921) and by Lord Denning M.R. in Rasu Maritima S.A. v. Pertamina [1978] Q.B. 644, at pp.657-658 (C.A.).

FN18. But the decision of the U.S. Supreme Court in Shaffer v. Heitner, 433 U.S. 186 (1977) severely limited the use of what by then had become known in the United States as quasi-in rem jurisdiction, i.e. the attachment of assets to found the jurisdiction of the court, rather than merely to preserve assets within the jurisdiction. See also Rush v. Savchuk, 444 U.S. 320 (1980), and the discussion in Scoles and Hay, Conflict of Laws (1982), pp.236-252.

FN19. [1989] 2 W.L.R. at p.240. Cf. Att.-Gen. v. Newspaper Publishing plc [1988] Ch. 333 at p.343, revd. on other grounds ibid., 350.

FN20. Seaward v. Paterson [1897] 1 Ch. 545; Kerr, Injunctions (Paterson, 6th ed., 1927), p.675.

FN21. [1982] Q.B. 558 (C.A.).

FN22. At pp.573-574.

FN23. See, e.g. Third Chandris Shipping Corp. v. Unimarine S.A. [1979] Q.B. 645 at pp.668-669 (C.A.).

FN24. Intraco Ltd. v. Notis Shipping Corp. [1981] 2 Lloyd's Rep. 256 (C.A.).

FN25. That this was the ratio is confirmed by Deutsche Schachtbau v. R'as Al Khaimah National Oil Co. [1987] 3 W.L.R. 1023, 1039, revd. on other grounds [1988] 3 W.L.R. 230 (H.L.).

FN26. [1981] 2 Lloyd's Rep. at p.258.

FN27. See, e.g. CBS U.K. Ltd. v. Lambert [1983] Ch. 37; PCW (Underwriting Agencies) Ltd. v. Dixon [1983] 2 All E.R. 158 at p.166, and the standard form of Mareva order referred to in Ashtiani v. Kashi [1987] Q.B. 888 at pp.897-898 (C.A.).

FN28. See, e.g. Bekhor v. Bilton [1981] Q.B. 923 at p.935; Ashtiani v. Kashi [1987] Q.B. 888 at p.901.

FN29. [1986] 2 F.T.L.R. 111.

FN30. See Anton Piller K.G. v. Manufacturing Processes Ltd. [1976] Ch. 55 (C.A.): this is an ex parte "search and seizure" order (particularly valuable in intellectual property cases) giving the plaintiff access to the premises and documents of the defendant: for the procedure see Supreme Court Practice (1988) at pp.485-488.

FN31. [1986] 2 F.T.L.R. at p.112.

FN32. [1987] Q.B. 888 (C.A.).

FN33. The composition of the court is worthy of note, since Neill and Nicholls L.JJ. were members of the court in Babanaft International S.A. v. Bassatne [1989] 2 W.L.R. 232 and Nicholls L.J. was a member of the court in Derby & Co. Ltd. v. Weldon (No. 1) [1989] 2 W.L.R. 276.

FN34. [1987] Q.B. at p.899.

FN35. [1983] 1 A.C. 280 at p.323.

FN36. For examples see Kerr L.J. in Z Ltd. v. A-Z [1982] Q.B. 558 at p.585 (C.A.).

FN37. See, e.g. Iraqi Ministry of Defence v. Arcepey Shipping Co. S.A. (The Angel Bell) [1981] Q.B. 65.

FN38. Cretanor Maritime Co. Ltd. v. Irish Marine Management Ltd. [1978] 1 W.L.R. 966 (C.A.).

FN39. [1987] Q.B. at pp.899, 901. See also Neill L.J. at p.905.

FN40. Re a Company [1985] B.C.L.C. 333.

FN41. April 15, 1987, reported in The Independent, April 16, 1987, but not on this point. For further proceedings see [1988] 1 W.L.R. 863 (C.A.).

FN42. [1987] Q.B. at p.903. Both Neill and Nicholls L.JJ. agreed with the whole of Dillon L.J.'s judgment.

FN43. For references to the material in Canada, Australia and New Zealand see Dicey and Morris, Conflict of Laws (11th ed., 1987) at p.192.

FN44. (1985) 1 N.S.W.L.R. 155, affirming [1984] 2 N.S.W.L.R. 662.

FN45. (1986) 42 S.A.S.R. 413. Cf. Re Clunies-Ross (1987) 72 A.L.R. 241 (power of Federal Court in bankruptcy to restrain disposition of property in the Cocos Islands).

FN46. (1987) 7 N.S.W.L.R. 571.

FN47. [1987] L.R.C. (Comm.) 835.

FN48. At p.840.

