Lessons from English "Mareva" Injunctions - Part 2 Chapter 11 - The Practice of International Litigation - 2nd Edition
Lawrence W. Newman has been a partner in the New York office of Baker & McKenzie since 1971, when, together with the late Professor Henry deVries, he founded the litigation department in that office. He is the author/editor of 4 works on international litigation/arbitration.
Michael Burrows, Formerly, Of Counsel, Baker & McKenzie, New York.
The so-called Mareva injunction, developed by courts in England, prevents a defendant from transferring its assets outside the United Kingdom or otherwise dealing with its assets (other than in the ordinary course of business and for the payment of proper expenses) during the pendency of an action. Although originally limited to assets within the United Kingdom, Mareva injunctions have been extended so as to provide that defendants must refrain from dealing with assets, wherever they might be, if their actions are designed to frustrate court orders (“worldwide Mareva injunctions”). Courts in the United States have also been faced with issues for which transnational provisional relief, including the power of a court to issue an injunction that extends beyond national borders have been considered. The Mareva injunction represents a model for providing provisional relief to which U.S. courts may look in considering whether to grant injunctions with an extraterritorial effect.
The Mareva injunction was first issued in 1975 in Mareva Companía Naviera S.A. v. International Bulk Carriers S.A. In that decision, the Court of Appeal upheld the grant of an injunction restraining the defendant from removing its assets from the jurisdiction pending the trial of an action against it. Since that decision, English courts have granted what became known as Mareva injunctions to restrain defendants from removing or otherwise dealing with assets both within and outside the jurisdiction, thereby preventing defendants from frustrating money judgments against them. Because of the “drastic” and potentially “oppressive” nature of the relief provided by worldwide Mareva injunctions, however, their issuance must be justified by exceptional circumstances — that the defendant’s assets in the United Kingdom are insufficient to satisfy a potential judgment and there exists a real risk that the defendant will attempt to dispose of its assets. A Mareva injunction is usually issued as part of a proceeding on the merits in which jurisdictional requirements over the defendant have been satisfied. Statutory support for the Mareva injunction initially came from Section 45(1) of the Supreme Court of Judicature (Consolidation) Act, 1925 and was later provided for in Section 37(3) of the Supreme Court Act of 1981.
The scope of the Mareva injunction was limited by the decision in Siskina v. Distos Companía Naviera S.A., in which the Court of Appeal held that a Mareva injunction is not an independent cause of action and cannot be used in support of a proceeding in a foreign jurisdiction. Rather, the injunction must be “ancillary to a substantive claim for debt or damages.” The Siskina decision itself, however, was nullified in part when the United Kingdom became a signatory to the Brussels Convention and adopted Article 24 in Section 25 of the Civil Jurisdiction and Judgments Act 1982.
The Brussels Convention addresses the use of an injunction preventing a defendant from engaging in transfers of assets that would have the effect of making a judgment, even if recognized by another jurisdiction, useless because of the unavailability of assets. Article 24 of the European Convention on Jurisdiction and Enforcement of Judgments (the Brussels and Lugano Conventions) provides that, even though a court in a Contracting State may not have jurisdiction to decide the merits of a case, it may nevertheless entertain a request for provisional relief pending a decision on the merits by a competent court in another Contracting State. Thus, under Article 24, a plaintiff may file an ancillary proceeding in the United Kingdom for a Mareva injunction in connection with proceedings in a Contracting State.