10 November 2014
In Cruz City 1 Mauritius Holdings v. Unitech Limited & Others (2014) the English Commercial Court appointed a receiver over Unitech Limited’s non-UK assets and, also, made ancillary orders which it considered necessary to prevent the Defendants from impeding the receivers. The judgment emphasises the commitment of the English Courts to enforce arbitration awards.
The parties entered into a joint venture for the clearance and development of slum property in Mumbai, India. A dispute arose out of the Claimant’s right to require two subsidiary companies of Unitech Limited jointly and severally to purchase the Claimant’s interest in the joint venture if certain conditions for the start of the project had not been fulfilled within a specified time. The project was delayed and the Claimant exercised its put option. The Defendant companies denied that they were liable to purchase the Claimant’s interest in the joint venture.
The Claimant commenced arbitration proceedings in London seeking to enforce the put option and associated obligations. In the arbitration the Defendants were ordered jointly and severally to pay the Claimant almost US$300 million. The Defendants declined to pay any part of the sum awarded.
Several legal skirmishes ensued between the parties. The Claimant subsequently applied in the English Court for the appointment of receivers by way of equitable execution over foreign assets of a foreign company.
The application came before Mr. Justice Males who reviewed the law and principles applicable to the appointment of a receiver by way of equitable execution. He concluded that it was just and convenient to make the Order sought on the application. He noted:
1) Unitech Limited held assets through multiple chains of companies located not only in India but in a variety of jurisdictions, many of which did not offer transparency as to the assets held.
2) Usual methods of execution were likely to be ineffectual and recovery of the debt by other methods was not practicable in any reasonable timescale in the countries where the Defendants held assets.
3) The appointment would overcome the apparent obstacles that the Defendants had placed in the way of enforcement and, accordingly, the appointment of receivers would not be fruitless.
4) The appointment of receivers would be a valuable support for a freezing order previously obtained by the Claimant and would help prevent the dissipation of assets by the Defendants.
5) There was a realistic prospect that the Order would be complied with by the Defendants and its directors since any failure to comply with the receivership Order would be open defiance, not easily capable of being concealed.
In this case the English Court has confirmed once more its commitment to promoting the enforcement of arbitration awards and its willingness to develop its jurisdiction incrementally if necessary. The judgment demonstrates vividly the English Court’s ability to grant orders against non UK companies to enforce arbitration awards against assets held in foreign jurisdictions.
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Note: This is a general briefing and not an exhaustive treatment of the subject.