FN49. [1988] Q.B. 738 (C.A.). In Reilly v. Fryer [1988] 2 F.T.L.R. 69 (C.A.), a Mareva disclosure order in relation to foreign assets was refused, but it was wrongly conceded that Ashtiani v. Kashi applied equally after judgment as before; and the judgment creditors should have proceeded under Ord. 48.

FN50. The Civil Jurisdiction and Judgments Act 1982 was not then in force.

FN51. [1988] 3 W.L.R. 1190 (C.A.).

FN52. [1987] 1 W.L.R. 1711.

FN53. [1987] 3 W.L.R. 1023 (C.A.), revd. on other grounds [1988] 3 W.L.R. 230 (H.L.).

FN54. At p.1036, citing Bullus v. Bullus (1910) 102 L.T. 399.

FN55. [1989] 2 W.L.R. 232 (C.A.).

FN56. At p.238.

FN57. [1989] 2 W.L.R. 261 (C.A.).

FN58. It is possible that in England such a claim would be contrary to public policy as being the direct enforcement by a foreign state of its rights (see Dicey and Morris, op. cit. supra, n.43 at pp.100-104, 106-109) and not merely the assertion of a "patrimonial right" (on which see cases cited in Dicey and Morris at p.104, n.9). If that suggestion is right, it clearly would be arguable that interim measures in England to support such a claim would also be contrary to public policy, but the point does not seem to have been taken. The point may now be moot in view of recent political developments in Haiti.

FN59. [1989] 2 W.L.R. 276 (C.A.).

FN60. For its predecessors see Judicature Act 1873, s.25(5); Judicature Act 1925, s.45.

FN61. North London Railway Co. v. Great Northern Railway Co. (1883) 11 Q.B.D. 30. For a modern example of the principle see Associated Newspapers Group plc v. Insert Media Ltd. [1988] 1 W.L.R. 509.

FN62. The Siskina v. Distos Compania Naviera [1979] A.C. 210. See Collins, op. cit. supra, n.5, at pp.254-259.

FN63. South Carolina Insurance Co. v. Assurantie Maatschappij "De Zeven Provincien" N.V. [1987] A.C. 24.

FN64. [1987] A.C. at p.44.

FN65. Ord. 11, r. 1(1)(d).

FN66. [1979] A.C. 210. The law in the United States is different: see Restatement, Second, Judgments, s.8(1)(c); Scoles and Hay, Conflict of Laws (1982) at p.244.

FN67. Civil Jurisdiction and Judgments Act 1982, s.25(1).

FN68. Third Chandris Shipping Corp. v. Unimarine S.A. [1979] Q.B. 645 at p.668.

FN69. This is confirmed by Derby & Co. Ltd. v. Weldon (Nos. 3 and 4) [1989] 2 W.L.R. 412 (C.A.), departing from the practice in MPBXL Corp. v. International Banking Corp., unrep. 1975 (C.A.).

FN70. Kerr, Injunctions (Paterson, 6th ed., 1927) p.11.

FN71. [1971] 3 All E.R. 1175 (C.A.).

FN72. [1989] 2 W.L.R. 232.

FN73. [1987] Q.B. 888 (C.A.).

FN74. [1989] 2 W.L.R. at p.252. See also Nicholls L.J. at p.255.

FN75. [1989] 2 W.L.R. 261. It was held that service of a writ claiming interim measures in aid of foreign proceedings under the Civil Jurisdiction and Judgments Act 1982, s.25(1) is made under Ord. 11, r.1(2) (i.e. leave is not required, but of course the court's discretion is directly involved in the making of the order for interim measures).

FN76. [1989] 2 W.L.R. at p.273, citing Re Liddell's Settlement Trusts [1936] Ch. 365.

FN77. [1989] 2 W.L.R. 276.

FN78. At p.284. See also Derby & Co. Ltd. v. Weldon (Nos. 3 and 4) [1989] 2 W.L.R. 412 (C.A.).

FN79. This extended concept of exorbitant jurisdiction is found in The Siskina [1979] A.C. 210 at p.254, per Lord Diplock; Amin Rasheed Shipping Corp. v. Kuwait Insurance Co. [1984] A.C. 50 at p.65, per Lord Diplock; cf. The Atlantic Star [1974] A.C. 436 at p.476, per Lord Kilbrandon; Spiliada Maritime Corp. v. Cansulex Ltd. [1987] A.C. 460 at p.481, per Lord Goff.

FN80. Jursidictionally Improper Fora, in Conflict of Laws: International and Interstate (1972) at p.222.

