What tools or treaties exist to aid discovery of assets, the granting of orders and recovery?

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

Netherlands – JW Well, if we examine treaties, we
must, of course, refer to the European Union Treaty in which there is a free
exchange of judgments between the member states.

This free exchange between the member states makes it much
easier to execute a possible favourable judgment against an opponent. Most
people in the EU are aware of the regulation EU number 655 2014, applicable
from January 18 2017, and providing for a European account preservation order.

It lets a court in one EU country freeze funds in the bank
account of a debtor in another EU country. It is a procedure that may be used
in cross-border cases, where the court carrying out the procedure, or the
country of domicile of the creditor, are in different member states than the
one in which the debtor account is maintained. That makes it easier to recover
debts, and acts as an alternative to existing legal procedures.

It does not apply in all EU countries, though, for instance
Denmark and the UK.

Spain – RC When you are enforcing an EU judgment in
Spain, the procedure is pretty straight forward. It could take just a month to
achieve an asset seizure.

The important point here, is the fact that the debtor is not
aware of the enforcement procedure until he or she receive the seizing order
from the court. This means there is literally no time to conceal any assets or
to default the creditor.

Things change when you have to enforce a judgment outside
the EU. In such a case, you have to go through a process within the court in
order to achieve the recognition of the foreign judgment. Then the first
difficulty is to serve the procedure to the debtor.

It is awfully common that debtors are hidden or assets are
concealed within the company under other names. If the debtor becomes aware of
the enforcement procedure, then the concealing behaviour increases.

In order to tackle such behaviour, the Spanish government
passed a modification to the criminal code in 2015, by which the felony for
concealment of assets was considerably tightened.

Austria – KO As of 18 January 2017, creditors
domiciled within the EU can also apply for a European Account Preservation
Order (EAPO) in order to secure claims. This interim measure is available
before and after proceedings have been initiated or a judgment has been
granted. The EAPO is directed at the seizure of bank accounts within the EU and
is available for all kinds of pecuniary claims including claims relating to
tort, delict and civil claims for damages or restitution that are based on an
act giving rise to criminal proceedings.

Generally, the opposing party is neither informed about the
creditor’s application nor heard prior to the granting of the EAPO. The
claimant has to provide sufficient evidence for the endangerment of the
enforcement of the claim. If the creditor has not yet obtained a judgment, the
competent court will have to decide within ten working days after the
application has been filed. An EAPO issued in an EU Member State is
automatically recognised in all other participating EU Member States.

England – FT Foreign judgments (where there are
reciprocal arrangements or treaties in place) can be registered in the high
court and once registered all the normal enforcement processes available to a
creditor can be used against assets of the debtor held within the jurisdiction
of England & Wales.

Separate registration would be needed to deal with assets in
Scotland or Northern Ireland but the process is not that complicated.

Enforcement of a judgment is not court led in the sense that
it is for the judgment creditor to make applications to use the enforcement
options.

If you know what assets are held by the debtor there are
various means by which those particular assets can be seized – e.g. bank
accounts, vehicles, etc.

Property (buildings/land) can be made subject to a charging
order for the value of the debt, but such orders sit behind any
mortgages/charges already registered against the title. If the debt is
significant it is also possible to then upgrade the charging order by applying
for an order for sale.

If you don’t know what the debtor has by way of assets, an
application can be made for the debtor to attend the court and provide information
about what assets they have. The debtor gets two chances to attend the court
and if they fail to appear, the court will regard that as a contempt of court
and order their arrest. They would be released once they had provided the
information.

It is not, however, a particularly effective means of
getting information, and if the debtor drags out the process, it can be months
between making the application and the debtor finally attending court.

Cayman Islands – CB The Cayman Islands has a panoply
of tools to aid in the discovery of assets. These include the Confidential
Information Disclosure Law, Anton Piller Orders, Bankers’ Books Orders,
Disclosure Orders, Letters of Request, and pretrial depositions. It goes beyond
the scope of this discussion to expand upon all of these, but some of the more
important are described below.

