Universal Africa Lines BV v Knidos Shipping Corporation

For a freezing injunction in aid of arbitration, the applicant must establish a good arguable case on the merits, assets against which a judgment could be enforced, and a real risk that the assets will be dissipated so as to frustrate enforcement. The prospective nature of the remedy means that the underlying monetary right need not have crystallised, provided there is sufficient certainty that proceedings and an enforceable monetary claim will arise. Risk of dissipation may be inferred from the nature and liquidity of the assets, the defendant’s corporate and enforcement circumstances, and its conduct viewed collectively. The court may grant wider relief where the risk extends beyond a particular fund. Alternative service may be ordered exceptionally where immediate notice of a freezing order is necessary.

The applicant, a time charterer, sought without-notice relief under the Arbitration Act 1996 in support of London arbitration proceedings against the defendant shipowner. The arbitration concerned alleged unseaworthiness and a prospective indemnity claim under the Interclub Agreement 1984 following cargo damage proceedings in Rotterdam.

The defendant was a one-ship company. After the vessel became a total loss, the applicant became concerned that hull and machinery insurance proceeds would be transferred away, leaving any eventual arbitral award unsatisfied. The issues were whether there was a good arguable case, a realistic risk of dissipation despite the prospective nature of the indemnity claim, and whether the relief sought was just and reasonable.

1. Application granted. The applicant established a good arguable case on the merits, supported by expert evidence concerning the absence of an appropriate safety system for the vessel’s hold lights.
2. The principles governing freezing injunctions were stated by reference to Isabel dos Santos v Unitel SA [2024] EWCA Civ 1109 and Broad Idea International Ltd v Convoy Collateral Ltd [2021] UKPC 24. The merits threshold required more than a claim barely capable of serious argument, but did not require a better-than-even chance of success.
3. The fact that the prospective ICA indemnity had not yet crystallised did not prevent relief. It was sufficient that there was a sufficient degree of certainty that the Rotterdam claim would be settled and that an indemnity claim would then be brought in the arbitration. The applicant’s undertakings concerning prompt settlement negotiations and amendment of the arbitration claim supplied that certainty.
4. There was a real risk of dissipation. The conclusion was inferential and depended on the circumstances viewed collectively. Relevant considerations included the defendant’s limited asset base, the liquidity and mobility of insurance proceeds, the likely enforcement difficulties associated with Panama, and the defendant’s prolonged failure to agree alternative security or instruct its P&I club to provide security.
5. A general freezing order was appropriate because the evidence did not establish that the risk was confined to the insurance proceeds. The court also accepted an undertaking to file evidence concerning the enforceability in the Netherlands of any judgment on the cross-undertaking in damages.
6. Service on the defendant’s London solicitors was ordered by alternative means. Although Panama was a Hague Service Convention state, the making of an immediate freezing order and the need for a speedy return date constituted exceptional circumstances.