FN81. This is treated as exorbitant by Article 3 of the 1968 Convention: cf. Schibsby v. Westenholz (1870) L.R. 6 Q.B. 155; Mann, Studies in International Law (1973), pp.66-69; Nadelmann, op. cit. supra, pp.223-226. Cf. Deutsche Schachtbau v. Shell International Petroleum Co. Ltd. [1988] 3 W.L.R. 230 at pp.245, 259 (H.L.).

FN82. [1989] 2 W.L.R. 232, at p.257.

FN83. Text at nn.20-22, supra.

FN84. The worldwide Mareva was originally refused by Vinelott J. but granted after an application to the Court of Appeal: see [1989] 2 W.L.R. at p.236.

FN85. Under the principle in Z Ltd. v. A-Z [1982] Q.B. 558 (C.A.).

FN86. [1989] 2 W.L.R. at p.251.

FN87. [1989] 2 W.L.R. at p.254.

FN88. [1989] 2 W.L.R. at p.257.

FN89. See Arlidge and Eady, The Law of Contempt (1982) at pp.65-68.

FN90. Comet Products (U.K.) v. Hawkex Plastics Ltd. [1971] 2 Q.B. 67 at p.73, per Lord Denning M.R.; see also Re Bramblevale [1970] Ch. 128. But contrast Garvin v. Domus Publishing Ltd. [1988] 3 W.L.R. 344.

FN91. Jurisdiction over Fraud Offences with a Foreign Element (1987) at p.1. See also Law Commission, Report on the Territorial and Extraterritorial Extent of the Criminal Law. Law Com. No. 91 (1978).

FN92. Law Commission paper (1987) at pp.52-53, citing R. v. Jameson [1896] 2 Q.B. 425; R. v. Robert Millar Ltd. [1970] 2 Q.B. 54 (C.A.). See the important article by Glanville Williams (1985) 81 L.Q.R. 276 at pp.395 and 518, especially pp.529-534.

FN93. British Airways Board v. Laker Airways Ltd. [1985] A.C. 58.

FN94. In Derby & Co. Ltd. v. Weldon (Nos. 3 and 4) [1989] 2 W.L.R. 412 (C.A.) Lord Donaldson M.R. considered that where a person was wholly outside the jurisdiction, and assisted in the breach of the order, either it would not be a contempt, or it would involve an excess of jurisdiction to seek to punish him. The two ways of putting it are two sides of the same coin: it is not a contempt because there is no jurisdiction to punish for the act done wholly abroad by a person not subject to the jurisdiction.

FN95. This was the situation in Republic of Haiti v. Duvalier.

FN96. [1989] 2 W.L.R. 261, applied in Derby & Co. Ltd. v. Weldon (No. 1) [1989] 2 W.L.R. 276, and criticised in Derby & Co. Ltd. v. Weldon (Nos. 3 and 4), supra.

FN97. [1989] 2 W.L.R. 412 (C.A.).

FN98. [1986] Ch. 482.

FN99. For some wider issues see Collins, "Banking Secrecy and the Enforcement of Securities Legislation," in Goode (ed.) Conflicts of Interest in the Changing Financial World (1986) at p.81.

FN1. [1987] Q.B. 888 (C.A.).

FN2. Interpool Ltd. v. Galani [1988] Q.B. 738 (C.A.); Maclaine Watson & Co. Ltd. v. International Tin Council (No. 2) [1988] 3 W.L.R. 1190 (C.A.); see also Yandil Holdings Pty Ltd. v. Insurance Co. of North America (1987) 7 N.S.W.L.R. 571.

FN3. [1989] 2 W.L.R. at p.260.

FN4. [1989] 2 W.L.R. 261.

FN5. [1989] 2 W.L.R. 276. In Derby & Co. Ltd. v. Weldon (Nos. 3 and 4) [1989] 2 W.L.R. 412 (C.A.), the primary object of the Mareva was to obtain attachments in Luxembourg and Panama.

FN6. [1989] 2 W.L.R. at p.285.

FN7. On this provision see Collins, Civil Jurisdiction and Judgments Act 1982 (1983) at pp.98-102.

FN8. [1979] A.C. 210, on which see Collins (1981) 1 Yb. Eur. L. 249 at pp.254- 258.

FN9. Case 143/78 [1979] E.C.R. 1055.

FN10. Case 125/79 [1980] E.C.R. 1553. In Case 258/83 Calzaturificio Brennero SAS v. Wendel GmbH [1984] E.C.R. 3971 an Italian court made a protective order purporting to seize the assets of a German company (which had no assets in Italy) up to the value of the plaintiff's claim. It seems to have been assumed by the German court which was asked to enforce the order, and by the European Court, that in principle the order was enforceable in Germany.

FN11. See Advocate General Warner [1979] E.C.R. at p.1069.

FN12. According to the plaintiff: [1980] E.C.R. at p.1557.