The Confidential Information Disclosure Law, 2016, may be
used as a shield to protect sources of confidential information from legal
action. The original version of this law provided that the trading and misuse
of confidential information was (with various exceptions) a criminal offence
either if committed in the Cayman Islands, or worldwide if it relates to
Caymanian subject matter. The new CIDL Law removed this criminal offence for
breach of confidence, and expands the circumstances in which disclosure can be
made. It provides a clearer list of circumstances in which disclosure is
permitted and a list of authorities to which confidential information can be
disclosed.

Anton Piller orders are available in the Cayman Islands
Orders to prevent the destruction or dissipation of documents. A plaintiff may
obtain such an order pre-action and ex parte in exceptional cases, and, if
necessary, seize evidence in the defendant’s possession without warning. The
test for obtaining such as order is difficult to satisfy, and the party
applying for the order must give undertakings, inter alia, to provide damages
if it is determined at a later date that the order should not have been made.

Section 8 of the Evidence Law (2019 Revision) allows a
Cayman Islands court to order that an applicant be permitted to inspect and
take copies of a ‘bankers’ book’. Norwich Pharmacal Orders are available
against third parties before suit, who are involved in arguable wrongdoing,
whether intentionally or otherwise. They are applied for against registered
agents holding details of the actual owners or ultimate beneficial owners of
the entities in question.

Turkey – CEB In the context of legal disputes, in Turkey,
the tools are divided into two types as a quick and effective solution which
are provisional injunction and provisional attachment.

A decision for the injunction may be taken against the
dispute in cases when the protection of the rights of the claimant is
obligatory, the judge may decide before the hearing. The requesting party has
to prove his/her rightness approximately.

The provisional injunction on the basis of the note is not
affected by the allegation of falsity about the note and the note holder may
request new measures to protect his/ her rights when necessary.

The court may decide on any measure that would eliminate the
drawback or prevent loss, such as protecting the goods or rights subject to the
measure, or safekeeping or not doing something.

The provisional injunction decision can take several forms
such as the failure to return the bank guarantee letters, failure to return the
charge of the letter, the suspension of payment of receivables, the prevention
of delivery of goods, the suspension of a navigation of the ship, the
prevention of the transfer of real estate to the third persons, blocking bank
accounts, the suspension of transfer of copyrights.

In the case of a provisional attachment, the creditor of a
due pecuniary debt levies the movable and immovable property and receivables
and other rights of the debtor into third-party custody.

Because of the undue debts, the provisional attachment is
only requested if the borrower does not have a specific residence, or if the
borrower prepares to hide or to smuggle their property, or if they make
fraudulent transactions that violate the rights of the creditor.

The creditor is obliged to provide evidence to the court
that convinces them about the reasons for the debt and attachment. The court is
free to listen to both sides, and it is possible to appeal this decision.

If the creditor requesting a provisional attachment is
wrong, they are liable for all damages and the collateral to be paid to the
debtor and the third party. If there is only one court decision, no collateral
is required.

Turks & Caicos Islands – SW We don't have mutual
recognition and enforcement of judgments with anybody, including the UK, which
means it's difficult to enforce orders and judgments in the Turks and Caicos
Islands, and vice versa.

We do have a mutual legal assistance treaty with the US,
which allows US authorities to approach the court here and obtain information
and to freeze assets in this jurisdiction. This also enables us to be able to
obtain similar assistance from the US.

With regard to banking secrecy laws and the protection of
confidential information generally, our Confidential Relations Ordinance was
such that we had very tight confidentiality provisions which meant that in
civil litigation it was very difficult to obtain confidential information
including discovery from a bank regarding somebody’s bank account, unless that
person consented to the release of that information. Part X of the Companies
Ordinance (Cap. 16.08) provides for a process whereby a person intending or
being required to give in evidence in, or in connection with, any proceeding
being tried, inquired into or determined by any court, tribunal or other
authority (whether within or without the Islands) of any confidential
information within the meaning of Part X, may before so doing apply to the
Supreme Court for directions.

