This is part of a series of bulletins for US lawyers and parties who may have litigation or disputes in England, issued by partner Stephen Rosen who heads our UK/USA Transatlantic disputes team.

Bulletins from our UK/USA Transatlantic disputes team:

1) Pro-active steps to obtaining deposition evidence under the Hague Convention

2) Care needed when serving US proceedings in the UK

3) Collective actions: England cautious – catch-up with the US

4) Comparison of Chapter 11 US insolvencies with the UK approach 

5) Enforcing US Judgments in England

6) Obtaining documentary evidence from a witness in England

7) US challenges to English court jurisdiction

8) An English court fraud and asset recovery toolkit for US litigators

Over decades the English[1] court has developed an integrated, distinctive suite of remedies aimed at the three immediate objectives of fraud victims: identifying the fraudster, tracing the assets and preserving the recovery. The court’s internationally popular remedies are frequently used alongside US litigation and can provide strategic advantages that are unavailable or more difficult to obtain under US procedural rules.

US lawyers handling fraud, asset tracing, crypto asset disputes, breach of trust claims, investment fraud, authorised push payment fraud and international judgment enforcement frequently encounter cases with an English connection. English courts offer a suite of remedies, including Worldwide Freezing Orders, Norwich Pharmacal Orders and Bankers Trust Orders, which can help identify wrongdoers, obtain evidence from banks and intermediaries, trace misappropriated assets and preserve assets pending judgment.

Common challenges in tracing assets are that assets can be moved through multiple jurisdictions within hours, beneficial ownership can be obscured through complex corporate structures, and critical evidence may be held by banks, intermediaries or service providers.  Faced with this the English courts have developed a sophisticated body of jurisprudence and remedies and created one of the world’s leading centres for international fraud, asset recovery and cross-border enforcement. The courts routinely determine applications involving multiple jurisdictions, offshore structures, cryptocurrency assets, trusts and complex banking arrangements.

The court’s remedies can potentially help identify the perpetrators of a fraud, compel disclosure from financial institutions and others, trace the movement of assets and freeze those assets worldwide, all at a very early stage of a case, and the orders can usually be obtained speedily often within days where necessary.

Importantly, English proceedings often complement, rather than replace, litigation in the United States. A targeted application in England may provide access to information, tracing remedies or asset-preservation measures that materially strengthen wider proceedings being pursued in the US or elsewhere.

1) The English integrated approach

The true strength of the system is its ability to deploy multiple remedies in an integrated and speedy way. In an appropriate case, a claimant can:

• Obtain a Norwich Pharmacal Order[2]to identify perpetrators, facilitators or recipients.
• Obtain a Bankers Trust Order[3] to trace the movement of funds through financial institutions.
• Obtain a Worldwide Freezing Order to preserve assets.
• Compel disclosure of the defendant’s assets.
• Pursue substantive proceedings in the Commercial Court or Chancery Division of the High Court.

In this bulletin we describe the remedies available and compare them with the position commonly encountered in the United States.

2) Practical considerations for US counsel

For US counsel handling matters with a UK connection, early consideration should be given to whether the English court has jurisdiction[4] and therefore whether English court assistance may be available. Potential connecting factors for US counsel include:

• funds passing through London banks;
• English incorporated companies;
• English trustees or intermediaries;
• assets located in England;
• defendants subject to English jurisdiction; or
• disclosure held by England based institutions.

3) Three main questions

In a fraud case, most lawyers need immediate answers to three practical questions:

Who did it?

English courts can grant a Norwich Pharmacal Order, compelling disclosure from innocent third parties who possess information necessary to identify wrongdoers. Banks, internet service providers, payment processors, cryptocurrency exchanges and corporate service providers are frequent targets of such applications.

Where did the money go?

A Bankers Trust Order can require banks and financial institutions to disclose information needed to trace misappropriated assets and follow the movement of funds through multiple accounts and jurisdictions.

Can the assets be prevented from disappearing?

A Worldwide Freezing Order can restrain a defendant from dealing with assets worldwide where there is a good arguable case and a real risk of dissipation. The remedy is one of the most powerful forms of interim relief available in international commercial litigation.

We deal with each of these remedies below and also briefly compare them with the US position.

4) Question One: Who did it? Norwich Pharmacal Orders

Obtaining information from innocent third parties

One of the recurring themes in fraud litigation is that the victim knows a wrongdoing has occurred but does not know who committed it. A Norwich Pharmacal Order can compel an innocent third party who has become involved in, or facilitated, wrongdoing to disclose information identifying the wrongdoer. The rationale is straightforward. If an innocent third party has become mixed up in the wrongdoing and possesses information needed to achieve justice, the court may require that information to be provided.

The remedy is particularly valuable where fraudsters have hidden behind nominee arrangements, anonymous online identities or complex corporate structures.

In many international investigations, Norwich Pharmacal relief is the critical first step in identifying potential defendants and enabling substantive proceedings to be commenced.

