Case law Developments in PIL

Further Remarks on the Enforceability of Worldwide Freezing Orders in Italy

The author of this post is Stefano Ferrero, partner at Gattai Minoli, Milan.

As a follow-up to the post by Pietro Franzina on this blog regarding the approach of Italian courts to worldwide freezing injunctions issued in common law countries, I would like to share some additional information and remarks on the matter.

By a ruling of 28 December 2021, the Court of Appeal of Naples provided guidance also to the second issue mentioned in the post, i.e., whether a worldwide freezing order should undergo some adaptation in the State requested (in particular, Italy) at the stage of enforcement.

It is worth noting that the relationship between the sequestro conservativo, a precautionary measure typical of the Italian legal system, and the freezing (formerly Mareva) injunction (or order), a precautionary measure typical of English law, has long been the subject of doubts and uncertainties. The difficulties encountered reflect, in my view, a misunderstanding.

Based on the assumption that a sequestro operates in rem whereas a common law freezing injunction operates in personam, and that the two measures would accordingly be fundamentally different in substance, Italian Land Registrars have generally refused to record English freezing orders affecting immoveable property located in Italy.

Registrars have mostly relied, for this purpose, on a decision rendered in January 2014 by the Court of First Instance of Bologna, which rejected a complaint pursuant to Articles 2674 bis of the Italian Civil Code and 113 ter of the Italian Civil Code made against the temporary and precarious registration of a freezing order that was effected pursuant to Article 2674 bis of the Italian Civil Code.

However, Land Registrars have apparently long been unaware that in June 2014 the Bologna Court of Appeal (with the agreeing opinion of the Attorney General’s Office) had then upheld the complaint against the Bologna Court decree, ordering the Registrar to proceed with registration without reservation.

A similar case has been brought a few years later in Naples. The Registrar had ordered the registration with reservation of an English freezing order, the Court had rejected the complaint with a decree of December 2020 that the Court of Appeal of Naples eventually overturned (under an unreported decision, available here, in Italian), despite the opposition of the Italian revenue authorities (Agenzia delle Entrate).

The decisions of the two Courts of Appeal share the basic idea that the distinction between the sequestro as a measure in rem and the freezing order as a measure in personam has no relevance in the context of the present discussion: a careful examination of the rules of the two judicial remedies (as regards the United Kingdom, the Civil Procedure Rules, the Land Registration Act 2002 and the Land Registration Rules 2003) reveals that they have, also from the point of view of their operation and effects, profound similarities.

Such conclusions had already been reached in 2015 by the English High Court (Arcadia Petroleum Ltd and others v Bosworth and others [2015] EWHC 3700 (Comm) – 15 December 2015), that had declared the full equivalence between English freezing orders and continental attachments, confirming that the (however limited) difference between in rem and in personam nature is, in fact, a false problem.

Moreover, the two Italian measures are based on the assumption that within the European judicial area there is the fundamental principle, confirmed by Article 54 of the Brussels I bis Regulation, whereby the requested State must implement unknown foreign measures by adapting them in the manner and with the effects proper to an equivalent domestic measure.

Admittedly, adaptation may not be available where the foreign measure in question is at odds with the fundamental principles of the requested Member State.

With reference to this last profile, the Court of Appeal of Naples confirmed in the unreported decision mentioned above the full compatibility of the freezing orders with Italian public policy. The Court emphasized that the good arguable claim and the fumus boni iuris tests are largely equivalent, as do the risk of dissipation and periculum in mora tests. Registration in the Italian land registers and the restriction in the English Land Registries are also similar, in that they have an effect limiting the circulation of the goods affected, although the restriction imposes an ex ante (and stricter, for it concerns the validity itself of the act of disposal) limit, whereas the registration operates ex post through the sanction of the relative ineffectiveness of the act of disposal.

The Court of Appeal eventually endorsed the principle affirmed by the Court of Cassation in the ruling of 2021 reported by Pietro Franzina in his post, which had already clarified that the fact that the violation of a freezing order may give rise to a personal criminal sanction (the contempt of court) is a recurring consequence also in Italian law, which punishes the failure to comply with court orders (Article 388 of the Criminal Code).

%d bloggers like this: