Nomihold Securites Inc v Mobile Telesystems Finance SA

A post-judgment freezing order is not a mechanism for interfering with ordinary commercial transactions merely because a judgment debtor is unwilling or unable to pay. The jurisdiction requires an element of impropriety. It does not ordinarily permit pressure to be placed on a third-party parent company to secure payment. Transactions may proceed where they involve independent steps by the parent and no step, expenditure or liability of the judgment debtor. The freezing order may nevertheless continue where there is a real concern that assets are being removed or liability avoided, including an unexplained disappearance of an indemnity relevant to solvency. A cross-undertaking in damages is appropriate, but need not ordinarily be fortified in a post-judgment case.

The claimant obtained a substantial arbitral award against the defendant under an option agreement. The time for challenging the award under sections 67, 68 and 69 of the Arbitration Act 1996 had expired. An ex parte worldwide freezing order and an order enforcing the award as a judgment under section 66 had been made.

The defendant sought relief concerning alleged non-disclosure, continuation of the freezing order, and proposed transactions involving its parent company. The central issues were whether the order should restrain a consent solicitation or tender offer, whether the order should continue pending the section 66 application, and what undertaking in damages was required.

1. Ex parte relief. The freezing order had been properly granted. The apparent impending removal of the defendant’s principal asset, together with the unexplained disappearance from group accounts of a substantial indemnity connected with the arbitration liability, justified post-award freezing relief. The alleged non-disclosures did not vitiate the order.
2. Scope of the jurisdiction. The jurisdiction does not extend to interfering with ordinary commercial transactions simply because a judgment debtor is not paying promptly. There must be some element of impropriety. The court rejected an interpretation of the authorities which would allow a judgment creditor to pressure a parent company into paying or securing the judgment debt. The consent solicitation could therefore proceed.
3. Tender offer. The parent’s independent purchase or tendering of loans could proceed, provided the defendant took no step in the transaction. The defendant could incur no fees, expenditure or liability connected with either transaction.
4. Continuation. The freezing order should continue pending determination of the section 66 application. The continuing concern was the defendant’s apparent determination to avoid liability and the unresolved status of the indemnity. No security from the defendant or its parent was ordered.
5. Undertakings. An unfortified cross-undertaking in damages should have been given. The court did not consider that the authority concerning a worldwide freezing-order policing system required such an undertaking in every case.

First-instance decision in the Commercial Court. The judgment itself records earlier ex parte orders made by Gloster J, including a worldwide freezing order and an enforcement order under section 66 of the Arbitration Act 1996.