High Court Upholds Freezing Injunctions in Favour of Hilton

High Court Upholds Freezing Injunctions in Favour of Hilton

The High Court has delivered judgement on Sun Travels and Tours Private Limited’s (“Sun”) appeal of the Civil Court’s orders freezing all banks accounts of Sun pursuant to the enforcement proceedings of an ICC arbitral award in favour of Hilton International Manage (Maldives) Pvt Ltd (“Hilton”). 

Sun argued that the Civil Court had prematurely commenced enforcement of the foreign arbitral award outside of its jurisdiction, and without Hilton first obtaining a recognition order.

The High Court justices discussed at length the interpretation of section 72 of the Maldives’ Arbitration Act. All justices agreed that prima facie local recognition of a foreign arbitral award is required prior to commencing enforcement. The majority agreed that the enforcement process in the Maldives is a single-step process where an applicant applies for enforcement and does not separately need to apply for recognition. It was however in their view incumbent on the court to take a view on whether the award should be recognized in the Maldives before taking steps towards enforcement. 

The appeal was filed as the Civil Court issued freezing orders over Suns bank accounts prior to the award first being recognised. Sun argued that it had been denied the opportunity to resist recognition and enforcement pursuant to s.74 of the Maldives’ Arbitration Act before the freezing orders were issued.

The majority in the present case decided that Civil Court had jurisdiction to issue the freezing orders and that there were no good reasons to overturn the freezing orders. Sun had subsequent to the freezing orders raised its grounds for refusing recognition and enforcement pursuant to s.73 and s.74 of the arbitration act. This was denied in the first instance which had been confirmed through appeal stages finally by the Supreme Court. The practical impact therefore of overturning the injunctions presently will be nothing more than opening an opportunity for Sun to put funds outside of the Court’s reach where it has failed to make payment under an award that is now final and binding in the Maldives.

Justices delivering the majority view could not agree on whether there are exceptional instances where an ex parte order would be justified. Justice Mazeed took the view that an order may not be issued before recognition notwithstanding the tipping-off effect of such a process. Justice Farheeza took the view that there may be exceptional instances where an ex parte order would be justified if the effect of notice would amount to a tip-off pursuant to which a respondent may move funds or hide assets.

The minority view of Justice Shafeeu was that recognition and enforcement were two steps. He took the view that a party has to apply for recognition first before seeking enforcement.

As a result of the judgment, the Civil Court’s freezing orders have been upheld and the Civil Court has subsequently ordered Sun to pay the outstanding amount within a period of 1 month from 19 December 2021. 

The S&A Lawyers team on the matter were – Shahdy Anwar, Hussain Siraj, Zain Shaheed, Najy Faiz, and Juni Latheef.