U.S – Ohio – CN There is no Federal treaty to
recognise foreign judgments, so a foreign judgment would have to be entered
into state-by-state, based upon the laws of recognition or Res Judicata.

You have to basically file a new complaint and likely attach
the judgment and show that the issues already decided in the foreign
jurisdiction are subject to a fair and full trial. The court would determine
under its laws whether to recognise those issues as already having been
decided.

Another option might be arbitration, where the Federal court
may recognise the arbitration award if it complied with the US Federal
Arbitration Act.

Dominican Republic – PGT As far as the Dominican
Republic goes, we are party to a convention called the Inter-American
Convention on Execution of Preventive Measures.

This is an old treaty in place since 1979, but it is seldom
use in practice. Under the treaty, any party member is entitled to make a
request to the Dominican Republic to issue a temporary preventive measure.

This treaty has the significance that it deals with foreign
claims dealing with labour, civil and commercial matters. The Dominican
Republic has a very large numbers of treaties based on mutual traditional
systems, but most of them have to do with persecution based on a criminal
infringement. For civil, labour and commercial matters, this is the only
convention in place.

We do have also banking secrecy laws, but from the civil
perspective, a creditor is not harmed by the banking secrecy laws; in other
words, this is not an obstacle to freeze bank accounts. Under our enforcement
procedures, a creditor can place an embargo with a bank, without knowing
exactly whether the debtor has an account with that bank. It would be the
bank’s obligation, after the embargo is placed, to let know the creditor
whether the intended debtor has any money in the bank.

With regard to companies, we have the problem of piercing
the corporate veil, because we recognise that the company has a legal
authority. In that case, in order to locate the assets of a debtor company, we
will be required by the court to pierce the corporate veil. There’s a lot of
very new legislation in the Dominican Republic, with very complicated
procedures around piercing the corporate veil.

You would need to determine that there's a fraud, and that
the debtor and is using different companies to conceal assets. Where location
of assets is concerned, the debtor will try to locate measures to seize the
assets in the same place that the assets are located.

Germany – JS German law does not recognise asset
tracing. However, the debtor's asset information is to be submitted to the
bailiff within the framework of an enforcement carried out by the creditor
against the debtor. This serves to provide the creditor with knowledge
regarding the assets belonging to the debtor in order to be able to
successfully enforce them.

In accordance with Sec. 802c et seq. ZPO, the creditor may
entrust the court bailiff directly with the acceptance of asset information.
This information may open up further enforcement possibilities for the
creditor. If the debtor refuses to submit the asset information, or if he
fulfils his obligation but the enforcement of the listed assets is unlikely to
result in full satisfaction for the creditor, the court bailiff is authorised
pursuant to Sec. 802l ZPO to obtain further information about the debtor from
third parties at the creditor's request.

The creditor may obtain information about the debtor's bank
accounts from the Federal Central Tax Office, ask the statutory pension
insurance institution for the debtor's employment relationships that are
subject to social insurance contributions, or ask the Federal Motor Transport
Authority about vehicles registered in the debtor’s name. If the debtor does
not attend the meeting to submit the asset information, without excuse or
refuses to provide the information without a reason, the local court issues a
detention order at the creditor's request (Sec. 802g ZPO). The arrest serves
only to enforce the disclosure of the property information. After the
information has been submitted, the debtor is released from custody. The term
of the detention may not exceed six months (Sec. 802j (1) ZPO).

Orders by courts outside of the EU may be enforced if they
have the same legal quality as a German order, which requires an exequatur
proceeding. As an EU member, Germany profits from EU regulations and treaties
governing cross-border litigations. These regulations simplify the service of
documents and the enforcement of judgments. The EU regulation 655/2014, for
example, intends to give creditors the possibility to ensure, even before main
proceedings or at any stage of the litigation, that a following court decision
on the main action may also be enforced. It allows a temporary attachment of an
account of an EU member without warning the debtor, which is uncommon in German
law.

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

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