CYPRUS: The Chabra jurisdiction of Cypriot Courts

In the case GDL TRADING LTD -V- AGROMARKETS LTD & OTHERS, the District Court of Nicosia inter alia held – (adopting English case law) - that the jurisdiction of the Courts to grant Chabra injunction, arises when:

(i) a third party against whom there was not cause of action, is in a possession of assets beneficially owned by the cause of action defendant; or

(ii) the latter can be shown to control, or have a power of disposition over the formers assets; or

(iii) there is, a process ultimately available to cause the beneficial owner to disgorge the assets held by the third party (see LINSEN INTERNATIONAL LTD -V- HUMPUSS SEA TRANSPORT PTE LTD (2011) EWHC 2339).

It has been furthermore held that:

(i) The Chabra jurisdiction may be exercised, where there is a good reason to suppose that the assets of the third party, are in truth the assets of the injuncted Defendant, as well as to extend to a situation, where the principal defendant, whilst having no legal, or equitable right to the assets in question, has some right in respect of, or control over, or other rights of access to them.

(ii) Where the Court exercises the Chabra jurisdiction and restrains a third party, in effect the Court is granting an ancillary relief in aid of, and as part of, the freezing relief granted against the defendant.

The Chabra jurisdiction empowers the Cypriot Courts to freeze assets held by a discretionary trust or foundation, if the substantive reality is that the relevant defendant controls the exercise of the discretionary trust (see DADOURIAN CASE (2005)).