October 19, 2020

“Free Standing Injunctions”

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stationeryCyprus: Do Cyprus Courts Have Jurisdiction To Issue The So Called “Free Standing Injunctions” In Aid Of Foreign Court Proceedings Pending Outside EU?

Article by Soteris Pittas Soteris, Pittas & Co LLC

Pursuant to Section 31 of the EU Regulation 44/2001 (the “Regulation”), Cyprus Courts have jurisdiction to issue free standing injunctions (i.e. injunctions issued without the filing of any substantive proceedings in Cyprus) in aid and in support of Court proceedings, pending before Courts of Member States of EU (except Denmark).

The same power and jurisdiction exist, pursuant to Section 9 of the Cyprus International Commercial Arbitration Law (UNCITRAL MODEL LAW), for the issue of interim measures of protection, in aid and in support of international commercial arbitration cases, pending in Cyprus, and overseas.

Until now, there is no court precedent, regarding whether Cyprus Courts, have jurisdiction to issue free standing injunctions, in aid and in support of foreign court proceedings, pending in countries, outside EU.

However, case law in BVI, Jersey and Cayman Islands – (which adopted and followed the minority dicta of Lord Nicholls in the Privy Council case Mercedes-Benz AG –v- Leduc)-, supports the existence of such jurisdiction in order to do justice.

Due to the fact, that the request for issue of interim injunction, cannot be considered as a substantive claim, covered by existing Cypriot Civil Procedure Rules, regulating the power of the Cypriot Courts, to grant leave to serve outside the jurisdiction, to the foreign defendants (i.e. the same obstacles and problems existed in England in the Mercedes case, as well as in BVI (in the Black Swan case), in Jersey (in Solvalub –v- Match Investments Ltd), and Cayman Islands (in Gillies-Smith –v- Smith), the Courts (including Cyprus Courts), do not have jurisdiction to issue free standing injunctions, against a defendant, not domiciled in Cyprus, but only against defendant, domiciled in Cyprus, because no leave can be given for service outside the jurisdiction to the foreign defendant of such free standing injunctions.

In the above common law cases (BVI, Jersey, Cayman), the Court issued free standing injunctions -(i.e. Chambra type injunctions)- , against Companies, residing within the jurisdiction of the Court, whose shares were beneficially owned by the principal foreign defendant, against whom the foreign action was filed.

There is no need, the above Companies to be parties to the foreign proceedings. Cyprus Courts have jurisdiction to grant freezing orders over the assets of “non-cause-of action” defendants domiciled in Cyprus, whose shares are beneficially owned by the foreign substantive defendant (i.e. Chambra injunctions).

The following dicta of Justice Bannister in the BVI case BLACK SWAN INVESTMENT USA -v- HARVEST VIEW LTD and Another, have full application in Cyprus as well as:

” … quite apart from the jurisdictional analysis of Lord Nicholls which I have respectfully adopted, there are sound policy reasons why important offshore financial centres, such as Jersey and the BVI, should be in a position to grant such orders in aid where necessary. The business of companies registered within such jurisdictions is invariably transacted abroad and disputes between parties who own them and others are often resolved aboard. It seems to me that when a party to such a dispute, is seeking a money judgment against someone with assets within this jurisdiction, it would be highly detrimental to its reputation, if potential foreign judgment creditors were to be told that they could not, if successful, have resort to such assets, unless they were to commence substantive proceedings here, in circumstances where, in all probability, they would be unable to obtain permission to serve them abroad – thus presenting them with an effective brick wall or double bind of the sort so deplored by Lord Nicholls in Mercedes Benz …”

We strongly believe, that in the proper case, the Cyprus Courts will recognize the existence of such jurisdiction and they will follow and adopt the above decisions issued in the above common law jurisdictions (i.e. BVI, Jersey, Cayman etc).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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