Banco Nacional De Comercio Exterior SNC v Empresa De Telecommunicaciones De Cuba SA & Anor

Registration of a judgment under Council Regulation (EC) 44/2001 permits protective measures directed at domestic enforcement. It does not confer jurisdiction to grant a worldwide freezing order against foreign assets.

Interim relief under section 25 of the Civil Jurisdiction and Judgments Act 1982 requires a real territorial connection. Worldwide relief will ordinarily be inexpedient where the debtor and relevant assets are abroad and parallel enforcement may cause conflicting orders.

A post-judgment freezing order should normally include the standard undertaking to compensate innocent third parties. The Regulation preserves access to protective measures but does not remove compatible incidents of domestic procedure.

A Mexican state-owned bank obtained a Turin judgment for more than US$167 million against a Cuban telecommunications company. After registering that judgment in England under Council Regulation (EC) 44/2001, the bank obtained domestic and worldwide freezing orders. The judgment debtor challenged the court's jurisdiction to grant worldwide relief.

The worldwide order included the standard undertaking concerning losses caused to third parties. A telecommunications company affected by both orders appealed because the domestic order omitted that protection. David Steel J had continued the worldwide order and refused to alter the respective undertakings in [2006] EWHC 19 (Comm).

The Court of Appeal determined whether the Regulation or section 25 of the Civil Jurisdiction and Judgments Act 1982 supported worldwide relief and whether a post-judgment freezing order should protect innocent third parties through the standard undertaking.

1. The judgment debtor's appeal was allowed and the worldwide freezing order discharged. Article 47 of Council Regulation (EC) 44/2001 is directed to enforcement. Paragraph (1) permits protective measures before registration, paragraph (2) operates after registration, and paragraph (3) governs the period during an appeal. Article 47 does not provide an unrestricted jurisdiction to protect assets worldwide.

2. Section 25 of the Civil Jurisdiction and Judgments Act 1982, read with article 31 of the Regulation, did not justify worldwide relief. Protective measures require a real connection with the territorial jurisdiction of the court granting them. The debtor was not resident in England, domestic assets were already protected, and the worldwide order operated only against foreign assets. There was therefore no relevant territorial connection.

   Relief was also inexpedient because Italian policy did not permit worldwide freezing orders and enforcement was already proceeding in several Member States. An English worldwide order risked disharmony and conflicting, inconsistent or overlapping orders. The court was consequently obliged, as a matter of principle, to decline jurisdiction.

3. The affected third party's appeal was allowed. The domestic freezing order was varied to include the standard undertaking concerning third-party loss. Innocent third parties require the same protection before and after judgment. A judgment makes the creditor's claim more certain, but it does not reduce losses which freezing the debtor's assets may cause to third parties.

4. A freezing order differs from a third-party debt order because it restrains dealings generally without attaching a particular asset. The creditor's exposure under the undertaking is controlled by requirements of causation and a judicial decision that compensation is appropriate. Exceptional cases may justify omitting the undertaking, particularly where a third party is not innocent, but this was not such a case.

5. The Regulation establishes access to protective measures while leaving their character and procedural incidents to domestic law, provided national procedure does not frustrate the Regulation. An applicant must therefore accept an English freezing order with its standard third-party undertaking. Requiring that undertaking neither re-examines the foreign claim nor curtails the period during which protective measures remain available.

• Court of Appeal (Civil Division): The judgment debtor's appeal was allowed and the worldwide freezing order was discharged. The affected third party's appeal was allowed and the domestic order was varied to include the standard undertaking. The bank's challenge concerning the undertaking in the discharged worldwide order was academic.
• High Court, Commercial Court: In [2006] EWHC 19 (Comm), David Steel J held that the court had jurisdiction, found a risk of dissipation, continued the worldwide freezing order and refused to remove its third-party undertaking. He later refused to enlarge the undertaking in the domestic order but granted the affected third party permission to appeal.
• High Court, without-notice proceedings: Irwin J registered the Turin judgment and granted a domestic freezing order without the standard undertaking concerning third-party losses. David Steel J subsequently granted the worldwide freezing order, which did include that undertaking.