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What injunctions are available in your jurisdiction in order to freeze assets?

The following article discusses session one in the IR Global Virtual Series on 'Freezing Assets - The mechanics behind cross-border injunctions'

Dominican Republic - Pablo Gonzalez Tapia (PGT) In the Dominican Republic, in general terms, asset freezing is a procedure that you have to undertake before a judge, usually the Chief Justice of the First Instance Court of the jurisdiction where the assets are placed. Creditor has to show that the credit is in danger of collection, or that the debtor has been hesitant to pay. It is also useful to demonstrate that there is a danger the debtor could dissipate the assets. The presentation is usually done ex-parte, meaning that the other side doesn’t know that creditor is looking for an injunction.

If creditor manages to prove the case, the embargo order is provided and with that order creditor is entitled to freeze. Usually, a creditor would ask the judge to freeze not only mobile assets but also real estate assets.

Real estate assets are frozen under a so-called ‘judicial mortgage’. That's distinct from a normal embargo, which is usually applied to mobile assets and bank accounts. Presenting the judicial mortgage order before the register of deeds, means you can put a lien on the real estate properties.

With regard to mobile assets, a creditor would have two options, at the moment of the embargo. Firstly, you can leave the mobile assets in the hands of the debtor, without transporting them to another location. The court officer conducting the embargo would just go to the place where they are, and either leave them in the hands of the debtor or appoint a guardian of those assets. Sometimes a creditor is entitled to move the asset, which is very rare in practice, because the law commands that if the assets remain in the hands of the debtor or the guardian, they are legally responsible for the safety of those assets.

Another option is to freeze the debtor’s bank accounts. This can be done with a judicial order, but in the Dominican Republic we do also have a special kind of injunction or embargo, which only requires proof of the credit, i.e., an invoice or contract clearly showing you are owed money. With that document, a creditor is entitled to go to every bank in the Dominican Republic, or to any person that owes money to your debtor and freeze that money in the debtor’s hands.

Once you have frozen the assets, you are required to appoint the normal Court, in order to validate the procedure. You have to present your case before the judge within either 10 days or 60 days, based on the type of embargo that you have placed. The judge will rule the case on its merits, but the assets remain frozen throughout the procedure.

If a debtor wants to release the assets, they would be required to post a bond in order to take back control.

Netherlands - John Wolfs (JW) The Netherlands, together with Belgium, has a very particular position within the European Union.

This is because, it is not only possible to arrange for an asset arrest after having obtained a judgment, but it's also possible to arrange for a so-called conservatory arrest. This means that assets can be frozen from the moment that one intends to start a proceeding, even before the proceeding has begun.

It is, however, obligatory to start a proceeding within one month at the latest, in order to obtain permission to arrange a conservatory arrest. You need to go to the President of the District Court and explain the claim you have against the opponents. You are also required to name the assets, or possible assets, to be included in the conservatory arrest.

Those assets can include real estate, shares, claims on third parties (debtors) cars, computers, TVs, jewellery and money. If the money is in a bank account, it is possible to arrange for a third party conservatory arrest, administered by the bank.

Implementing a conservatory arrest, means that it is not possible for the debtor to do anything with those assets. As an example, a conservatory arrest on a house means that the house cannot be sold, unless the one who seeks the conservatory arrest approves.

This might happen if security is provided by the debtor, for 130 per cent of the claim. The extra 30 per cent is used to cover interest, judicial costs and so on, because it may take a year or more before a proceeding has ended.

The bailiff is the executor of the conservatory arrest and can execute this with third parties, or at the real estate registry, from that moment the conservatory arrest is in place. Once a judgment is obtained, the conservatory arrest changes into an executionary arrest.

Ohio - Chris Niekamp (CN) In Ohio, as in other states, you can file for a temporary restraining order and a preliminary injunction at the outset of your case.

Generally, if you are seeking to enjoin a person or a bank, you would name that party to the lawsuit and get some sort of service over that party. You can attempt to walk through the motion and do it ex-parte with the judge if there is some injury to be had, or if you are concerned that assets will be transferred fraudulently. In that instance, you can put forth a case that there is a real emergency.

The judge will usually require some kind of notice to the other side, so as not to surprise them, especially if you've been communicating with them. If the circumstances are right, and you can show irreparable harm and likelihood of success on the merits, then the judge may grant a temporary restraining order.

The Court will generally set the matter for a hearing within 10 days to consider a preliminary injunction, which is a little more lasting until you get to trial. At that point you can attempt to freeze assets until you have a trial on the merits.

Another tactic that we use in Ohio is the appointment of a receiver. Sometimes we go in and seek an emergency motion to appoint a receiver over a company that is in the process of liquidating assets, so that the receiver can take control of the assets and collect any assets for the benefit of the creditor.

I do this regularly on behalf of banks.

Turks & Caicos Islands - Stephen Wilson, QC (SW) The Turks and Caicos Islands, perhaps not surprisingly as a British overseas territory, very much follows the law in England and Wales.

In terms of orders available to freeze assets, there is the classic Mareva Injunction, or freezing order as they tend to be called these days.

That's usually an application made ex-parte, without any notice, in order to secure assets stopping them from being dissipated in order to frustrate an eventual judgment.

Unlike the procedure Chris has just described in Ohio, there is no need in the Turks and Caicos Islands to name banks or other third parties who might be affected by the order, but the order would nevertheless be served on those institutions.

The Mareva injunction is thought of as a nuclear weapon, but in circumstances where there is less likelihood of an immediate dissipation of assets, such as when dealing with real estate, there's an ability to apply for what's called an Inhibition, which is then registered on title and prevents the owner of real estate from transferring it without the Court's approval.

There are also orders allowing for the preservation of property that is the subject matter of a dispute. In those cases, in which a winding up order might be made, we have something similar to what Chris described as the appointment of a receiver.

In such a case, we would seek the appointment of the provisional liquidator, who would hold the ring and protect the assets of the company that was the subject of a winding up petition.

Finally, if the asset that is owned by the defendant, is a ship, we can arrest the vessel if it's in Turks and Caicos Islands’ waters.

Cayman Islands - Cherry Bridges (CB) The Cayman Courts have a wide discretion to grant Mareva Injunction Orders (MIOs), in order to prevent assets from being disposed of within a jurisdiction, removed from a jurisdiction, or otherwise dealt with either in the Cayman Islands, or worldwide. They can be free standing injunctions in support of foreign legal proceedings (where there are no extant proceedings in the Cayman Islands). The party applying for the MIO (the plaintiff) may apply for it at any stage of a case, without notice, including before proceedings have been issued, if urgent.

Since MIOs are usually made ex-parte (without notice) the plaintiff must give full and frank disclosure of all material facts and matters in the affidavit evidence on the ex-parte application. Failure to do so, will result in the discharge of the MIO at the stage of the inter partes hearing, if contested. The court usually requires the plaintiff to give an undertaking to pay damages to the counterparty who may later be found to have suffered an unjustifiable loss, if it is subsequently determined that the MIO should not have been granted in the first place. The Court may also require security to fortify the undertaking as to damages and to meet the costs of third parties.

MIOs are usually personally served on the defendant. A breach of an MIO constitutes a civil contempt, punishable by a fine, seizure of assets and/or imprisonment. Importantly, the MIO may apply to third parties (such as a bank) which may also face sanctions for any breach.

To prevent the destruction of relevant evidence, a plaintiff may also apply for an Anton Piller Order to search premises and seize evidence without prior warning.

Turkey - Cemil Baha (CEB) In Turkey, the preventive legal actions are divided into two types as a quick and effective solution which are provisional injunction and provisional attachment.

In general, if the claimant is in a position as follows;

• If action is not taken, the acquisition of the right would be become substantially difficult or completely impossible

• if there is a concern about loss or a serious damage, in the event that the decision is not taken, because of the delay

• If the borrower does not have a specific residence

• If the borrower prepares to hide or to smuggle his/her property or if s/he escapes or if s/he makes fraudulent transactions that violate the rights of the creditor in order to not fulfil the commitment

A decision for the injunction may be ordered by the court. It may be decided that the movant may deposit collateral to meet the potential losses of the third party. It is usually at the discretion of this court; the general rate is approved at rates ranging from 10 per cent to 20 per cent of the value of the dispute. The amount of the guarantee may vary depending on whether the measure is changed or removed. If the request is based on an official document, further evidence or other circumstances, the court may decide not to receive a guarantee, provided that it clearly indicates its justification.

