Offshore Litigation

Blog

Offshore Litigation

Contributors

Jonathan Addo
Jonathan Addo
  • Jonathan Addo

  • Partner
  • British Virgin Islands
Ian Mann
Ian Mann
  • Ian Mann

  • Partner
  • Hong Kong
Nick Hoffman
Nick Hoffman
  • Nick Hoffman

  • Partner
  • Cayman Islands
Vicky Lord
Vicky Lord
  • Vicky Lord

  • Partner
  • Shanghai
Chai Ridgers
Chai Ridgers
  • Chai Ridgers

  • Partner
  • Hong Kong
William Peake
William Peake
  • William Peake

  • Partner
  • London
Peter Ferrer
Peter Ferrer
  • Peter Ferrer

  • Partner
  • British Virgin Islands
Jeremy Child
Jeremy Child
  • Jeremy Child

  • Partner
  • London
Claire Goldstein
Claire Goldstein
  • Claire Goldstein

  • Partner
  • British Virgin Islands
Jayson Wood
Jayson Wood
  • Jayson Wood

  • Partner
  • Cayman Islands
Phillip Kite
Phillip Kite
  • Phillip Kite

  • Partner
  • London
Stuart Cullen
Stuart Cullen
  • Stuart Cullen

  • Partner
  • British Virgin Islands
Lorinda Peasland
Lorinda Peasland
  • Lorinda Peasland

  • Consultant
  • Hong Kong
Paul Madden
Paul Madden
  • Paul Madden

  • Partner
  • Cayman Islands
Jessica Williams
Jessica Williams
  • Jessica Williams

  • Partner
  • Cayman Islands
Paula Kay
Paula Kay
  • Paula Kay

  • Partner
  • Hong Kong
Andrew Thorp
Andrew Thorp
  • Andrew Thorp

  • Partner
  • British Virgin Islands
Henry Mander
Henry Mander
  • Henry Mander

  • Partner
  • Cayman Islands
Andrew Johnstone
Andrew Johnstone
  • Andrew Johnstone

  • Partner
  • Hong Kong
Nicola Roberts
Nicola Roberts
  • Nicola Roberts

  • Partner
  • Hong Kong
  • Singapore
Julie Engwirda
Julie Engwirda
  • Julie Engwirda

  • Partner
  • Hong Kong
Paul Smith
Paul Smith
  • Paul Smith

  • Partner
  • Cayman Islands

Exercising voting rights is not “dealing with” frozen assets

In the recent decision of Palladyne v Upper Brook the Cayman Islands Court of Appeal (CICA) analysed the Sanctions Order which gives effect to the resolutions of the UNSC which required the freezing of Libyan state assets. Shares in three Cayman investment funds held by specified Libyan entities were frozen pursuant to the Sanctions Order. Article 10(1) prohibits dealing with a frozen asset. The CICA upheld the judgment of Segal J (see our previous article on that decision here). 

Palladyne had been the investment manager and director of the relevant Cayman investment funds. The issue was whether the adoption of resolutions to appoint and remove directors (Palladyne) and to change the names of the companies was prohibited by the Sanctions Order. 

Palladyne argued that the passing of the resolutions constituted a breach in that it was a “use” of frozen shares and the benefits attaching to them, or it was a change that would “enable use” of the underlying assets. The respondents emphasised that the restrictive measures in the Sanctions Order were protective and precautionary, and not penal. The purpose was to freeze assets to ensure that they were not dissipated, not to strip a person of ownership or remove all means of corporate governance.

The CICA found that the passing of resolutions did not dissipate or affect the value or character of the shares or the value of the underlying assets. The exercise of voting rights in the shareholder resolutions was not “dealing with” the funds and did not in allow access to or make a change that would enable use of the assets of the companies and therefore amount to a prohibited action:

While the principle of strict interpretation of penal legislation is an indicator of great weight, it is one of many indicators of the meaning and is capable of being displaced.

  • While the court has to bear in mind the penal sanctions for contravening the provision, such measures are intended to have far-reaching effects and their legislative origin embodies a very high public interest.
  • The starting point is the natural and ordinary effect of its language and context including its purpose in the light of any statutory definitions.

The meaning of “use” for which Palladyne contends could cause a complete paralysis of the corporate governance. Article 10 did not penalise preparatory steps. It is designed to prevent actual dissipation of assets.

Exercising voting rights is not “dealing with” frozen assets

Leave A Comment