The Court of Appeal has, with necessary firmness, restored legal orthodoxy in the long-running Lakatamia saga. In Lakatamia Shipping Co Ltd v Su [2025] EWCA Civ 1389, the Court clarified that the Babanaft proviso in Worldwide Freezing Orders (WFO) cannot be “repurposed” by third parties (beyond the territorial jurisdiction of the English court) as a substantive defense against a claim in unlawful means conspiracy.
Below, the Deputy Judge (Simon Colton KC), in Lakatamia Shipping Company Ltd v Su & Ors [2024] EWHC 1749 (Comm), held that a Monegasque lawyer escaped liability in unlawful means conspiracy, notwithstanding his role in facilitating the dissipation of frozen assets. The error lay in the Deputy Judge’s reasoning, which elevated the Babanaft proviso from being a procedural carve-out into a substantive shield against civil claims with respect to the same unlawful conduct.
The bifurcation of procedural immunity and substantive liability
Writing for a unanimous Court of Appeal, Males LJ has rightly identified this as a fundamental category error. By distinguishing the Supreme Court judgment JSC BTA Bank v Khrapunov [2018] UKSC 19 on thin technicalities, the Deputy Judge mistakenly translated the “expansive language” (at [87]) of the Babanaft proviso into a blanket immunity against civil litigation in respect of that breach - characterising the latter as a form of the “exorbitant, extraterritorial jurisdiction” (which Babanaft International sought to prevent). This approach effectively sidestepped the fundamental bifurcation articulated by Lord Sumption and Lord Lloyd-Jones in Khrapunov (at [23]). There, the Supreme Court drew a line between two legally distinct spheres: the court’s jurisdiction in contempt (a matter of quasi-criminal enforcement) and the independent regime of civil liability in tort.
The Deputy Judge’s reasoning (at [82]) proceeded on the faulty inference that the Babanaft proviso creates an implicit expectation of immunity. His Lordship reasoned that it would be “misleading” and legally incoherent to ground liability for assisting in a breach of an order that, on its face, expressly excluded application to the defendant. This, however, ignores the central lesson of Khrapunov: that a defendant’s immunity from the court’s jurisdiction in contempt does not translate into a shield for substantive civil wrongs against the applicant for the WFO. The Court of Appeal has now corrected this doctrinal conflation, reaffirming that the two regimes serve distinct ends and operate on separate planes of legal accountability.
The policy fallacy: comity and coercion
The Deputy Judge further reasoned (at [95]) that permitting a tort claim for the breach of a WFO would undermine the very policy that the Babanaft proviso sought to protect – namely, the restraint of the court’s “coercive effect” over foreign third parties. While Males LJ did not address this head-on, the argument is similarly doctrinally flawed.
The rationale of international comity underpinning Babanaft is concerned with the English court’s interference with the sovereignty of a foreign state. There is a fundamental distinction here that the Deputy Judge overlooked. Contempt is a coercive exercise of sovereignty. It seeks to “command” behaviour on foreign soil, backed by the penal threat of imprisonment or fine. To exert this power over a foreigner with no connection to England is indeed an “exorbitant” jurisdictional act. In contrast, a money judgment is not a “command” in the same jurisdictional sense. It is a declaratory recognition of a legal liability - i.e. a debt arising from a wrong.
By awarding damages, the court is not “coercing” the defendant into obedience through the state’s “policing” powers; rather, it is adjudicating a private obligation to compensate a victim for loss. The Babanaft shield protects the foreigner from the court’s “stick” (jail), but it does not, and indeed should not, insulate their assets from the consequences of their own tortious acts.
Practical effect
The practical consequence of this judgment is that the English WFO remains a potent tool with “teeth.” The respondent to a WFO cannot transfer assets to a foreign intermediary without that intermediary being liable for the loss they caused in helping flout the WFO. This direct liability for damages affirmed by the Court of Appeal means that there is a financial deterrence on foreign intermediary that assist in flouting the WFO.
