Bahamas - Market Insights

Current trends in the jurisdiction: the influx of ex parte standalone Mareva injunctions in aid of foreign proceedings

In international commercial litigation, worldwide freezing orders are powerful tools which can extend to assets held abroad, making it harder for defendants to evade justice by moving money offshore. For many years it was thought that this remedy was not available in The Bahamas. However, following the instructive and persuasive judgment delivered by His Majesty’s Privy Council in Broad Idea International Ltd v. Convoy Collateral Ltd and Convoy Collateral Ltd v. Cho Kwai Chee (also known as Cho Kwai Chee Roy) [2021] UKPC 24 (“Convoy Collateral”), which was considered by Charles J (as she then was) in the Bahamian Supreme Court case of The Public Institution for Social Security v. Fahad Maziad Rajaan Al-Rajaan 2020/CLE/gen/00976 (“PIFSS”), as well as the implementation of the Supreme Court Civil Procedure Rules, 2022 (as amended) (CPR), The Bahamas has been handed a new tool to further justice by preventing the dissipation of assets which might be necessary to enforce judgments from around the globe.

The legislation

Section 21(1) of the Bahamian Supreme Court Act, 1996 (which mirrors section 37(1) of the Supreme Court Act of England & Wales, 1981) confers authority to a judge of the Bahamian Supreme Court to grant an injunction. It states that: “21. (1) The Court may by order (whether interlocutory or final) grant an injunction or appoint a receiver in all cases in which it appears to the Court to be just and convenient to do so.”

What is absent from this legislation is a provision similar to that of section 25 of the Civil Jurisdiction and Judgments Act, 1982 in England (which was expanded even further by the Civil Jurisdiction and Judgments Act 1982 (Interim Relief) Order 1997, SI 1997/302), which permits the English High Court to grant interim remedies, including worldwide freezing orders, in support of civil proceedings commenced or about to be commenced in foreign jurisdictions.

History of the Mareva injunction

The fundamental principle of granting a Mareva injunction (also referred to as a freezing order) derives from the leading case of Mareva Compania Naviera SA v. International Bulkcarriers SA [1980] 1 All ER 213 (CA), where Lord Denning MR opined at page 215 of his judgment: “If it appears that [a] debt is due and owing — and there is a danger that the debtor may dispose of his assets so as to defeat it before judgment — the Court has jurisdiction in a proper case to grant an interlocutory judgment so as to prevent him disposing those assets.”

Traditionally, the common law held that a pre-existing cause of action was required for a judge to grant a Mareva injunction. The view that an interlocutory injunction was ancillary to a pre-existing cause of action was conferred by the House of Lords in the landmark ruling of Siskina (Cargo Owners) v. Distos Compania Naviera SA [1979] A.C. 210 (“Siskina”), where Lord Diplock (with whom the other Law Lords agreed) stated at page 256: “A right to obtain an interlocutory injunction is not a cause of action. It cannot stand on its own. It is dependent on there being a pre-existing cause of action against the defendant arising out of an invasion, actual or threatened, by him of a legal or equitable right of the plaintiff for the enforcement of which the defendant is amenable to the jurisdiction of the court. The right to obtain an interlocutory injunction is merely ancillary and incidental to the pre-existing cause of action…”

For quite some time, the Siskina ruling had very consistently and stringently held precedence in the English and Bahamian Courts. The President of the Bahamian Court of Appeal, Gonsalves-Sabola (as she was then), confirmed the position in this jurisdiction at page 637 of her judgment in Meespierson (Bahamas) Ltd. v. Grupo Toras SA [1999] BHS J. No. 31 (“Meespierson”): “I am concluding this judgment with certain broad commonsense observations on the importance of the requirement of substantive domestic proceedings on a justiciable cause of action as the basis of Mareva Relief. In the first place, no person who does not have a cause of action within the jurisdiction ought to be able to invoke the court’s assistance to restrain another person’s control over that person’s own assets. No one would contend that a Mareva injunction which imposes such a restraint should be available on demand. A seeker of it must be able to make a case for such extraordinary relief. The essential nature of the Mareva is that it is interlocutory. It essentially derives from substantive proceedings as ancillary relief. If it did not so derive there would be lack of logic in the legal sense, of its grant. The court which is applied to for Mareva relief would not be able to have in view a prospective judgment whose probability, or even possibility, could be used as a touchstone to determine whether it was just and convenient to grant the relief.”

