Worldwide freezing orders: the Babanaft proviso no defence to civil claims against wrongdoers outside the jurisdiction

The Court of Appeal in Lakatamia Shipping Co Ltd v Su (Nobu) & Ors [2025] EWCA Civ 1389 has confirmed that the Babanaft proviso (a standard provision in worldwide freezing orders limiting the territorial reach of English freezing orders against parties outside of the jurisdiction) is not a defence to a civil action, ensuring the protection of judgment creditors against those assisting judgment debtors seeking to avoid enforcement by moving assets in breach of a freezing order.

Background

In the latest instalment of Lakatamia’s long-running efforts to enforce judgments of the English Court against Mr Su, the shipping company brought a claim in unlawful means conspiracy against Mr Su, Mr Chang and Maître Zabaldano following the dissipation of funds (the sale proceeds of two Monaco properties) beneficially held by Mr Su, in breach of a worldwide freezing order. Had the funds not been transferred, Lakatamia would have been able to enforce the English judgments against those funds once the judgments had been recognised in Monaco. The transfer of funds was effected by Maître Zabaldano (a Monegasque lawyer) on the instructions of Mr Chang (the sole director of Cresta Overseas, a company of which Mr Su was the UBO), who was in turn following Mr Su’s instructions. Lakatamia brought claims seeking damages against the three defendants for unlawful means conspiracy and inducing a breach of judgment (i.e. the so-called Marex tort).

First instance decision

The trial Judge dismissed the claim at first instance on the basis that:

• In the case of Mr Chang, the Judge was not satisfied that he had knowledge that Mr Su was bound by the freezing order, or that he still owed the judgment debt at the time the instructions were given to Maître Zabaldano to transfer the remaining sale proceeds of the Monaco properties.
• In the case of Maître Zabaldano, despite the Judge finding that he knew the transfer was in breach of Mr Su’s obligations under the freezing order and a finding that the elements  for a claim in unlawful means conspiracy were otherwise satisfied, the Judge invited post-hearing written submissions as to whether Maître Zabaldano could rely on the Babanaft proviso in the freezing order as a defence to the claim. Following those submissions, the Judge treated the Babanaft proviso (that the order “does not affect or concern anyone outside the jurisdiction”) as insulating Maître Zabaldano from tortious liability.
• Having found that Mr Chang and Maître Zabaldano were not liable in conspiracy, the claim against Mr Su necessarily  failed on the basis that he could not be liable for conspiring on his own.

Court of Appeal decision

The Court of Appeal (Males LJ, with whom Sir Julian Flaux C. and Falk LJ agreed)  overturned the decision, finding that the factual conclusions of the Judge were incorrect and ‘contrary to binding Supreme Court authority’.

Applying the elements established in FM Capital Partners v Marino, the Court of Appeal held that all three defendants were liable in unlawful means conspiracy arising from the transfer of the funds, putting the funds beyond the reach of the longstanding worldwide freezing order. 

The Court of Appeal rejected the Judge’s analysis as contrary to the binding authority in JSC BTA Bank v Ablyazov (No.14) [2018] UKSC, clarifying that:

• The Babanaft proviso may protect a foreign non-party from penal sanctions for contempt, but it does not bar a civil claim for conspiracy where they assist the party bound by the order to breach it.
• Accordingly, the proviso does not provide a defence to a claim in unlawful means conspiracy to a foreign party to the conspiracy.

Applying the majority verdict in The Racing Partnership (discussed in more detail here: Rights in sports data – Court of Appeal), the Court confirmed that a claimant need only show that each conspirator knew the facts making the conduct unlawful; they need not appreciate the legal character of those facts as unlawful.  Overturning the factual findings of the trial judge (despite the high bar to the Court of Appeal revisiting factual findings), the Court found that  Maître Zabaldano knew of the freezing order, the judgment debt, Mr Su’s beneficial ownership of the funds which were transferred and that the transfer would be in breach of the freezing order; Mr Chang knew of or at least turned a blind eye to the freezing order and the judgment debt. 

In light of the fact that the claim in unlawful means conspiracy succeeded, and with an acceptance that the Marex tort is a “novel and developing tort”, the Court declined to rule on its scope leaving that “open in this court for decision in a future case”. Similarly, the Court left open whether the Marex tort was subject to a defence of justification, to which Maître Zabaldano was entitled because of his genuine belief that he was entitled and obliged to comply with the instructions given to him for the transfer of the funds.  Further, even on the assumption that justification can in principle be a defence, the Court left open whether the defence would have been made out by Maître Zabaldano on the facts of this case when it was always open to him to have made an application to the English court for directions.

Judgment was entered in favour of the appellants for more than USD 26m.

Comment

The Court of Appeal has helpfully reconfirmed the purpose and effect of the Babanaft proviso.  It does not afford those outside the territorial jurisdiction of the English court with a defence to a claim in tort if they unlawfully conspire to dissipate frozen assets in breach of a worldwide freezing order.  The Babanaft proviso does however shield a foreign wrongdoer from contempt of court proceedings for assisting in the breach of a freezing order.  In order for contempt of court proceedings to be able to be brought, the individual in question has to be within the territorial jurisdiction of the English court when any act occurred in breach of a relevant court order.

The judgment will be a welcome confirmation to those seeking to hold to account parties outside of this jurisdiction who wrongfully assist in breaches of freezing orders.