The provisional injunctions decided without any explanation of the counter party can be appealed. Unless otherwise decided, the objection shall not stop the execution of the decision.

Turkey is a party to the United Nations Convention on Contracts for International Sale of Goods (CISG) and this contract does not have exactly this kind of a measure. However, this situation does not prevent the provisional injunction and provisional attachment decisions made by the local court.

In case there is a foreign country court order, which is not yet to be completed the recognition and enforcement procedure, even that order can be subject to the same conditions as mentioned above.

Austria - Klaus Oblin (KO) The main precondition for a party to ask the court for an injunction under Austrian law is that it can demonstrate that the enforcement of specific claims would be endangered if no interim measure was granted. When assessing the presence of endangerment, judges consider the behaviour and recent actions of the debtor as well as any specific circumstances of the case at hand.

Preliminary injunctions may be granted for securing pecuniary and non-pecuniary claims as well as disputed legal relations. The possible interim measures granted are stipulated by law and comprise judicial custody of physical assets, forced administration of real estates or prohibition of the sale or attachment of assets.

Preliminary injunctions are granted or dismissed in expedited proceedings. The court may even refrain from hearing the opposing party, if the purpose of the preliminary measure was otherwise impeded. In practice, courts often allow opponent to submit a written statement, but set a very tight deadline. A lower standard of proof applies, so that parties only have to present plausible proof for their allegations.

Spain - Roger Canals (RC) Our system regarding interim measures is similar to The Netherlands or Belgium. We have a system of conservatory arrests when you submit a claim to a court. If we are claiming for an amount of money, you are entitled to at least try an interim measure ending in a conservatory arrest. Any assets you include will be frozen until the procedure is ended, if it is successful.

In general terms, Spanish courts are reluctant to recognise or grant these kinds of measures, unless you can prove a very strong claim against a debtor. Often, such interim measures are refused when demanded, because the court prefers to convene the parties in a hearing where the issue will be discussed. The award is more likely, after review, if you show a clear right.

The other route arises from enforcement of foreign court judgments. The first thing to do with a foreign court judgment is to go through a recognition process within the Spanish court. If the court has recognised the foreign judgment, then you can seize the assets of the debtor if they are located in Spain. The Spanish government has a good system of public information regarding the seizure of assets. The court issues a general order to banks and real estate registers to locate the assets, then once you have the foreign judgment, you can seize the assets easily.

Germany - Jana Schott (JS) In German law there are several preliminary injunctions at one’s disposal in order to secure claims, even before main proceedings may be started or completed.

Firstly, there is the preliminary proceeding in accordance to Sec. 916 et seq. ZPO (German Civil Procedure Code) which literally translates to ‘arrest’ or ‘seizure’. It is admissible when securing the enforcement of a monetary claim or a claim that may be converted into a monetary claim. The request must be submitted at the local court that also covers the main proceeding regarding the claim. The request should contain the title of the claim stating the amount of money or the monetary value and name the reason for the proceeding.

Secondly, there is the preliminary proceeding in accordance with Sec. 935 et seq. ZPO. This injunction aims at safeguarding individual claims that are not currently directed at money. The injunction is also admissible for the purpose of regulating a condition in relation to a disputed legal relationship. Under certain circumstances, the court may issue a performance order. This order is an exception to the principle in German law, that claims should be secured first before issuing any performance orders, as this order already provides a performance benefit. The performance order is thus an exception concerning interim proceedings because it already includes what would otherwise be received through the main proceeding.

Judgments in main proceedings that are performance-oriented may be declared provisionally enforceable by the court in accordance with Sec. 709 ZPO against the deposit of a security. If a monetary claim is to be enforced through the judgement, it is sufficient if the amount of the security is stated in a certain proportion to the amount of the enforced monetary claim. This offers the possibility of enforcing a judgment which is not yet legally binding because of possible appeals.

Enforcement, in the case of refusal of performance by the debtor after a judgment, or foreclosure is in general dependent on three conditions: the title (e.g. the judgment, order or ruling), the clause (an enforceable duplicate of the title) and the delivery of the aforementioned to the debtor (the debtor must know about the title in order to take counter measures). The court bailiff may then visit the debtor and seize and secure assets.

