Worldwide Freeze Orders

• Author: International Law Group
• Pages: 116-119

Page 116

The present litigation originally arose out of an arbitration between the claimants and a company called Charlton Court plc (Charlton). In essence, the claimants and Charlton entered into a contract having to do with the manufacture of hospital beds and related equipment. The agreement eventually crumbled. In November 1998, Charlton fi led suit in a New York state court against the fi rst Respondents for breach of contract and against the second and third Respondents for fraudulent misrepresentation.

A New York federal court, however, enjoined the action in the spring of 1999, ordering the dispute to arbitration by virtue of an arbitration clause in the Charlton contract. The arbitration soon got under way. The Respondents counterclaimed, inter alia, for fraudulent misrepresentation.

In July 2002, the arbitrator dismissed Charlton's claims because it had failed to provide security in response to an order to do so. He also upheld the first Respondent's counterclaim for fraudulent misrepresentation. The arbitrator found that Respondent (Simms) and another individual, Selim Rahman (the second defendant) had made the fraudulent misrepresentation. During the arbitration, Simms put in evidence that Jack and Helga Dadourian were shareholders in Charlton via nominee offshore entities or trusts.

Mr. Simms, the first Appellant [and fi rst defendant] in this action, has been a solicitor with an international commercial practice. In February 2004, however, a Disciplinary Tribunal struck him off the Roll. He allegedly was a close adviser of the Dadourians and their go-between with their Swiss bankers and advisers.

The arbitrator awarded the claimants $4.5 million in damages. The defendants' failure to pay a cent of it has led to the present English proceedings. The causes of action in these proceedings include fraudulent misrepresentation and conspiracy.

The English court of fi rst instance issued a Worldwide Freezing Order (WFO) (formerly called a Mareva injunction). It forbade the Appellants to dispose of their assets, wherever located, up to $5.5Page 117 million. The WFO reaches all the assets in the direct or indirect control of each of the Appellants, none of whom now attack the WFO.

The WFO stipulates, however, that the Respondents could not enforce the WFO in a foreign jurisdiction unless the court gave its permission in advance. Specifically, the Order declared that: "The Applicant will not, without the permission of the court, seek to enforce this order in any country outside England and Wales or France or seek an order of a similar nature including orders conferring a charge or other security against the Respondent or the Respondent's assets, other than in those jurisdictions."

The central (but narrower) issue in the present appeal is the validity of the SVO. If the Respondents secure leave of court to enforce the WFO in Switzerland, they can enforce the WFO against assets there if the Swiss court declares that it has the power to eff ectuate the order. (The WFO itself specifi ed a number of Respondents' undertakings to compensate the adversary and other involved parties...