Asset Tracing and Enforcement Update: September 2015
Published on 18th Sep 2015
Welcome to the latest edition of Osborne Clarke’s Asset
Tracing and Enforcement Update.
In this issue we look at recent developments relating to
equitable receivership – one of the less well known but potentially very
powerful remedies when it comes to international asset-tracing and
enforcement. This is gaining popularity and judicial support, as a way to
enforce against assets that traditional methods may not reach.
We then look at a recent case involving bribery in Brazil,
in which the Privy Council took a pragmatic view on tracing funds through
international bank accounts.
We also highlight two recent international developments: the
Hague Convention on Choice of Courts finally comes into force, aiding the
enforcement of judgments between contracting states, while the UN Conference
continues to make strides to assist recovery involving corruption.
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Court appointed
receivers: When will equity step in to fill the void?
English law provides a variety of tools to a party seeking
to enforce a judgment or arbitral award. Nevertheless, particularly in an
international context, there will be times when the defendant is determined to
resist enforcement and traditional enforcement methods are not
sufficient. In those circumstances, increasingly, parties are looking to
the courts to appoint equitable receivers over the defendant’s property.
Where the court does so, this can be a much more flexible, and effective, means
of enforcement.
Two recent English cases consider the use of receivers in
relation to a Lichtenstein Foundation and funds held by a third party (where
there was no contractual right to repayment).
“Backwards
tracing”: An important step forward in tracing funds internationally
In Brazil and another v Durant another, the Privy
Council confirmed that backwards tracing may be permitted as a means of asset
recovery, in certain circumstances. The court took a pragmatic view as to
whether funds in Jersey constituted the proceeds of the bribes paid in
Brazil. This was despite technical difficulties in terms of proving the
chain of transfers leading to the Jersey bank account.
In our view, this represents an important step forward, with
judges in the highest common law court recognising that courts need to be
flexible in applying legal doctrines when faced with complex international
structures and frauds.
The Hague Convention
on Choice of Courts Agreements: A threat to international arbitration?
On 1 October 2015 the Hague Convention on
Choice of Courts Agreements 2005 comes into force, some 10 years after
the Convention was concluded. Initially, the Convention will only have
effect between Mexico and EU member states. If the EU’s accession is
followed by a procession of other states, however, the Convention could
significantly shift the balance between arbitration and litigation as a forum
for resolving international disputes.
The key principles of the Convention are that: an exclusive
jurisdiction clause in favour of one contracting state will be respected by
another contracting state; and a judgment given by a court in one contracting
state will be enforceable in another contracting state (subject to limited
exceptions and formalities for recognising the judgment).
The US and Singapore have already signed (but not ratified)
the Convention, and other countries are considering doing so. As the
number of contracting states rises, the Convention will begin to make a real
difference to the enforcement of judgments between contracting states.
Action taken by UN
conference to support asset recovery cases
The ability to recover assets relating to bribery and
corruption can vary greatly depending on where in the world the offence takes
place and where any assets are located. The UN Conference of the States
Parties to the United Nations Convention against Corruption has produced a
useful digest
of global corruption cases, and has highlighted the role that the international
community has to play in supporting the recovery of assets through civil
litigation.
Restraining foreign
proceedings: Delay at your peril
When one party commences litigation in a foreign
jurisdiction, in breach of an arbitration agreement, this can leave the other
party in a difficult position. Should it enter into those proceedings, if
only to contest jurisdiction? If it does so but loses on jurisdiction,
what should it do then? And what injunctive relief is available in other
courts?
In Ecobank v Tanoh, the Court set aside an
anti-enforcement action that had been obtained on an ex parte
basis. The judge noted that Ecobank had engaged in the foreign
proceedings, to contest jurisdiction, and had delayed in taking any action in
England in the meantime. He also doubted whether the foreign disputes
would have been covered by the arbitration agreement in any event. The
case is a reminder both that any delay in seeking relief from the English
Courts can be costly, and that an arbitration clause may not cover all forms of
dispute that can arise between the parties.