A judicial officer may also issue an attachment and transfer order (so called “Pfändungs- und Überweisungsbeschluss”) at the creditor's request according to Sec. 829 ZPO that effectively leads to the garnishment of the bank account. Even before this attachment is made there is the possibility of advance attachment in accordance with Sec. 845 ZPO.

England - Frankie Tierney (FT) The process utilised in the civil courts differs in Scotland and Northern Ireland so it is important to recognise there is not a standard UK-wide court system – albeit the legal principles on which they operate are pretty much the same.

A civil freezing injunction is dealt with in the High Court and can be applied for without having to give any notice to the other party. It is not given lightly; so you generally have to show that there is a real risk of assets being dissipated or removed from the reach of the court. If there are no court proceedings already underway; you have to start them at the same time. You therefore prepare the court documents as you would normally, but include an application for a freezing injunction which is backed up by a witness statement. That has to set out what information you have obtained about the assets held by the other party; the value of the claim you are bringing and demonstrate why you say there is a high risk that once the other party becomes aware of the court proceedings; assets will be disposed of.

If the injunction is granted; notice is given by you to the banks where you know the other party holds accounts so that they can freeze access to them. This is normally done just before the court documents are served on the other party. This all has to be done literally within hours of the injunction being granted. The injunction forbids the other party from disposing of any assets (e.g. property, stocks, share cash etc) and requires them to provide you with full details of the assets they have and to provide bank statements etc.

Breaching a freezing injunction, or assisting someone to breach it, is a contempt of court and can result in a prison sentence. Because of the impact such orders have on businesses and individuals, a high court judge will only grant them in very serious cases.

More limited injunctions can be obtained if you just want to prevent the disposal of a particular asset that is the subject of a court claim.

There is an Injunction process by which the high court will authorise a party to enter the premises of another to search and seize property. These are highly specialised orders made only in exceptional cases and are subject to strict rules. They are mainly restricted to situations whereby data/ information/pirated or bootlegged products will potentially be destroyed if prior warning of a claim is given.

The sting in the tail is that a condition of getting an injunction is that undertakings (legally binding promises) must be given to the court by the party seeking the injunction. This means that if you lose the primary case, or the court later finds the injunction has caused loss, you will be ordered to pay compensation.

Securing the seizure of assets that are mobile; e.g. a ship or airplane; to ensure they are not moved out of the jurisdiction; also involves specialist court applications.

U.S - Ohio - CN Just one additional thought. I have real concerns about cryptocurrency and the use of Bitcoins, as debtors are finding ways to elude the banking system. I was interested to know if any members have dealt with that issue and whether they’ve had any success with debtors that are transacting business with cryptocurrencies.

Netherlands - JW Yes, I've been requested on behalf of a foreign client to research the possibilities of setting up a company dealing in cryptocurrencies.

We work together closely with one of the top law firms in The Netherlands, and even they are very reluctant to offer advice. So what one sees, is that, here in The Netherlands, it is quite difficult to not only obtain advice, but also to arrest and attach cryptocurrencies.

Contributors

Roger Canals (RC) Arco Abogados – Spain www.irglobal.com/advisor/roger-canals

Dr. Klaus Oblin (KO) OBLIN Rechtsanwälte GmbH – Austria www.irglobal.com/advisor/dr-klaus-oblin

John Wolfs (JW) Wolfs Advocaten – The Netherlands www.irglobal.com/advisor/john-wolfs

Frankie Tierney (FT) Herrington Carmichael – England www.herrington-carmichael.com/our-people/frankie-tierney

Chris Niekamp (CN) Niekamp Weisensell Mutersbaugh & Mastrantonio, LLP – U.S – Ohio www.irglobal.com/advisor/chris-niekamp

Stephen Wilson, QC (SW) Graham Thompson – Turks & Caicos Islands www.irglobal.com/advisor/stephen-wilson-qc

Pablo González Tapia (PGT) GONZÁLEZ TAPIA ABOGADOS – Dominican Republic www.irglobal.com/advisor/pablo-gonzalez-tapia

Dr. Jana Schott (JS) AQUAN Rechtsanwälte, Germany www.irglobal.com/advisor/dr-jana-schott

Cherry Bridges (CB) Ritch & Conolly – Cayman Islands www.irglobal.com/advisor/cherry-bridges

Cemil Baha (CEB) ÖZALP – Turkey www.irglobal.com/advisor/cemil-baha-ozalp