Mareva injunctions restrain asset disposal to preserve potential judgment satisfaction, subject to claimant cross-undertakings. Mareva injunctions allow an ex parte restraint on a defendant and those controlling the defendant's assets to prevent disposal of assets within the court's jurisdiction where affidavit evidence shows a real risk that dissipation would defeat satisfaction of an eventual judgment; relief is conditional on the claimant's cross-undertaking to compensate for wrongful harm and indemnify third parties, is ad personam, does not alter creditor priority, and permits the defendant, under court supervision, to meet reasonable expenses from frozen funds. (AI Summary)
Background:
Traditionally as per English law a plaintiff is not entitled to 'security to guarantee' from defendant before the judgment (i.e. for satisfaction of the judgment that the plaintiff may eventually obtain).
A change was brought by the pair of Court decisions -
- Nippon Yusen Kaisha v. Karageorgis (1975)
- Mareva Compania Naviera SA v. International Bulk Carriers SA (1975)
The plaintiff claimed for damages arising from shipping contracts, brought against foreign defendants. In both the aforesaid cases, the plaintiffs obtained 'ex parte' orders restraining the defendants from removing their funds out of the jurisdiction of the Court, pending the final adjudication of the matter in issue. (Now this decision is popularly known as MAREVA Injunction)
Requirement
1. The plaintiff applies to the Court for ex parte order - for an injunction to restrain the defendant and any one with control over the defendant's assets from disposing of the defendant's assets, giving the reason, if order not allowed, defendant would reduce the value of those assets below a certain level usually the value of the plaintiff's claim.
2. The plaintiff must show, by affidavit-evidence that there are reasons to believe that the defendant has assets within the jurisdiction of the Court and there is a danger that, if the defendant is not restrained from disposing those assets, then any judgment that the plaintiff may eventually obtain, may go unsatisfied.
2. The Order is subject to cross-undertaking by the plaintiff to compensate the defendant for any unwarranted damage that the defendant may suffer and to indemnify third parties in respect of costs that they may incur in confirming with the injunction.
4. Injunction order granted by the Court commonly states that the defendant is at liberty to apply, upon notice to the plaintiff, to discharge or vary the order.
Nature of the Order
1. A MAREVA injunction is an 'ad personam' order restraining the defendant from dealing with assets in which the plaintiff claims no rights whatsoever.
2. A MAREVA order does not give the plaintiff any precedence over the other creditors with respect to the frozen assets.
3. Subject to the Court supervision, the defendant remains free to meet his living expenses and other obligations form the frozen funds.
Relevance to Bankers
1. The MAREVA injunction could be relevant for bankers in so far as it constitutes a weapon in relation to debts.
2. It could turn out to be particular utility against foreign parties.
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