Winning an arbitration claim is satisfying but, with a recalcitrant award debtor, there may be further hurdles to clear before the debt is paid off. If an award debtor refuses to pay, other means must be found to recover the sums owed.

Fortunately, the English courts have extensive powers to assist award creditors faced with non-paying award debtors. The award creditor can apply for permission to enforce the award as if it were a court judgment. The initial order is usually granted promptly on a without notice basis. The award debtor may seek to challenge the enforcement proceedings. If there is evidence of a risk of dissipation of the assets, it may be possible to obtain a freezing order to secure any assets pending the outcome of the enforcement challenge. England is an arbitration-friendly jurisdiction. It is rare for enforcement challenges to succeed and their passage through the English courts is usually relatively swift. All being well, the award debt will be accruing interest at a decent rate while the challenge proceedings run their course.

Once the court has granted permission to enforce the award as if it were a court judgment, a range of enforcement tools becomes available. If an evasive award debtor holds shares in a plc, these can offer particularly rich pickings for a creditor seeking to enforce its award. 

There are various means by which a judgment can be enforced against shares. 

Typically, a charging order will be sought. This process is done in two stages: the interim charging order is obtained without notice and, once served, has the effect of freezing the shares. There then follows a hearing at which the court will decide whether or not to make the charging order final. Assuming the court does so, the award creditor may then apply for an order for sale of the shares. This will generally include a provision appointing a "fit and proper person" to sign the necessary documents on the award debtor's behalf so the award debtor is unable to prevent the sale. The matter is simply taken out of its hands. 

However, another, generally less well-known option may also be available: in certain circumstances, an award creditor may be able to recover the debt directly from dividends declared in respect of the award debtor's shareholding. This would be done by means of a third party debt order. As the name suggests, this is an order by which a third party which owes money to the award debtor can be required to pay funds directly to the award creditor. Depending on the amount owed by the third party to the award debtor, this should at least result in a reduction of the debt owed to the award creditor and may be sufficient to settle the entire debt. Where a third party debt order is available, it is likely to be cheaper and swifter than seeking to sell the shares. 

The Dentons Disputes Team successfully engaged this process in a recent matter involving a dividend of over £11m.

A third party debt order can only be granted in respect of a debt which is "due or accruing due". Where a dividend is announced by the board but not subject to shareholder approval (usually an interim dividend), the debt is only deemed to accrue when the dividend is paid. Until that moment, the board can cancel the distribution and the interim dividend is not enforceable. However, where a final dividend subject to approval by shareholders' meeting is announced, this creates an enforceable debt which can be the subject of a third party debt order. Such an announcement is the award debtor's cue to file its third party debt order application.

The court will treat such an application as urgent business. It will issue an interim third party debt order which, once served on the third party (in this case the company in respect of whose shares a dividend distribution has been declared), will freeze the dividend proceeds up to the amount of the debt (principal and interest) with provision also made to cover the costs of the application. A hearing will then be fixed for at least 28 days later at which the court will decide whether to make the third party debt order final. Once the final third party debt order is served on the company, it will be required to settle the debt (principal, interest and legal costs) on the award debtor's behalf from the dividend proceeds (or as much as can be settled if the dividend proceeds total less than the debt). If the third party does not do this, it can itself become directly liable to the award creditor for the debt. 

We have extensive experience of making urgent applications for permission to enforce awards as if they were English court judgments and of achieving the resulting enforcement. We would be glad to discuss any requirements you may have in this regard.