U&M Mining Zambia Ltd v Konkola Copper Mines Plc

A freezing order may support enforcement of an arbitration award even where the defendant’s assets are outside England. Where the arbitration is seated in England and Wales, it will ordinarily be appropriate for the English court to grant protective relief, although the court retains a discretion.

A real risk of dissipation may be inferred from the totality of conduct showing a willingness to obstruct enforcement, cause unnecessary harm or rely on untenable positions. Financial weakness and delay in paying creditors, without more, do not establish that risk.

Serious but innocent breaches of the duty of full and frank disclosure do not automatically require discharge of an otherwise justified freezing order. The court must decide what is in the interests of justice, including by making an appropriate costs order.

U&M Mining Zambia Ltd obtained a worldwide freezing order ex parte in support of arbitration awards against Konkola Copper Mines Plc. The awards arose from disputes concerning mining contracts and a settlement agreement. Most of KCM’s assets were in Zambia, and the parties’ contracts provided that the High Court of Zambia had exclusive jurisdiction to execute arbitration awards.

U&M applied inter partes to continue the order. KCM argued that there was no real risk of dissipation, that continuation was neither just nor convenient, and that U&M had failed in its duty of full and frank disclosure. The central issues were whether the English court could properly grant protective relief in support of a London arbitration and what consequence should follow from the disclosure failures.

1. Risk of dissipation. The applicable test was the real risk that, unless restrained, the defendant would dissipate or dispose of assets other than in the ordinary course of business, or deal with them so as to make enforcement more difficult. The court could assess the totality of conduct rather than each act in isolation.
2. KCM’s reliance on untrue evidence, obstructive conduct in the arbitration, refusal to comply with an award, and pursuit of untenable grounds of challenge constituted solid evidence from which the required risk could be inferred. The fact that KCM was a substantial trading company with capital assets did not eliminate the risk concerning its liquid assets.
3. Evidence that KCM lacked cash, had substantial debts and delayed payment to creditors did not itself establish dissipation. A freezing order was not intended to pressure a defendant to prefer the claimant’s debt over those of other creditors: Camdex International v Bank of Zambia [1997] 1 WLR 632.
4. Just and convenient. A freezing order had real utility because it preserved the position for future enforcement. It operated in personam and was conceptually distinct from enforcement, which required attachment of an asset. The fact that enforcement would occur in Zambia, or that the Zambian courts could also grant relief, did not make the English order inappropriate where the arbitration was seated in London. The approach in Cetelem SA v Roust Holdings Ltd [2005] EWHC 300 (QB) and Belair v Basel [2009] EWHC 725 (Comm) was preferred. Credit Suisse Trust v Cuoghi [1998] QB 818 did not require a different result.
5. Full and frank disclosure. U&M had failed to disclose several material matters, including unpaid dividends, more favourable replacement financing, the Zambian Government’s special share, the exclusive Zambian enforcement clause, relevant support and restructuring evidence, and Deloitte’s view that related-party copper sales were at arm’s length.
6. The failures were serious and numerous but appeared innocent rather than deliberate. In the interests of justice the freezing order was continued. U&M was ordered to bear its own costs of both applications and to pay one-third of KCM’s costs of resisting continuation on the indemnity basis.