Facts
- Babanaft International Company S.A. (Babanaft) obtained an English judgment for more than US$15 million against Bahaedine Bassatne and an affiliated defendant.
- Following judgment, the High Court made a Mareva (freezing) injunction but confined its restraint to assets within the United Kingdom.
- The court then extended the order’s reach by requiring the defendant to give Babanaft advance notice (five days) before moving or using assets located outside the United Kingdom, and it also made disclosure measures directed to identifying assets available to satisfy the judgment.
- Babanaft notified banks and other entities in multiple countries about the revised order.
- The defendants appealed, contending that an unqualified post-judgment Mareva order with worldwide effect was improper, or at least that any such order must make clear it bound only the defendants and did not affect foreign third parties (such as banks) or foreign courts.
Issues
- Whether the High Court had jurisdiction under Supreme Court Act 1981, section 37(1), to grant post-judgment Mareva relief with worldwide effect against a defendant subject to the court’s personal jurisdiction.
- Whether Supreme Court Act 1981, section 37(3), limited Mareva relief to assets located within England and Wales.
- If a worldwide order could be made, how it should be framed so it did not purport to bind foreign third parties or interfere with foreign courts, particularly where the order was being notified to banks abroad.
Decision
- The Court of Appeal held that the High Court had jurisdiction under Supreme Court Act 1981, section 37(1), to grant a Mareva-type injunction with worldwide effect against the defendants, including after judgment.
- The court rejected the argument that section 37(3) imposed a territorial cap on the section 37(1) power; section 37(3) was treated as confirmatory rather than restrictive.
- The court accepted that, without careful wording, worldwide freezing relief and the way it was communicated to third parties could be read as asserting control over foreign persons and foreign assets.
- The Court of Appeal therefore required the order to be varied to include safeguards (commonly known as the “Babanaft” provisos), clarifying that the injunction was directed to the defendants and did not impose obligations on third parties outside the jurisdiction unless and until a foreign court gave effect to it, and that compliance with a contrary foreign court order would not put the defendant in contempt of the English court.
Legal Principles
- Under Supreme Court Act 1981, section 37(1), the court may grant injunctive relief where it is “just and convenient,” including a freezing injunction restraining a defendant from dealing with assets outside England and Wales, because the order operates in personam against the defendant.
- Section 37(3) does not cut down the general power in section 37(1); it does not confine freezing relief to assets physically located within the jurisdiction.
- Worldwide freezing orders must be drafted so they do not purport to bind foreign third parties (such as banks) or dictate outcomes in foreign proceedings; the order should state on its face that it does not affect third parties outside the jurisdiction and is subject to foreign law and foreign court authority.
- Where a worldwide order may be shown to foreign intermediaries, the terms and any notifications should make clear the limited legal effect of the English order abroad and avoid language suggesting that foreign recipients are directly commanded by the English court.
Conclusion
Babanaft confirms that English courts can grant post-judgment freezing relief with worldwide effect under section 37(1), but it also requires that such orders be carefully limited in form to avoid stating (or implying) that foreign third parties are bound or that foreign courts must give effect to the English injunction, leading to the standard “Babanaft proviso” approach in worldwide freezing orders.