It can be seen that most of the evolution of the Mareva Injunction has happened at the hands of the judiciary. Mareva injunction is an interim remedy over the years, which can be considered an excellent outcome of the creative judicial process. It is a very strong weapon in the disputes where there are major monetary questions of fraud. The Mareva Injunction was granted for restraining the defendant from disposing of assets held in any part of the world. Mareva injunction was granted for in respect of assets found outside the jurisdiction of the court. If the court refused the particular application, then it must state the reasons for doing so.
In 1975, the Mareva Injunction appeared, which was considered as powerful, unique to English law, extreme tools. But now it becomes commonplace, which sought as a matter of procedure in most developed commonwealth countries.
It is also known as freezing orders, generally, an interlocutory order that granted an ancillary to a substantive claim that involves money. It prevents the defendant from rending a decree against him worthless by removing his assets from the court’s jurisdiction.
Now the scope of the injunction is changed and evolved vastly from the earlier one. It has grown into a general jurisdiction, enabling the courts to grant interim relief against the defendant according to the circumstances of the case, which is very different from what was envisaged in the beginning.
What is a Mareva Injunction?
Mareva injunction is a form of “ad personam” interim relief, which is usually sought during the pendency of court proceedings or after the completion of proceedings. Still, it should be enforced and enacted before the judgment. This type of injunction is essential for the claimant against the respondent to prevent the final from spreading his assets in the ordinary business course. So, for ensuring that the respondent does not conquer the enforcement of the judgment, the concerned injunction is necessary.
It is different from the other injunction. It will cover those assets that are not necessarily a part of the subject-matter in the concerned dispute. It evolved in 1980 through the case of “The Mareva”. In the particular case, the court enforced a judgment on the Mareva injunction to prevent dissipating their assets from beyond a court’s jurisdiction.
Before this case, common law did not permit this type of pre-judgment injunction. Mostly, the injunction is served on third parties, commonly in many cases the infringer’s bank asking them to freeze the infringer’s assets. If any person knows the infringer’s assets, he would be amount to contempt of court if he does not do this. If the Mareva injunction is granted at the pre-trial stage in en-parts hearings, it is based on affidavit evidence alone.
Evolution of the Mareva Injunction
Until 1975, in English law, the scope of the Mareva Injunction was very restricted. However, on the other hand, other jurisdictions, especially the civil law system, had a wide range of provisional protective measures. Initially, the English law system did not allow freezing of assets before or during the trial. But in between the 20th century, the person could not get an injunction to restrain another person who is supposed to be a debtor from parting with his property. It created a scope for unrestrained abuse.
Foreign companies try to adverse the judgments and remove their assets from the court’s jurisdiction before trial. And due to this plaintiff was left holding nothing except an empty judgment. Same this type of exploitation was seen in several cases in which involving ‘one-ship’ companies.
To prevent the people from this type of exploitation, the English court in 1975 within two successive cases, the court of appeal granted an injunction that stops the defendant from taking assets out of the court’s jurisdiction in the pending trial. The first time Mareva injunction was granted in the case of Mareva Companies SA vs. International Bulkcarries, this case gave the injunction its name.
Further, till 1979 Mareva Injunction was applicable only against the non-resident defendants. But this limitation was criticized at a vast level. So in 1980, in Rahman v. Abu-Taha, the court of appeal approved the expansion of jurisdiction to a resident defendant.
The jurisdictional ground of the Mareva Injunction under the English Law is provided through the Parliament under section 37(3) of the Supreme Court Act 1981. However, in India, the jurisdiction of the Mareva injunction provides the courts under Order XXXVIII, Rule 5 of the Civil Procedure Code, 1980, which grants this remedy.
Several jurists analyze that the acquisition of the jurisdiction to grant the Mareva injunction is considered very useful.
Criteria for Grant of Mareva Injunction
The plaintiff who wants to get a Mareva Injunction order then must include the lines of any interim injunction, i.e., Balance of convenience, irreparable injury, and a prima facie case.
Now over all the years, the criteria laid down clearly in the case of Dynasty Rangers vs. SBSK Plantations:
- If the plaintiff wants to get the injunction, he must be demonstrated a good arguable case, and the cause of action must exist at the time of granting the particular order.
- For the injunction, the defendant’s assets must be within the jurisdiction of the court.
- While granting the injunction, the balance of convenience must be in favor of the plaintiff.
