English courts are developing ways to ensure that creditors are not thwarted by sophisticated and devious debtors using offshore structures that do not appear to be fictitious.
Worldwide Freezing Orders (WFO) apply to assets where a defendant has the power to dispose of or deal with the asset as if it is his own. In JSC BTA Bank v. Ablyazov, (no. 10), (2015) 1 WLR 4754, the Supreme Court held that the defendant’s, the settlor of the trust, right to draw down under a loan agreement showed de facto control over the trust assets. A WFO could extend to freeze the assets of that trust. Control by the settlor of the trust is the key factor to getting a WFO.
The stumbling block in these cases seeking a WFO, however, is to persuade the Court that the judgment could be enforced against the assets. In Tasarruf v. Merrill Lynch, (2012) 1 WLR 1721, the Privy Council held that an equitable receiver could be appointed to the settlor/judgment debtor’s power of revocation in an offshore trust, with the purpose of allowing the receiver to revoke the trust so as to re-vest the trust assets in the settlor/judgment debtor. In VTB Bank v. Skurikhin, (2012) EWHC 3916 (Comm), (2015) EWHC 21316, a WFO was granted over the beneficial interest of the intended judgment debtor in two English LLPs where the interest was held through a discretionary Liechtenstein Foundation. And, in Algosaibi v. Saad, (2011) 1 CILR 178, the court enforced a Russian judgment in England and Wales by appointing an equitable receiver to LLP membership interests and an administrator was then appointed to the LLPs.
Thus, creditors need to look past the trust agreements to the exercise of the offshore trust as to whether their claims can be enforced against the trust.