Relevant Factors in Grant of Freezing Injunction in Support of Foreign Arbitration

Mobil Cerro Negro Ltd. v. Petroleos de Venezuela SA, 2008 WL 678144, [2008] EWHC 532 (Queen’s Bench Div., Commercial Ct.)

In this case, a freezing injunction was set aside, having been granted in support of claims which were the subject of ICC arbitration seated in New York.  The parties were parties to a contract for the exploitation of oil rights, the Claimant being a US corporate and the Defendant the Venezuelan state oil company.  Venezuelan legislation passed in 2007 mandated the “migration” of non-Venezuelan interests in Venezuelan oil to Venezuelan entities, and gave rise to claims under the parties’ contract.  Mobil obtained a worldwide freezing injunction up to a value of $12 billion and Petroleos applied to have the injunction set aside.

It was held that it was not just or convenient to maintain the injunction, as there was no evidence of behaviour on the part of Petroleos in relation to its assets which was unjustifiable; accordingly there was not the requisite urgency; and there were no factors connecting the defendants with the jurisdiction, the English court should not intervene.  The factors considered included residence and the presence of assets within the jurisdiction.  The applicant for the injunction also failed to show that it would be just and convenient to grant the injunction, or that the requisite degree of urgency existed. 

The case confirms that a clear connection with England and Wales is required before the English court will exercise its power under s.44 of the Arbitration Act 1996 (the “Act”) to intervene in respect of foreign arbitration in accordance with s.2 of the Act which stipulates that "…the court may refuse to exercise any such power if, in the opinion of the court, the fact that the seat of the arbitration is outside England and Wales or Northern Ireland….makes it inappropriate to do so."  The power of the court under the Act is therefore analogous with the court’s power to intervene in respect of foreign litigation (in non-fraud cases) under s.25 of the Civil Jurisdiction and Judgments Act 1982.