Cross-Undertakings in ADGM Freezing Orders – Managing Risk and Exposure

An essential guide to the damages risk, security requirements, and strategic trade-offs that accompany freezing orders in the ADGM. 

Worldwide Freezing Orders (“WFOs”) are among the most intrusive interim remedies available under the ADGM Courts’ jurisdiction. Precisely because of their severity, the grant of a freezing order is almost invariably conditioned upon the applicant giving a cross-undertaking in damages. In assessing the adequacy and potential scope of a cross-undertaking in damages, courts typically consider the foreseeable losses likely to be caused by the freezing order if it is later discharged. Relevant factors include 

1. the nature and scale of the restrained assets, 
2.  the anticipated duration of the order, 
3.  the respondent’s business activities and cash-flow requirements,  
4. the likelihood of third-party losses (such as bank charges, contractual defaults, or disrupted transactions), and  
5.  the applicant’s financial capacity to satisfy a damages award. The court’s assessment is necessarily prospective and precautionary rather than exact, reflecting the interim nature of the relief and the need to balance urgency against potential injustice. This undertaking operates as the principal safeguard against injustice to the respondent and affected third parties, ensuring that urgent relief does not become an instrument of unfair leverage. This article examines the legal basis, scope, and strategic implications of cross-undertakings in ADGM freezing order applications. 

 What Is a Cross-Undertaking in Damages? 

A cross-undertaking  in damages is a formal promise given by the applicant to compensate the respondent (and, in appropriate cases, affected third parties) for losses suffered as a result of a freezing order if it is later determined that the order should not have been granted. In substance, it reflects the equitable principle that a party who seeks exceptional interim relief must accept responsibility for the consequences if that relief proves unjustified. Under the ADGM framework, this undertaking is expressly required by CPR r 25.8 and is incorporated as a mandatory component of the standard form freezing order set out in Practice Direction 7 (Interim Remedies and Applications), Schedule A, which prescribes the wording and scope of the cross-undertaking to be given as a condition of relief. 

Under the ADGM framework, the requirement for a cross-undertaking flows from CPR Part 25, which governs interim remedies, and is reinforced by long-standing common law principles adopted into ADGM law. The undertaking is not merely procedural; it is a substantive condition precedent to relief. Without it, the court will rarely, if ever, grant a freezing order. 

The undertaking is typically framed broadly, covering losses “which the court considers the respondent has sustained by reason of the order.” This wording gives the court significant discretion at the damages stage and underscores the seriousness with which applicants must approach the obligation. 

 Legal Basis and CPR Framework in ADGM 

The procedural anchor for cross-undertakings in freezing orders lies in CPR r 25.8, which empowers the ADGM Courts to require an applicant to give “such undertaking as the Court considers appropriate.” This provision is supplemented and operationalised by Practice Direction 7 (Interim Remedies and Applications), which expressly contemplates the giving of cross-undertakings as a standard condition of freezing relief and sets out the form and content of such undertakings within the Schedule A freezing order template. Taken together, these provisions mirror the position under the English Civil Procedure Rules and confirm that the cross-undertaking is not a discretionary or exceptional requirement, but an inherent and indispensable feature of freezing order relief under the ADGM framework.   

In addition, the duty of full and frank disclosure imposed by CPR r 25.3 is closely linked to the cross-undertaking. Where an applicant fails to comply with this duty, particularly in ex parte applications, the court may not only discharge the order but also activate the undertaking as a compensatory mechanism. 

The ADGM Courts’ approach reflects a careful balancing exercise: while they recognise the need for urgent asset-preservation measures, they are equally alert to the risk of commercial harm caused by freezing orders that later prove to be unwarranted or disproportionate. 

When Do ADGM Courts Require Security for the Undertaking? 

While a cross-undertaking is almost always required, the court may go further and order the applicant to provide security for the undertaking. This is particularly likely where there is a real concern that the applicant may be unable to satisfy a damages award if the order is later discharged. Factors commonly considered by the ADGM Courts include: 

• the applicant’s financial standing and liquidity, 

• whether the applicant is based offshore or has limited assets within the UAE, 

• the scale of potential loss arising from the freezing order, and 

• the duration for which the order is likely to remain in force. 

 Security for a cross-undertaking may take various forms, including cash payments into court, bank guarantees, or other acceptable financial instruments. Where the applicant’s solvency is in question, the ADGM Courts may require enhanced security measures to ensure that the undertaking is meaningful in practice. In such cases, the court’s focus remains protective rather than punitive, seeking to ensure that the respondent’s right to compensation is real and enforceable rather than illusory. 

Assessing Exposure if the Freezing Order Is Later Discharged 

Applicants often underestimate the financial exposure associated with cross-undertakings. If a freezing order is discharged, whether due to lack of jurisdiction, inadequate evidence of dissipation, material non-disclosure, or breach of disclosure duties, the respondent may pursue damages under the undertaking. Recoverable losses can include: 

• loss of business opportunities, 

• increased financing costs, 

• reputational harm (where causally linked), and 

• third-party losses, such as those suffered by banks or counterparties affected by the order. 

Importantly, liability under the undertaking does not require proof of bad faith. It is sufficient that the order caused loss and was later found to be unjustified. This strict approach reflects the courts’ view that freezing orders are exceptional remedies that carry inherent risk. 

English authorities such as Abbey Forwarding Ltd v Hone and Les Laboratoires Servier v Apotex, which are persuasive in the ADGM, illustrate how substantial damages can flow from improperly granted freezing orders, even where the applicant acted in good faith. 

Strategic Considerations Before Seeking Urgent Relief 

A “realistic assessment of downside risk” refers to a forward-looking evaluation of the financial and commercial consequences that may arise if the freezing order is later varied or discharged, including losses compensable under the cross-undertaking in damages. This assessment is not fixed unilaterally by the applicant; rather, it is scrutinised by the Court at the pre-grant stage, informed by the applicant’s evidence, the scope of relief sought, and submissions made at the return date. While there is no prescribed timeframe for such assessment, in practice the Court revisits the adequacy and implications of the undertaking at the inter partes return date, which typically occurs within 7 to 21 days of an ex parte order being granted, and may reassess exposure again if the order is continued for a prolonged period.  Strategic best practices include: 

• narrowly tailoring the scope of the freezing order to reduce collateral damage, 

• avoiding overstatement of dissipation risk, 

• ensuring meticulous compliance with disclosure obligations, and 

• preparing for the possibility of security being required. 

From a litigation strategy perspective, the existence of a cross-undertaking also affects settlement dynamics. Respondents may leverage potential damages exposure when negotiating variation or discharge of the order, particularly where commercial harm is ongoing. 

Cross-undertakings in damages are the essential counterweight to the extraordinary power of Worldwide Freezing Orders in the ADGM. They ensure that urgency does not eclipse fairness and that applicants internalise the risks associated with aggressive interim relief. For claimants, understanding and managing exposure under a cross-undertaking is not optional it is central to the responsible and effective use of freezing orders within the ADGM’s sophisticated common law framework.