TerraLex guide to tracing assets around the world 2018
We are delighted to present the TerraLex 2018 Guide to Tracing Assets Around the World.
The ability to trace assets across the world is increasingly relevant to businesses operating globally. And when a business holds assets outside the territory in which it is subject to dispute, it is important that the claiming parties are able to trace assets across jurisdictions.
We hope you will find the guide a useful resource for understanding the broad framework of asset tracing in each of these territories, in the knowledge that where specialist advice is needed, it’s only a call or email away.
Navigate asset tracing rules in key territories across the Americas, Asia and Europe
Australia | Bahamas | Brazil | Canada | Cayman Islands | China (Mainland) | France | Germany | Hong Kong | Hungary | Luxembourg | Malaysia | Mauritius | Serbia | Spain | Switzerland | US (California) | US (Colorado) | US (Idaho) | US (Illinois) | US (Mississippi) | US (Montana) | US (New York) | US (North Carolina) | US (Tennessee) | US (Texas) | US (Wyoming)
Focus: asset tracing in the UK
This guide draws together contributions from lawyers in the TerraLex network across a number of territories in the Americas, Europe and Asia.
We at RPC have pulled together contributions from our in-house team to bring you an overview of asset tracing in the United Kingdom. Is any information about assets publicly available? What assets can be frozen? How can they be protected on an interim basis? How to obtain a search order or a freezing injunction?
Find out more below.
An overview of asset tracing in the UK in 8 questions
The English courts have powerful and effective tools to identify and preserve assets. The "freezing injunction" which can have worldwide reach is the nuclear option" of remedies available to English courts and can, in the right circumstances, be extremely fruitful for claimants that have been victims of complex international fraud or other wrongdoing.
1. Is any information about assets publicly available?
Public Limited Companies (PLC) will publish accounts and file information with the relevant share exchange
Larger Private Limited Companies (Ltd) or Limited Liability Partnerships (LLP) must file annual accounts at Companies House which are publicly available.
The Land Registry holds a central record of property ownership in England and Wales. It is possible to search for properties owned by a corporate entity. It is not generally possible to search for property owned by private individuals. There are exceptions eg for a trustee in bankruptcy or if there is an applicable court order.
2. What steps can be taken to obtain information to identify asset holders (whether third party or wrongdoer/adverse party) or the assets?
As against third parties
"Norwich Pharmacal Orders" – a form of court disclosure order made where the applicant does not know who to proceed against without the information from the third party respondent. The applicant needs to show that the respondent has become mixed up in or otherwise facilitated the wrongdoing (whether knowingly or innocently). Often used against banks in fraud situations.
Non-party Disclosure Orders – If substantive court proceedings have been commenced, it is possible to apply for a non-party disclosure order. An applicant needs to show that the documents are likely to support its case and are necessary to resolve the proceedings.
As against the wrongdoer
When making application to the English court for a freezing injunction (see below) the applicant can ask the court to include an order that the respondent discloses all the assets owned by it anywhere in the world. Any failure to comply with these disclosure requirements can be considered contempt of court and result in a prison sentence for individuals.
3. Can steps be taken to protect/preserve assets on an interim basis?
Yes. A freezing injunction can be obtained which prevents a party from disposing of or dealing with its assets pending the outcome of a final judgment of a claim.
It is usual for such an injunction to require the respondent party to disclose information about his assets. It should be noted that the party seeking the injunction will be required to provide an undertaking to the court that it will not use any information obtained as a result of the injunction for the purpose of any civil or criminal proceedings (either in England and Wales or in any other jurisdiction) other than the claim in which the order is granted, except with the permission of the court.
4. What are the requirements for obtaining a freezing injunction (if available)?
The applicant needs to show:
- the English court has jurisdiction to hear the substantive claim and there are assets in the jurisdiction.
- there is a substantive cause of action for which the applicant has a good arguable case. The applicant must progress the substantive claim.
- it is just and convenient to grant the injunction: this is the main consideration and means the injunction would not be granted if it would cause some injustice to the respondent that outweighs the benefit to the applicant.
- there is a real risk the respondent would dissipate the assets.
The applicant will also need to provide certain undertakings to the court which would include an agreement to pay damages to the respondent if the injunction was improperly obtained or if it is decided at final trial that the injunction should not have been granted.
5. What assets can be frozen and do they have to be within the jurisdiction?
A freezing order can apply to all asset classes (ie not just property, but bank accounts, shares etc), whether within or outside the jurisdiction.
A party subject to a freezing order can be compelled to disclose information relating to any interest in any trusts whether as a beneficiary or otherwise. In general, the court has the power to make whatever ancillary orders are necessary to make the freezing order effective.
The court will only exercise its discretion to grant a freezing injunction extending to foreign assets in exceptional circumstances if the respondent is resident within the jurisdiction or is someone over whom the court has or would have in personam jurisdiction.
The court will only grant worldwide relief if it is just and expedient to do so. The court is mindful of disharmony or confusion or the risk of conflicting, inconsistent or overlapping orders in other jurisdictions.
The injunction will not automatically be enforced worldwide; the applicant will still need to enforce the injunction in those jurisdictions where assets are located.
In certain circumstances, for example where the responding party has limited assets in the jurisdiction, the court might make an order that further assets (or assets of a certain value) be brought into the jurisdiction.
6. What about a search order?
The procedure for obtaining a search order is similar to that which applies in relation to obtaining a freezing order. However, the search order will only apply to premises within the English jurisdiction and they are granted by the court only in extreme situations (for example, where there is a real risk that the defendant will destroy documents).
7. Can a freezing injunction or search order be obtained in support of proceedings outside of the jurisdiction?
Yes. The English courts have jurisdiction to grant a freezing injunction or search order in support of substantive proceedings that have been (or will be) served outside the jurisdiction.
8. Can a freezing injunction obtained from a foreign court be enforced against assets in the jurisdiction?
Yes, dependent on various regimes. The applicable regime depends on where the freezing injunction was obtained.
There are statutory regimes for freezing injunctions from the EU, EFTA and commonwealth countries. These require that in order for a freezing injunction to be enforceable, the original court must have had jurisdiction over the substantive dispute. Once this test is passed a certificate must be obtained from the original court certifying the judgment, and then served (along with a copy of the judgment, which may be required to be translated) in the UK.
If the country (or type of injunction) falls outside of one of the statutory regimes, common law is applied. Common law covers amongst other countries, the USA, Scotland and Northern Ireland (although Scotland and Northern Ireland have applicable statutes for enforcing other judgments, freezing injunctions are specifically excluded).
The common law position is similar to the statutory regimes and requires that a foreign freezing injunction is only enforceable if the original court had jurisdiction according to the rules which English law applies in such cases, which means broadly on a territorial or consensual basis. It is insufficient that the original court had jurisdiction according to its own rules.