Содержание
Worldwide Freezing Order (WFO) is an English court order to freeze a debtor’s property worldwide. A positive judgment does not mean recovery. Courts or arbitrations can last for years, during which the debtor can withdraw money from the accounts. WFO solves this problem.
Why Worldwide Freezing Order?
The main things:
- WFO prohibits a debtor from withdrawing funds or selling assets
- The order is obtained in support of court proceedings or arbitration
- WFO can be obtained in three days
- WFO can be applied for even before filing a claim in court or arbitration
- WFO may be received without notice to the other party
- Violation of the order carries a sentence of up to two years imprisonment
- Liability may extend to persons who help withdraw funds in breach of the order (e.g. a bank)
Examples
Sailor invested a million dollars in an NFT startup. A month later, the startup’s founders stopped contacting him and shut down the website. It turned out that the startup company had gone bankrupt a year earlier. Sailor got a WFO against the startup founders and filed a court claim. While the court hears the dispute, the founders are barred from withdrawing money from their accounts. Saylor sent a copy of the order to the defendants’ banks and advised them of their liability if they withdrew funds from the accounts.
This example relates to the cryptocurrency industry. However, a Worldwide Freezing Order can be obtained in any field: stock purchases, IT consulting and application development, freight forwarding, metal trading, etc. Here is an example from grain trading:
MegaExport sold corn on FOB to HonestImport. After delivery of the goods, MegaExport sent the original documents to the buyer’s bank for payment on a “CAD” basis. After this, the buyer stopped contacting MegaExport. It turned out that HonestImport had knowingly given the wrong shipping address and received the original documents, bypassing the payment. Furthermore, the buyer never had an account at the bank specified in their instructions. Belated due diligence of the company revealed that HonestImport had not filed tax returns for the past three years and that its only asset was a bank account. MegaExport obtained a WFO against the company and filed a claim in Gafta arbitration.
When is Worldwide Freezing Order available?
If the contract provides arbitration or litigation in England, the parties can apply to the High Court of Justice for interim measures. The exception is the Scott v Avery clause, which prohibits the parties from seeking interim measures before obtaining a final decision on the dispute’s merits. This clause is contained in FOSFA‘s pro forma contracts.
One can apply for a WFO before filing a claim or during a dispute.
It is also possible to obtain an order without notice to the other party. To do so, it must be justified that notifying the other party will defeat the purpose of obtaining the order. For example, the debtor will immediately withdraw the money from the accounts, and it does not have other assets.
To obtain a Worldwide Freezing Order, one needs to prove that:
- It would be just to issue the order
- The claimant has a good arguable case
- The debtor has assets (for instance, a bank account)
- There were no delays in applying for the order
- There is a risk of dissipation of assets
Usually, difficulties arise with the last point. The risk must be supported by substantial evidence. It is not enough to say that the debtor will withdraw assets.
The applicant must also undertake to pay damages to the debtor in case the order is revoked. The court may order the applicant to pay a deposit to the court for possible damages or provide a bank guarantee.
How do I find the debtor’s assets?
A Disclosure Order is usually received together with the WFO. Under the order. The debtor must disclose the location and value of their assets. There is a double effect: the debtor discloses its assets, and these assets are subject to the WFO.
It is a breach if a debtor ignores a Disclosure Order or does not disclose all assets. Breaching the Disclosure Order carries the same liability as breaching the WFO.
How long does it take to get WFO and Disclosure Order?
In simple terms, obtaining a WFO and Disclosure Order goes under the following scenario:
- The court sets a hearing 2-4 days after the application has been filed
- After the order has been granted, the applicant must notify the debtor. The claimant must also file a claim on the dispute’s merits without delay.
- The debtor discloses its assets
- After two weeks, there is a second hearing where the debtor can challenge the order. The court may uphold the order, amend or revoke it. The court also decides on the recovery of legal costs.
What if the debtor breaches the orders?
Violation of the orders is contempt of court. The court may impose the following sanctions on the offender:
- Imprisonment for up to two years (per one case of violation)
- Seizure of property
- Fine
- Other punishments permitted by law
The court does not automatically impose sanctions when orders are breached. This is a separate process called Committal Proceedings.
Got other questions?
If you need help getting WFO or have any questions, email or message me, and I will try to help.
