Freezing Orders and Cook Islands Trusts

A freezing order, also called a Mareva injunction, is a court order that prohibits a defendant from selling, moving, or hiding assets while a lawsuit is pending. English courts created the remedy in 1975, and courts throughout the Commonwealth now grant it, sometimes over assets worldwide. Violating a freezing order is contempt of court.

A freezing order does not reach assets in a Cook Islands trust. The Cook Islands does not recognize or enforce foreign judgments or foreign court orders against an international trust, so a creditor holding a freezing order must start over in a Cook Islands court under the Cook Islands trust statute. U.S. courts, for their part, cannot freeze assets before judgment in most lawsuits.

What Is a Freezing Order?

A freezing order is an injunction, issued while the case is still undecided, that bars the defendant from selling or transferring assets up to the amount the plaintiff claims. The English Court of Appeal approved the remedy in 1975 in Mareva Compania Naviera v. International Bulkcarriers, and the Mareva name stuck even after England renamed the order a freezing injunction.

Courts grant freezing orders at the start of a case, usually without notice to the defendant. The plaintiff must show a good arguable case on the merits and a real risk that the defendant will dissipate assets before judgment. The order typically lets the defendant pay reasonable living expenses, legal fees, and ordinary business costs, and the plaintiff must promise to compensate the defendant if the freeze was wrongly granted.

The order binds the defendant personally, under threat of fine or imprisonment for contempt. It gives the plaintiff no lien and no ownership interest in any frozen asset. Banks in the issuing country comply once served, because a bank that lets frozen money move can itself be punished for contempt.

How a Worldwide Freezing Order Works and Where It Stops

A worldwide freezing order covers the defendant’s assets in every country, on paper. English courts issue them regularly in fraud and asset-recovery cases, and courts in Australia, Canada, Hong Kong, and Singapore have followed.

The order’s worldwide scope comes from the court’s power over the defendant rather than over any asset. The order commands the defendant, who stands before the issuing court, to leave assets everywhere untouched. It does not command foreign banks or foreign trustees, because they sit outside the issuing court’s jurisdiction. A defendant who is a party to the foreign case remains personally bound wherever they live, and disobeying the order invites contempt sanctions in that court.

To freeze an asset abroad, the creditor must take the order to a court in the country where the asset is held and ask that court to recognize it. Whether the recognition request succeeds depends entirely on local law. A creditor pursuing enforcement against a Cook Islands trust runs into a legal system designed to refuse.

How the Cook Islands Treats Freezing Orders Against Trust Assets

Cook Islands courts will not recognize or enforce a foreign freezing order against a Cook Islands international trust. The Cook Islands trust statute bars local courts from hearing any attempt to enforce a foreign judgment or court order that rests on law inconsistent with the statute, and a foreign asset freeze always does. An international trust is not void or voidable because it defeats rights created by foreign law or violates a foreign court order.

A Cook Islands trustee served with a copy of a worldwide freezing order does not comply with it. The trustee answers to Cook Islands law, which treats the foreign order as having no effect on the trust. A creditor demand backed by a foreign court order is also a duress event: the duress clause requires the trustee to refuse instructions that creditor pressure produces.

The creditor’s only route to trust assets is a new lawsuit in the Cook Islands High Court. A U.S. judgment cannot be domesticated in the Cook Islands, so the creditor must prove a fraudulent transfer under Cook Islands law beyond a reasonable doubt.

A transfer made more than two years after the creditor’s cause of action arose cannot be challenged as fraudulent. A transfer made inside those two years is also protected unless the creditor sued the settlor on the underlying claim, in any court, within one year after the transfer. Neither rule protects a transfer made after the creditor had already sued the settlor, although the statute does not treat that timing alone as proof of intent to defraud.

Even inside the Cook Islands, a creditor cannot freeze trust assets while its underlying case is unproven. The Cook Islands trust statute prohibits its courts from granting interim relief against an international trust, including Mareva injunctions, unless the creditor first satisfies the court beyond a reasonable doubt that it can prove its fraudulent transfer claim.

That sequence is the reverse of how the remedy works everywhere else. In England or Australia, the freeze comes first, often the same week the claim is filed, and the trial follows months or years later. In the Cook Islands, a creditor must effectively win the case before any freeze issues. A remedy built on speed and surprise arrives, if at all, at the end.

Even a creditor who clears that bar recovers only from the property traceable to the specific transfer proved fraudulent. The trust itself survives, and its remaining assets stay with the trustee.

Can a U.S. Court Issue a Freezing Order?

U.S. courts cannot freeze a defendant’s assets before judgment in a lawsuit for money damages. The U.S. Supreme Court held in Grupo Mexicano de Desarrollo v. Alliance Bond Fund that federal courts have no power to enter a Mareva-style injunction over a defendant’s assets while a money-damages claim is pending. The Court examined the English Mareva line directly and declined to import it, calling the remedy a departure from centuries of equity practice.

The exceptions are narrow: a plaintiff with an equitable claim to specific money or property, such as a fraud victim tracing stolen funds, can ask the court to preserve that property. State statutes allow prejudgment writs of garnishment and attachment, but a writ requires a sworn showing and a surety bond that can run twice the amount claimed. In our practice, those writs appear almost entirely in commercial disputes over fixed debts such as unpaid notes, not in the negligence and malpractice cases that bring most people to offshore planning.

Government agencies face none of those constraints. Enforcement statutes give the SEC and FTC freeze powers that private plaintiffs lack, and we have seen accounts frozen the same week the case began. A defendant facing an ordinary money-damages lawsuit keeps control of its assets until judgment, which is why the funding window for an offshore trust stays open during litigation.

After judgment, U.S. courts gain powers no prejudgment plaintiff has. A court that has entered judgment can order the debtor to bring offshore assets back and can jail the debtor for contempt if the order goes unmet. Even then, the pressure lands on the debtor personally, and the trustee remains beyond the court’s reach.

When a Foreign Freezing Order Reaches U.S. Assets

A foreign freezing order can freeze money held in the United States if an American court agrees to recognize it. In 2021, a Florida trial court in Gorsoan Ltd. v. Bullock enforced a worldwide freezing order issued by a court in Cyprus, the clearest example yet of a U.S. court giving a foreign asset freeze full force. The decision is a trial-level outlier against decades of American refusal, but a defendant with U.S. bank accounts can no longer assume a foreign freeze stops at the border.

Assets held by a Cook Islands trustee do not carry that exposure. Recognition of a freezing order has to happen in the country where the asset sits, and the Cook Islands statute forbids its courts from granting it. A defendant’s U.S. accounts may be frozen by a foreign order that an American court adopts. Funds already offshore with a Cook Islands trustee sit outside every court that would grant the recognition.

Cook Islands trusts can be established after a lawsuit has been filed, and a money-damages plaintiff in a U.S. court holds no freezing order that interrupts the funding. Setting up a Cook Islands trust during litigation carries higher contempt risk and a weaker negotiating position than planning before any claim, but the creditor’s challenge still must proceed in the Cook Islands. For that creditor, the remedy that works fastest everywhere else arrives last, if at all.