Introduction
There are few things more powerful in global litigation than a worldwide freezing injunction issued by an English court.
Call it a relic of British history, or simply an invaluable tool in the international executive’s toolkit, a worldwide freezing injunction enables claimants to freeze all types of assets anywhere in the world. It is generally only in common law jurisdictions such as the UK that the courts’ power to freeze assets extends to cover the globe. By analogy, while typically the French courts can arbitrate matters up to the English Channel (or Le Manche, if you would prefer), as Sir Ivor Jennings QC famously put it (with a quite deliberate degree of provocation), the British constitution enables parliament in principle to legislate ‘that smoking in the streets of Paris is an offence’. Not that, in practice, a British judge would dare stand between a Parisian and his Gauloises.
For the purposes of a worldwide freezing order, the question of whether ‘all assets’ includes ‘crypto assets’ is long settled. The English courts will treat crypto as property like anything else: an injunction can freeze bitcoin, restrain the sale of jewellery, prevent the dispersal of share portfolio, wherever it is in the world, and even if the holders of the asset are unknown. Of course, for crypto assets, anonymous digital property existing solely on the internet, the ‘extra-territorial’ quality of English freezing orders is especially critical.
Joseph Keen Shing Law v Defendants Unknown & Huobi
Mr Joseph Keen Shing Law used this to his advantage in his recent claim against Defendants Unknown. Defrauded by owners of wallets held at crypto exchange Huobi, never mind that Huobi is based in the Seychelles and the Defendants were in the wind, Mr Law was successful in acquiring an order freezing the crypto in place. The next question was: would the English court agree that the proceeds of the fraud, frozen in the Huobi wallets, be transferred to England and to Mr Law.
Top marks here must go to Huobi, who cooperated with Mr Law’s solicitors – behaviour which is sadly far from the norm in the industry today.
The answer: HHJ Pelling KC was ‘entirely satisfied’ to make the order sought. Interestingly, this appears to be the second reported decision in which a claimant has successfully regained its stolen crypto assets from a major crypto exchange, the first being Ion Science.
Commentary
Perhaps what is most remarkable about the decision is its straightforwardness. Aforementioned phrases like ‘Bitcoin’ ‘crypto exchange’ and ‘digital property’ would have been gobbledegook to all but a (now, quite possibly, wealthy) few a decade ago, and certainly to the average venerable and respected judge. In 2023, the English court is willing to deem that crypto assets are property like any other (AA), that blockchain technology can be utilised to ‘counter-exploit’ thieves and recover stolen funds (Jump) and even hold that bitcoin developers cannot reasonably be said to owe a duty of care to hodlers (Tulip*) [*noting that the summary judgment in Tulip has been overturned on appeal and so the question will be subject to a full trial].
As such, UK authorities appear determined to pull crypto towards the jurisdiction. By contrast, US authorities appear set on deeming the industry contrary to securities law, and throwing it overboard like a chest of tea into Boston Harbour.
The decision in Joseph Keen Shing Law v Defendants Unknown & Huobi should give further comfort to those with one foot in the crypto-verse and one in the UK. English judges appear to be ahead of the curve in their understanding of blockchain, willingness to take participants in crypto markets at face value and flexibility in granting remedies with a view to practicality and the interests of justice.
Time will tell whether Rishi Sunak is a better governor of the rebellious and disruptive states of Web3 than bad George III was of America.
How we can help
Rosenblatt advises on all aspects of crypto assets and regulatory law. For enquiries, please contact our Dispute Resolution lawyers Tom Spiller OBE at Tom.Spiller@rosenblatt.co.uk and George Jackson at George.Jackson@rosenblatt.co.uk.
Disclaimer: We at Rosenblatt (and our parent company RBG Holdings plc) support and encourage free/independent thinking in relation to issues which are sometimes considered to be controversial subject matters. However, the views and opinions of the authors do not necessarily reflect the opinions, views, practices and policies of either Rosenblatt or RBG Holdings plc.
