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Worldwide Freezing and Tracing of Assets through Cyprus Courts

September 2016 - Litigation & Dispute Resolution. Legal Developments by Antoniou McCollum & Co..

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Cyprus courts have jurisdiction to issue interim orders relating to the worldwide freezing or tracing of assets, whether in the context of main proceedings or in aid of foreign litigation or arbitration proceedings.

Freezing orders (Mareva injunctions)

Freezing orders over assets in any part of the world can be issued on a successful application, including both tangible (immovable property only if situated in Cyprus) and intangible assets (funds, deposits, shares and goods).

The Cypriot legal order has incorporated the power of the courts to issue freezing orders to protect assets in risk of alienation, or to preserve a particular status quo pending the final and conclusive determination of the relevant proceedings.

Injunctions preventing acts or events from taking place

Cyprus courts can issue interim orders preventing various acts or events, for example the implementation of corporate resolutions and the convening of annual general meetings (or extraordinary general meetings) of companies.

These types of interim orders are often issued, without limitation, in the context of shareholders' disputes or derivative actions.

Discovery and tracing orders (Norwich Pharmacal orders)

In the context of applications for discovery or tracing of assets, Cyprus courts can issue orders towards:

Disclosure on oath by a respondent of the location and value of specified assets.

Tracing purposes, namely leading to the disclosure of information and documents regarding assets deprived or stolen from the applicant, to enable the person having suffered harm to identify and pursue proceedings against the real person committing the tort (tortfeasor).

Appointment of interim receiver or administrator

In the appropriate circumstances, Cyprus courts can be seized and have jurisdiction to issue an order to appoint an interim receiver or administrator of assets, in the form of ancillary relief to support a protective regime imposed by a freezing order or other interim order.

In issuing this order, the court will instruct the applicant to secure by bank guarantee the fees of the receiver to be appointed, in addition to counter-security needed to secure the losses of the respondent if the order is later reversed. The latter is a common requirement for all interim orders issued by a Cyprus court.

The court will further stipulate in the order the powers, duties and rights of the interim receiver. On a number of occasions the receiver will be able to exercise voting rights in holding companies, to protect assets held by their subsidiaries.

Chabra orders

Chabra interim orders are injunctions issued by Cyprus courts against a defendant other than the main defendant, where there are reasonable grounds to believe that this co-defendant is in possession or control of assets to which the principal defendant is beneficially entitled. This is an exceptional order granted to prevent subsequent losses to the claimant applying for the order.

The rationale for such orders is that as the principal defendant controls a third party, it indirectly controls the assets of that third party. Therefore such assets can be considered as being the principal defendant's assets, and therefore subject to freezing.

If the court is satisfied on a prima facie basis that such assets are in the possession or control of the co-defendant, a Chabra Order can be issued freezing or blocking the assets in the hands of the co-defendant as ancillary and incidental to the main claim against the principal defendant, despite there being no direct cause of action against such co-defendant.

Search orders (Anton Piller orders)

Anton Piller orders are interim orders issued by Cyprus courts. They order a party to admit another party to the former party's premises, for the purpose of preserving evidence or property that is or may become the subject matter of the main proceedings.

Anton Piller orders can be claimed by a party to:

Allow this party to discover and preserve evidence against the defendant, which is in the possession of the defendant and is likely to be concealed or destroyed by the defendant.

Identify and obtain evidence against others who have been involved with the principal tortfeasor in the tortious activities.

Prevent the defendant from warning others to destroy or conceal evidence.

Reveal further harm and damage to the applicant.

Interim orders in aid and/or support of arbitration and other proceedings

Cyprus courts have jurisdiction to grant interim orders in aid and/or in support of international commercial arbitration proceedings conducted or to be conducted in Cyprus or overseas, whether in the EU or non-EU jurisdictions. Applying for such orders can be pursued on an ex-parte basis, provided the element of urgency exists in the facts of the case.

Cyprus courts have jurisdiction to issue interim orders in support and/or in aid of the following proceedings:

  • Judicial proceedings pending before Cyprus courts.
  • Arbitration proceedings pending in Cyprus.
  • Judicial proceedings pending before national courts of any EU member state (excluding Denmark).
  • International commercial arbitration proceedings to be filed or pending in any state (EU and non-EU).

The Brussels Regulation has been recast by Regulation (EU) 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast) (Recast Brussels Regulation), applicable as of 10 January 2015.

The Recast Brussels Regulation clarifies that arbitration is excluded from its ambit. As such, a Cyprus court being seized over a dispute that may be subject to arbitration will no longer bar another member state court from exercising jurisdiction to address the question of the validity of the arbitration agreement and to refer the parties to arbitration. In addition, the revised Brussels Regulation sets out in its recital the primacy of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958, which Cyprus ratified as of 1980.