¶ 3801
Overview
Scope of the chapter. This chapter addresses the interim remedies a creditor uses to hold assets in place before judgment and to find assets after it, and the means by which a creditor traces assets across borders. It covers the English freezing injunction and its worldwide form, the extension of freezing relief to non-parties and to assets held through trusts and companies, relief granted by one court in aid of proceedings in another, the Norwich Pharmacal and Bankers Trust orders by which information is obtained from persons mixed up in a wrong, the position in the United States after Grupo Mexicano de Desarrollo, S.A. v. Alliance Bond Fund, Inc., 527 U.S. 308 (1999), the Swiss attachment and the European account preservation order, and the practical sources of tracing information. It closes with the position of a trustee or entity manager served with a foreign freezing order and with the place of these remedies in the Threat Matrix.
Why the chapter matters to planning. Most of the chapters in this treatise test a structure against a creditor who already holds a judgment. In contested cases the decisive events often occur earlier. A creditor who suspects that assets will be moved applies, usually without notice, for an order that restrains the debtor from dealing with assets anywhere in the world and requires the debtor to disclose them on oath. The order does not transfer any asset to the creditor. It does, however, convert any later transfer into a contempt of court, it exposes the structure to scrutiny through compelled disclosure. It can also be served on banks, trustees and managers who then face their own exposure if they assist a breach. A structure funded at T0 may be lawful and still be rendered unusable for the life of the litigation by an interim order. The planner must understand what such an order can reach and what it cannot.
The divergence between England and the United States. The common law world divides sharply on the central remedy. English courts, and courts in most Commonwealth and offshore jurisdictions that follow English practice, grant freezing injunctions in support of claims for money as a matter of routine. A federal court in the United States may not grant a preliminary injunction freezing a defendant's assets in an action for money damages in which no lien or equitable interest is claimed. Grupo Mexicano, 527 U.S. at 333. The prohibition is subject to significant exceptions, which are examined at ¶ 3850. The difference affects the choice of forum by creditors with international claims. It also determines where a client's assets are most exposed to interim restraint. An American debtor with assets in London, Zurich or a Caribbean financial center faces remedies that the debtor's home courts would not grant against assets at home.
Relation to other chapters. The banking consequences of a freezing order, including the bank's duty not to assist a breach, are addressed in chapter 34 (see supra ¶ 3460). Prejudgment remedies available to a creditor in the first weeks of a claim are introduced in chapter 36 (see supra ¶ 3650). Discovery of assets and structures, including discovery of evidence held abroad under 28 U.S.C. § 1782 and the Hague Evidence Convention, is addressed in chapter 37 (see supra ¶¶ 3710, 3760). Contempt for breach of a freezing or repatriation order is addressed in chapter 39 (see infra ch. 39). The trustee's position under pressure is developed in chapter 40 (see infra ch. 40), and recognition and enforcement of judgments abroad in chapter 41 (see infra ch. 41).
Terminology. This chapter uses "freezing order" for an interim order restraining a respondent from disposing of or dealing with assets, "worldwide freezing order" for such an order that extends to assets outside the jurisdiction of the court granting it, and "applicant" and "respondent" for the parties to the application. The English Civil Procedure Rules use "freezing injunction". The older term "Mareva injunction" survives in the Caribbean, in Australia and in American commentary. A "Norwich Pharmacal order" is an order requiring a person mixed up in a wrong to disclose information about it, and a "Bankers Trust order" is an order requiring a bank or other holder to disclose information that will help the applicant trace assets to which it asserts a proprietary claim.