The jurisdiction is also frequently deployed as part of a wider asset-tracing exercise. Information obtained from banks, corporate service providers, trust companies, cryptocurrency exchanges and other intermediaries may reveal not only the identity of a wrongdoer but also connected entities, nominee arrangements, beneficial ownership structures and onward recipients of funds. In practice, disclosure obtained through Norwich Pharmacal relief often provides the evidential foundation for subsequent tracing applications, freezing relief and substantive claims.

The English courts have repeatedly emphasised that the remedy exists to achieve justice where crucial information is held by a third party who has become innocently involved in wrongdoing. The court will balance the interests of the applicant, the respondent and any affected third parties, but where the information is genuinely necessary and the application is proportionate, the jurisdiction can provide a powerful investigative tool at an early stage of a case.

The English jurisdiction is notable because disclosure may be obtained from a non-party before substantive proceedings have commenced and specifically for the purpose of identifying wrongdoers or enabling claims to be brought. In many cases, the order can provide information that would otherwise be unavailable.

Common uses

Norwich Pharmacal Orders are frequently used against parties such as:

• banks;
• internet service providers;
• payment processors;
• corporate service providers;
• crypto exchanges;
• professional intermediaries; and
• other persons holding identifying information.

The remedy is often used to identify perpetrators of fraud, trace the movement of funds, uncover beneficial ownership structures or identify defendants before substantive proceedings are commenced.

Comparison with the US

US law has no direct equivalent of the Norwich Pharmacal jurisdiction. Depending upon the jurisdiction and circumstances, litigants may seek pre-suit disclosure through state procedural mechanisms, third-party subpoenas once proceedings have commenced, or discovery in aid of foreign proceedings under 28 U.S.C. §1782. However, there is generally no single federal procedure enabling a claimant to compel an innocent third party to identify an unknown wrongdoer before substantive proceedings have been commenced against the wrongdoer.

5) Question two: where did the money go? Bankers Trust Orders

Following the money

If Norwich Pharmacal Orders help identify the wrongdoer, Bankers Trust Orders help locate the money. These orders enable the court to compel disclosure from banks and other financial institutions where necessary to trace misappropriated assets. The orders are particularly valuable where funds have moved rapidly through multiple accounts or jurisdictions as often occurs in fraud cases. For victims of cyber fraud, investment fraud, authorised payment scams and other financial misconduct, Bankers Trust Orders frequently form a central component of the recovery strategy

What information can be obtained?

Depending on the circumstances, disclosure may include:

• account details;
• transaction records;
• payment instructions;
• account opening documentation;
• know-your-customer information; and
• other materials required to trace the location of assets.

The court will generally require evidence that assets belonging to the applicant have been misappropriated and that the disclosure sought is genuinely required for tracing and recovery purposes.

In practice, Bankers Trust Orders are regularly sought alongside freezing relief and other disclosure remedies as part of a coordinated recovery strategy.

Comparison with the US

US discovery can be extensive once proceedings are underway. However, English courts remain distinctive in their willingness to order targeted third-party disclosure at an early stage for the specific purpose of tracing proprietary assets and identifying the route by which misappropriated funds have moved through the banking system. For victims seeking to follow funds rapidly through multiple financial institutions, Bankers Trust relief can provide a focused and efficient mechanism which often has no direct equivalent under US procedural rules.

6) Question three: Can the assets be prevented from disappearing? Worldwide Freezing Orders

What is a Worldwide Freezing Order?

A Worldwide Freezing Order restrains a defendant from disposing of or dealing with assets up to a specified value anywhere in the world. Formerly known as a “Mareva injunction”, it is one of the most potent remedies available in English civil litigation

The order does not give the claimant security over the assets and does not transfer ownership. Instead, it preserves the status quo pending determination of the claim and prevents the defendant from rendering any eventual judgment worthless through dissipation of assets.

When will the court grant one?

The applicant will typically need to establish:

• a good arguable case on the merits;
• identifiable assets against which a judgment might be enforced;
• a real risk of dissipation; and
• that the order is just and convenient.

Applications are frequently made without notice to prevent assets being moved before the order can be obtained. In return, applicants owe a stringent duty of full and frank disclosure and are required to provide a cross-undertaking in damages.

Comparison with the US

In the United States, the Supreme Court’s decision in Grupo Mexicano de Desarrollo SA v Alliance Bond Fund Inc., 527 U.S. 308 (1999), generally limits the availability of prejudgment asset-freezing injunctions where a claimant seeks only an unsecured money judgment. Important exceptions exist where equitable remedies are sought, proprietary interests are asserted, constructive trusts are claimed, fraudulent transfer remedies are pursued or specific statutory powers apply. Nevertheless, pre-judgement worldwide asset-freezing relief of the type regularly granted by the English courts remains significantly less common in US litigation.

By Stephen Rosen head of Collyer Bristow’s transatlantic disputes team

[1]“England “ in this bulletin includes Wales.

[2] The jurisdiction derives from the decision in Norwich Pharmacal Co v Customs and Excise Commissioners [1974] AC 133.

[3] The jurisdiction derives from the decision in Bankers Trust Co v Shapira [1980] 1 WLR 1274.

[4] See some aspects of our bulletin: https://collyerbristow.com/shorter-reads/us-challenges-to-english-court-jurisdiction/