Globalisation of trade and creation of complex corporate structures has created high concerns regarding the efficiency of interim freezing injunction orders, essentially purported to ensure the execution of a final judgment against a wrongdoer/defendant, since the assets belonging to a wrongdoer are nowadays rarely held by the wrongdoer himself in his own name.
To this effect, and in order for a solution to be provided to this serious lacuna in the legal arena of interim relief injunctions, Cyprus Courts have adopted English case law which allows the attachment of assets held by a third party for and on behalf of the wrongdoer. More particularly, Cyprus Courts have adopted the principles first relayed in TSB Bank International v. Chabra [1992] 1 WLR 231, and thereafter extended by a series of English judgments (e.g. Yukos v. Rosneft [2011] EQHC 1461 (Comm) and Linsen International Limited v. Humpuss Sea Transport [2011] EWCA Civ 1042), by which the ambit of assets eligible of being caught by a freezing injunction has been extended.
What needs to be established in order for the Chabra - jurisdiction to be activated, is either (i) that a third party is in possession of assets beneficially owned by the wrongdoer, or (ii) it is evident that the wrongdoer has control of or has a power of disposition over the assets in question, or (iii) there is or may be a process ultimately available to cause the beneficial owner to disgorge the assets held by the third party. It should be underlined that any actual or potential cause of action against the third party is irrelevant and what prevails is the element of the wrongdoer’s interest in, or control over, the assets in question.
In short, Chabra – jurisdiction may be exercised provided that the assets registered in the name of a third person, are held by the latter as a bare trustee/nominee on behalf of the wrongdoer whilst the beneficial owner of those assets remains the wrongdoer or even when the latter is the one who retains substantive control of those assets.
Such an “interruption” into a trust relationship of a wrongdoer with a third person is sensible and pragmatic and entirely consistent with the underlying aim of a freezing injunction, namely to freeze those assets against which any subsequent judgment may be enforced, effectively confronting the attempts of any wrongdoer who intends to hide his assets behind complex structures and trust relationships.
Our Dispute Resolution Team is experienced to undertake and assist on any asset recovery matter in the context of commercially complex cases as efficiently and as effectively as possible.