FN13. [1980] E.C.R. at p.1576. See also the suggestion (in the oral procedure) by the Commission (recorded at p.1581) that a plaintiff faced with a defendant with assets in several countries would be obliged to seek urgent measures in each.

FN14. At p.1570.

FN15. In Case 145/86 Hoffmann v. Kreig, The Times, March 26, 1988, the European Court held that a foreign order which is capable of recognition under the 1968 Convention should, in principle, produce the same effects in the State in which enforcement was sought as it had in the State where the order was originally made. But this does not mean that the Contracting States must adopt the same remedies as English law, e.g. contempt of court. It is sufficient if they give the order the same general effect. Thus under civil law systems attachment operates like garnishment, so that the third party who pays the defendant will still remain liable to pay the plaintiff.

FN16. But it is clear that, even though an English Mareva injunction may be capable of recognition or enforcement in the Republic of Ireland, which is a party to the 1968 Convention, it is not capable of recognition or enforcement in Scotland or Northern Ireland: section 18(5) of the Civil Jurisdiction and Judgments Act 1982 excludes from the operation of the intra-United Kingdom enforcement provisions so much of any judgment as is "a provisional (including protective) measure other than an order for the making of an interim payment."

FN17. As was the Italian court in Case 258/83 Calzaturificio Brennero SAS v. Wendel GmbH [1984] E.C.R. 3971.

FN18. Babanaft [1989] 2 W.L.R. 232, at p.242; Republic of Haiti [1989] 2 W.L.R. 261, at p.273; Derby & Co. Ltd. v. Weldon (No. 1) [1989] 2 W.L.R. 276, at p.261. In Derby & Co. Ltd. v. Weldon (Nos. 3 and 4) [1989] 2 W.L.R. 412 (C.A.) Lord Donaldson M.R. suggested that this merely meant that the remedy ought to be granted only when it was really necessary.

FN19. (1890) 45 Ch.D. 1. See Goff and Jones, Law of Restitution (3rd ed., 1986), at pp.656-657.

FN20. See especially Babanaft [1989] 2 W.L.R. 232; Republic of Haiti [1989] 2 W.L.R. 261; Derby & Co. Ltd. v. Weldon (Nos. 3 and 4) [1989] 2 W.L.R. 412 (C.A.). In Babanaft it was held that Article 16(5) of the 1968 Convention (which gives exclusive jurisdiction to the courts of the Contracting State where judgment is to be enforced) did not preclude provisional measures affecting assets in other Contracting States as a prelude to execution in those States. This is clearly right: cf. Collins, Civil Jurisdiction and Judgments Act 1982 (1983) at p.83.

FN21. Nor should a judgment debtor be entitled to "Angel Bell" relief (supra, n.37) to pay his trade creditors out of the foreign assets.

FN22. R.S.C. Ord. 59, r.13.

FN23. Att.-Gen. v. Guardian Newspapers Ltd. [1987] 1 W.L.R. 1248, at pp.1269- 1270, per Sir Nicolas Browne-Wilkinson V.-C., revd. (but not on the correctness of the principle) ibid., 127 (C.A.), 1282 (H.L.); see also Att.-Gen. v. Guardian Newspapers Ltd. (No. 2) [1987] 2 W.L.R. 805 at p.911.

FN24. [1981] A.C. 557 at p.574.

FN25. [1986] Ch. 365 at p.374, per Romer L.J.

FN26. In Derby & Co. Ltd. v. Weldon (Nos. 3 and 4) [1989] 2 W.L.R. 412 (C.A.) Lord Donaldson M.R. pointed out that a defendant who disobeyed could have its defence struck out.

FN27. [1989] 2 W.L.R. 232, at p.255; in Republic of Haiti v. Duvalier the restraint was said to be temporary: [1989] 2 W.L.R. at p.267.

FN28. See, among many other examples, Derby & Co. Ltd. v. Weldon (No. 1) [1989] 2 W.L.R. at p.282, per Parker L.J.

FN29. The Siskina v. Distos Compania Naviera [1979] A.C. 210.

FN30. Civil Jurisdiction and Judgments Act 1982, s.25(1).

FN31. Republic of Haiti v. Duvalier [1989] 2 W.L.R. 261.

FN32. Derby & Co. Ltd. v. Weldon (Nos. 3 and 4) [1989] 2 W.L.R. 412 (C.A.).

FN33. As in Derby & Co. Ltd. v. Weldon (No. 1) [1989] 2 W.L.R. 276.

FN34. Interpool Ltd. v. Galani [1988] Q.B. 738 (C.A.).

FNa1. Solicitor, London; Fellow of Wolfson College, Cambridge; Visiting Professor, Queen Mary College, London.

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