MULTINATIONAL COMPANIES MUST BE BETTER EDUCATED ON COMPLYING WITH FOREIGN COURT ORDERS

By Mr Kartik Mittal, Solicitor at Zaiwalla and Co Solicitors

For years, the English legal system has been considered the most objective and fair. This has resulted in an influx of foreign nationals and companies flocking to our shores to settle their legal disputes. However, more and more foreign nationals and companies are increasingly getting caught out by the subtle nuances of English law.

Under UK law, failure to comply with a court order is considered Contempt of Court and as a result it can result in imprisonment, fine or sequestration of assets if found guilty. As was the case in a recent legal dispute we were involved in, the case of IpartnerPte Shipping Limited (Claimants) &Ors v Panacore Resources DMCC &Ors (Respondents), where a freezing injunction had been obtained against the Respondent. The freezing order contained a penal notice which stated that “if the Respondent companies did not comply with the Court’s Orders then the companies and/or its directors could be held liable for contempt of court”.

Kartik Mittal, Solicitor at Zaiwalla and Co.
Kartik Mittal, Solicitor at Zaiwalla and Co.

When the Claimants made an application to the Commercial Court alleging that the Respondent companies, my client, had not fully complied with the Court’s Order.  They sought an Order against the companies and/or its Indian Directors.

If our clients had been found guilty they would have had their assets frozen and they would have faced a prison sentence, despite the fact they are not English and the company is based in Singapore. This would of course be a hugely damaging scenario for the client, and could have been avoided with ease.

After working on this case for a number of months, what we found most alarming, despite the fact that it is rare to bring a committal case in a civil suit, was the naivety that revolves around complying with an English Court Order. Making an honest mistake is not a valid deference, given an individual is considered in contempt of court when they knowingly act or fail to act, even if they did not realise that the act was a breach or even sincerely thought it was in compliance with the Court Order.

The main focus of this case lies on the fact that if the foreign directors had not been compliant with the English court order, then the consequences could have been extremely severe. A number of foreign companies believe they are outside the grasp of the English Court and therefore simply ignore Court Orders that are issued.

In previous cases, where foreign nationals have failed to comply with court orders, the court have had the power to fine or imprison those deemed to be at fault. It cannot be understated that the location of the individual is completely irrelevant; therefore it is vital everyone should be educated on this issue.

On the 27th January, the Court committed the former deputy chairman of JSC BTW Bank was sent to prison for 15 months. This was the latest episode in the Bank’s long running fraud claim against the Bank’s former senior management, including the deputy chairman. However, his custodial sentence was not imposed as a result of his fraud but rather as a result of his failure to comply with orders issued by the court.

Since 2012, the English Courts have been sending a very clear message to everyone under its jurisdiction: a tougher stance is going to be taken on non-compliance with rules and directions. Any previous scope for leniency looks to be becoming increasingly a thing of the past. The reason behind this stance being implemented is that if a strict approach is consistently applied across the board, claimants and defendants alike will have clarity in their court proceedings as well as a system that is slick and cost-effective.  This means, a failure to comply with a rule, director or order is in itself a clear breach of the overriding objective, which would result in severe sanctions.

There should be no doubt that if a court order is issued against a foreign national, irrespective of where they are based, they should take all reasonable steps to comply with its provisions.  It is the duty of those whom practice law to ensure their clients are properly informed of the consequences which revolve around refusing to meet the terms of an English Court Order.

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