Mobil Cerro Negro Ltd v Petroleos De Venezuela SA

A freezing order supporting foreign arbitration is exceptional. The applicant must establish an arguable underlying claim, a real risk that conduct concerning assets will impair enforcement, and unjustifiable conduct. Where the application is made urgently under Arbitration Act 1996, s 44(3), urgency must also be shown. A freezing order is not security for a claim, and financial weakness or ordinary commercial dealings do not by themselves establish dissipation.

Where the arbitration has a foreign seat and the order would affect assets outside England and Wales, principles of comity require at least as much caution as in applications supporting foreign litigation. In the absence of fraud or another exceptional feature, a sufficiently strong link with England and Wales, such as substantial assets here, is required.

Mobil sought continuation of a without-notice worldwide freezing order granted by Teare J against PDV under s 44 of the Arbitration Act 1996. PDV applied to set the order aside. Mobil’s substantive claims arose from Venezuelan expropriation affecting an oil project and were subject to ICC arbitration seated in New York.

The application concerned a contractual guarantee, an alleged risk of dissipation, urgency before constitution of the arbitral tribunal, and whether the foreign seat and absence of substantial PDV assets in England and Wales made the relief inappropriate. The court also considered whether service by an alternative method should be permitted.

1. Disposition. PDV’s application succeeded. The freezing order of 24 January 2008 was set aside. Mobil’s application to continue it and its application for service by an alternative method were refused.
2. Underlying claim. Mobil had a sufficiently arguable case, for present purposes, that it possessed an accrued cause of action under the guarantee. That conclusion did not imply that the claim would probably succeed or was worth the amount claimed.
3. Dissipation. The expression “dissipation of assets” identifies conduct which may make it just and convenient to grant relief; it is not applied by dictionary definition. A freezing order is not security for a claim. The applicant must show a real risk of impairing enforcement of a judgment or award, and the conduct must be unjustifiable. Ordinary asset transfers, relocation of assets, financial difficulties, a large claim, technical objections and lawful commercial dealings did not satisfy that test on the evidence.
4. Urgency. Since Mobil failed to show a good arguable case of unjustifiable dissipation, it also failed to establish that the case was urgent within s 44(3) of the Arbitration Act 1996.
5. Foreign seat and comity. Section 2(3) gave the court a limited jurisdiction to act despite a foreign seat, but the absence of a seat link remained a relevant factor in exercising the discretion. In support of foreign arbitration, the court had to exercise at least the same caution as in support of foreign litigation where the proposed order affected assets outside England and Wales. In the absence of fraud or another sufficiently strong exceptional feature, a sufficiently strong link with England and Wales was required. Mobil had no good arguable case that PDV owned or effectively controlled substantial assets here.
6. Final stage analysis. Section 2(3) did not require its impact to be considered only at the end of the analysis. It could be assessed at the outset or alongside other factors where that was efficient and just.

Not stated in the judgment.