Isabel Dos Santos v Unitel S.A.

For a freezing injunction, a good arguable case on the merits is a case which is more than barely capable of serious argument. It does not require the court to decide which party has the better argument under the three-stage jurisdictional-gateway test. In substance, the merits threshold is the same as a serious issue to be tried.

The usual costs order for a contested freezing-injunction application is that the unsuccessful party pays the successful party’s costs. The different starting point for an American Cyanamid interim injunction reflects its balance-of-convenience basis and does not apply to freezing relief.

Unitel S.A. alleged that its former director, Isabel dos Santos, was liable in connection with substantial loans made to a company controlled by her. Bright J granted Unitel a worldwide freezing order and ordered Ms dos Santos to pay the costs of the contested application: [2023] EWHC 3231 (Comm).

Ms dos Santos appealed. She contended that the merits threshold for freezing relief was the three-limb jurisdictional test derived from Brownlie v Four Seasons Holdings Inc, and that Unitel’s claim was barred by Article 80(1) of the Angolan Commercial Companies Law. She also challenged the costs order. The appeal raised the proper meaning of “good arguable case” for freezing injunctions and the appropriate costs approach.

1. Appeal dismissed. The Chancellor, with whom Lord Justice Popplewell and Lady Justice Falk agreed, held that the freezing-order merits threshold remains the test formulated in Ninemia Maritime Corp v Trave Schiffahrtsgesellschaft GmbH (The Niedersachsen): a claim must be more than barely capable of serious argument, but need not be shown to have a greater than 50% prospect of success.

2. The three-limb test derived from Brownlie v Four Seasons Holdings Inc, [2017] UKSC 80, concerns jurisdictional gateways and is not the merits test for freezing injunctions. The two contexts serve different purposes. A relative assessment of which party has the better argument risks inappropriate mini-trials before disclosure and before factual disputes can be resolved at trial. Lakatamia Shipping Co Ltd v Morimoto, [2019] EWCA Civ 2203, did not alter that position.

3. The Court further held that the The Niedersachsen test is, in substance, the same as the serious-issue-to-be-tried threshold under American Cyanamid Co v Ethicon Ltd, [1975] AC 396. The invasive nature of freezing relief does not justify a heightened merits threshold. It is instead addressed through rigorous scrutiny of dissipation risk, whether relief is just and convenient, the order’s safeguards and the cross-undertaking in damages.

4. Unitel satisfied the merits threshold. Its expert evidence gave a clear and compelling basis for treating the timely English application to join Ms dos Santos as equivalent, for Article 80(1), to filing an indemnity action in Angola. The competing expert view did not establish that Unitel lacked a good arguable case.

5. The costs order was within Bright J’s discretion. A freezing order protects the prospective enforceability of a money judgment; it is not an orthodox balance-of-convenience injunction which provisionally enforces a substantive right. A later failure at trial does not itself show that a freezing order, properly granted on the three applicable criteria, was wrongly granted. Ms dos Santos had contested the application fully and lost.

• Court of Appeal (Civil Division): Appeal dismissed. The Court upheld the worldwide freezing order and the order that Ms dos Santos pay the costs of the contested application: [2024] EWCA Civ 1109.
• High Court, Commercial Court: Bright J granted Unitel a worldwide freezing order against Ms dos Santos and ordered her to pay the application costs: [2023] EWHC 3231 (Comm).