The Mareva injunction, a type of interlocutory relief designed to freeze the assets of a defendant pending determination of a plaintiff's claim, remains one of the most popular litigation tools in offshore jurisdictions and in the UK.

However, a Court will often need to maintain a balance between protecting the applicant by ensuring that there is no undue disposal of assets and protecting the respondent whose day-to-day business operations may face ruin by virtue of the constraints imposed by the order.  

Often, rather than making an order which completely freezes a company’s operations, the Court will only restrict disposals of assets over a certain value or, alternatively, will permit transactions which are in the ordinary and proper course of business.

These issues were scrutinised recently by the UK Court of Appeal (CA) in Kosa Ltd v Akcil where it overturned a first instance ruling which included a finding that two items of expenditure were not in the ordinary and proper course of the appellant's business, namely:

1. funding a related company to pursue arbitration proceedings against Turkey before the International Centre for the Settlement of Investment Disputes (ICSID) – the appellant maintained that it would benefit if the arbitration were successful; and
2. solicitors' fees for advice and representation on behalf of the sole director in opposing Turkey's request for his extradition. 

The CA recognised that a number of propositions applied to ‘ordinary and proper course of business’, including that the test was an objective one, making it necessary to consider the question against accepted commercial standards and practices for the running of a business.

In relation to the ICSID expense, the CA found that the first instance Judge had three options: a positive declaration that the funding was in the ordinary and proper course of the appellant's business; a negative declaration that it was not; or refusing a declaration because neither case had been made out. The CA held that the Judge’s negative declaration should be overturned, but it refused to make a positive declaration acknowledging that it was impossible for the Judge to have done so given that there was a seriously arguable case that a key share purchase agreement was a forgery.

As regards the extradition fees, the CA overturned the first instance ruling, holding that the director was a vital asset to the appellant and that the payment would also fall within the exception to the undertaking for "legal advice or representation for the company's benefit”.