The Mareva injunction in modern times

Convoy Collateral departed from the traditional train of thought conferred by judges across the globe in cases like Siskina and Meespierson. Lord Leggatt, who delivered the judgment on behalf of the majority, clarified the power of the court to grant standalone freezing orders against a party in support of foreign proceedings and judgments. At paragraphs 101–102 of Convoy Collateral, the Law Lord held that it was permissible to grant a freestanding freezing injunction provided the applicant had been granted or had a good arguable case for being granted a (domestic or foreign) judgment or order for the payment of a sum of money.

Very soon thereafter, the question of whether a freestanding freezing injunction could be granted in aid of foreign proceedings arose in this jurisdiction. Convoy Collateral was applied by the Bahamian Supreme Court by Charles J (as she then was) in PIFSS. At paragraph 35 of PIFSS, Her Ladyship held: “35. In my judgment, the Defendant’s submission that there needs to be a substantive cause of action in The Bahamas for an injunction in aid of foreign proceedings to be granted is misconceived based on the recent decision of the Privy Council in Convoy Collateral. The short answer is that while Convoy Collateral may not be binding on the Bahamian Court, it is highly persuasive and, therefore, the argument that the Bahamian Court cannot grant a freestanding injunction in aid of foreign proceedings is untenable and must fail. In fact, Convoy Collateral has now settled what was the law since Meespierson (Bahamas) Lts & Others v. Grupo Torras SA and Another [2000] 1 LRC 627.”

In her application and analysis of Convoy Collateral, Charles J (as she then was) further noted at paragraphs 61–62 of her judgment in PIFSS that “there is no reason why section 21(1) [of the Supreme Court Act] should not be interpreted to provide for the grant of injunctions in aid of foreign proceedings. The Board’s rationale for its interpretation [in Convoy Collateral] was that the purpose of the law is to facilitate the avoidance of frustrating judgments of neighbour courts and not to make it difficult.”

Practice and procedure

In practice, freezing injunctions in support of foreign proceedings are sought to prevent the dissipation of assets that could frustrate the enforcement of a judgment or order. Piggybacking off the ratio in PIFSS, the implementation of the CPR has provided a mechanism by which to obtain this.

An urgent ex parte application can be made pursuant to section 21 of the Supreme Court Act and rules 8.1(7)(b), 17.1(1)(j) and Part 11 of the CPR. CPR rule 8.1(7)(b) permits applications to be made in support of foreign proceedings without a cause of action in The Bahamas:

“8.1 How to start proceedings.

…

(6) A person who seeks a remedy:

(a) Before proceedings have been started; or

(b) In relation to proceedings which are taking place, or will take place in another jurisdiction must seek that remedy by an application under Part 11.”

CPR rule 17.1(1)(j) allows a freezing order to be granted as an interim remedy:

“17.1 Orders for interim remedies: relief which may be granted.

(1) The Court may grant interim remedies including…

(j) a “freezing order”, restraining a party from:

(i) dealing with any asset whether located within the jurisdiction or not;

(ii) removing from the jurisdiction assets located there.”

The Notice of Application must be supported by a certificate of urgency, draft order and an affidavit which provides an undertaking to pay damages if the injunction is found to have been wrongly granted and evidence that:

• the applicant has a good arguable case;
• the defendant has assets within the jurisdiction;
• there is a real risk that the defendant is/will dissipate assets in this jurisdiction to prevent enforcement of a judgment; and
• the relief sought is just and convenient.

Knowing that their assets are restrained, defendants may be more inclined to settle matters efficiently, which can lead to faster resolution of disputes and reduce the risk of defendants ignoring judgments.