- The plaintiff must take the court in confidence that there is a risk of dissipation of assets from the defendant’s side.
- The plaintiff must ensure that there has been no delay in applying for the injunction.
In Ninemia Maritime Corp v. Trave Schiffahrtsgesellschaft mbH & Co., in this case, the British court said that to assert that the assets will be dissipated by the defendant than the plaintiff must demonstrate this by a piece of solid evidence. And it may also be considered direct evidence if the defendant has previously acted in a way that shows that his statement is not reliable. Precisely the evidence always depends on the circumstances of the particular case, but there must be evidence.
What is the Role of Section 44 of the 1996 English Arbitration Act?
Section 44 prescribes the ambit of the interim reliefs, which the court granted to preserve the defendant’s assets. In any particular case in which the facts and circumstances of the case grant freezing orders only when the court prescribes certain conditions for deciding the case.
The primary ruling of section 44 is that when the arbitral tribunal is unable to grant the requisite interim relief only when the court can grant it. Thus, the court’s power to grant freezing injunctions is limited and affected by the parties’ agreement with the arbitral tribunal or some concerning provisions of the relevant institutional rules.
And the judiciary cannot break this rule because this is in keeping with the principle of judicial non-intervention in arbitral proceedings, but they can intervene only when there is a crucial situation.
Effect on Third Parties
The court got the opportunity to examine the impact of the Mareva Injunction in the case of Z Ltd. v. A-Z. In the particular case, the court of A appeal laid down several guidelines in which they explain the third party’s liability for violating the Mareva Injunction.
In this case, there was a foreign company (plaintiff); the plaintiff had an office in London to purchase goods with no intention of supply. The money received by the defendant was divided between various bank accounts in London, and the plaintiff discovered that fraud and took steps to recover the amount.
The concerned court grants the Mareva Injunction against the defendant, and other substantive issues had been settled.
After that, the bank filed an Appeal; they claim that the effect of an injunction on the third party, i.e., banks, could be clarified. The court of Appeal emerged the six principles:
- The third-party has been given notice of the injunction, and after all this, he knowingly assists in the order’s breach. The third-party will be guilty of contempt of court, irrespective of the defendant’s knowledge of the injunction.
- If the bank makes payments through another party on behalf of the defendant under the bank guarantee, then it will consider the violation of the injunction.
- The plaintiff must compensate any reasonable expense collect by a third-party in complying with the injunction, and then it must be required to give the court an undertaking to this effect. And these costs can be recovered by the defendant during the trial if the plaintiff will be successful.
- It is the duty of the plaintiff to give all necessary information to the third party, which is related to compliance with the injunction. If the plaintiff does not have adequate information and is unable to identify the defendant’s assets, he can request the third party to search.
- The injunction freezes the assets of the defendant only to the extent of the claim. But in exceptional cases, the entire estate of the defendant can be frozen.
- During the injunction, the provisions for the day to day living expenses of the defendant may be made.
These types of cases do not give any comment on the effect of the injunction on the third-parties, which are outside the jurisdiction of the court. But the third party, which is resident within the jurisdiction of the court, will be in contempt of court is he knowingly diminish the Mareva Injunction.
The Mareva injunction was introduced in 1975, it is a powerful tool, and gives various wide powers to the court to ensure the judgments are not rendered worthless. The most difficult thing is probably the extent to which the court will attempt to control third parties once it has decided to grant an injunction. Now over time, the injunction has evolved from being to prevent the defendants from removing their assets from the court’s jurisdiction irrespective of the fact is where he is resident or where his assets are.
In every case, the court must ensure that while granting such an injunction, there should be no violation of the principle of natural justice. There is no doubt that the Mareva Injunction is useful, and it should not be allowed to develop contrary to basic, it is well established by law and enacted under the principle of laws.
- In which case the Mareva Injunction was introduced?
- Is the third- party have any liability during the injunction period?
- What is the role of section 44 of the 1996 English Arbitration Act?
- On what basis the court accept the application of granting the Mareva injunction against the defendant?
- Tanna, M.L., Tannan’s Banking Law & Practice in India, 20th Edition., India law House, 2003, New Delhi
- Andrews, N.H., “Freezing Foreign Assets by Mareva Injunctions,” the Cambridge Law JOURNAL, Vol.48, No. 2
 (1980) 1 ALL ER 213(CA)
  1 WLR 1268
  2 Lloyd’s Rep. 600
  1 All ER 556,  2 WLR 288,  1 QB 558