IOT Engineering Projects Ltd v Dangote Fertilizer Ltd & Anor

Freezing relief requires a real risk that a judgment or award will go unsatisfied. That may be shown by dissipation outside ordinary business, or by dealings making enforcement more difficult than usual unless justified for normal and proper business purposes. Routine enforcement difficulties in the jurisdiction where the defendant operates do not, without more, establish that risk. The evidence must be assessed in the round. A suitable parent-company guarantee may mitigate or eliminate concerns about dissipation and enforcement. Where the evidence falls materially short of establishing a sufficient risk of dissipation, the court need not determine the other requirements for freezing relief.

IOT Engineering Projects Ltd appealed against an order of Eder J in the Commercial Court refusing to continue, save on an interim basis, a freezing order concerning sums paid under two advance payment guarantees. The underlying contractual disputes were subject to London arbitration.

The appeal concerned whether the alleged difficulty of enforcing any arbitral award in Nigeria justified restraining payment of the guarantee proceeds, particularly after the parent company offered a guarantee of the respondent’s obligations. The Commercial Court’s decision was reported at [2014] EWHC 901 (Comm).

The appeal was dismissed. Lewison and Kitchin LJJ agreed with the judgment of Tomlinson LJ.

1. The court adopted the summary of the risk of dissipation test in Congentra AG v Sixteen Thirteen Marine SA (the Nicholas M) [2008] 2 Lloyd’s Rep 602. A claimant must show either a real risk that the judgment or award will go unsatisfied because assets will be dissipated or disposed of otherwise than in the ordinary course of business, or that assets will be dealt with so as to make enforcement more difficult than usual unless the dealings are justified for normal and proper business purposes.

2. “More difficult” means more difficult than usual. Enforcement is rarely straightforward and some jurisdictions operate more slowly than others. A party contracting with a Nigerian company cannot rely, without more, on difficulties routinely encountered in enforcing awards or judgments in Nigeria. Nigeria’s adherence to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 and its implementing legislation were relevant context, but the evidence of prolonged enforcement difficulty was unimpressive.

3. The offer of a suitable parent-company guarantee may mitigate or eliminate concerns about dissipation and enforcement. In light of the parent company’s financial strength, the objection that the guarantee was not from a first-class London bank was unrealistic. IOTEP accepted the guarantee during the hearing, which rendered the appeal hopeless. The evidence of alleged hostility was hearsay and added little.

4. Because IOTEP failed to establish a sufficient risk of dissipation, it was unnecessary to determine the other grounds relied on by Eder J or the remaining requirements for freezing relief.

1. Court of Appeal (Civil Division): Appeal dismissed on 16 October 2014.
2. Queen’s Bench Division, Commercial Court: Eder J refused to continue the freezing order, save on an interim basis pending appeal, in the decision reported at [2014] EWHC 901 (Comm).