Virtual Round Table Series. Disputes Working Group 2019
Many modern organizations, regardless of size, own assets in multiple locations across the world. The advent of technology, together with accessible international markets, means dealing with clients across borders is easier than ever before. As a result of this trend, businesses may have money in foreign bank accounts, stock in foreign warehouses, or significant tangible assets such as offices, vehicles or land.
In the event of a commercial dispute with one of those companies, a creditor may find it necessary to freeze some of those assets, in order to satisfy a monetary claim against the debtor.
The cross-border injunctions required to do this are notoriously difficult to execute effectively, due to the intricacies of the various local laws of countries in which assets are located. Extra complexity is added, because of the need for accurate discovery, alongside secrecy and speed of execution, in order to prevent a debtor dispersing those assets.
Injunctions are dealt with differently depending on the asset. Real estate assets are often subject to specific requirements, such as presenting a court order granting an embargo before the official register of deeds. This effectively creates a lien on the property in question. More mobile assets, such as vehicles, are easier to hide and are usually dealt with by a court officer, who may be able to physically transfer the assets into the hands of a guardian. Highly liquid assets, such as cash in bank accounts, often require special treatment and may be subject to specialized legislation, such as the Mareva Injunction Order (MIO), which compels a bank to immediately freeze those accounts.
If the debt in dispute is large enough, it may be necessary for a creditor to require injunctions to be brought on multiple assets in multiple loca¬tions, which is incredibly complex without the correct legal advice in each location. Any delay to the process, or erroneous filing, could delay the process to the extent that assets are no longer discoverable and, therefore, an injunction is unenforceable.
Any unjustified attempt to freeze assets, will also incur compensation, meaning that not only does the legal process need to be quick, it also needs to be accurate. To that end, any tools that can aid discovery of assets are very useful.
The European Union has something called the European Account Preservation Order, which allows creditors to freeze debtor bank accounts in any EU member state. They are useful because they can be processed without the debtor’s awareness. Elsewhere Anton Pillar Orders and Norwich Pharmacal Orders are particularly useful in offshore jurisdictions. They allow for the seizure of documentation and the forced divulgence of beneficial ownership by third parties, such as banks or internet service providers, that hold assets for anonymous clients. Networks of treaties between certain countries, such as the Inter-American Conven¬tion on Execution of Preventive Measures, make it more likely that domestic courts will recognize foreign judgments.
If the process of securing multiple cross-border injunctions via the civil law courts is proving too challenging, a creditor may attempt to turn to the criminal courts. If the actions of a debtor are proven to be criminal (e.g. fraudulent), the greater powers of law enforcement agencies can be put to work. Dovetailing with a criminal investigation can be a powerful way to reach the intended goal for a creditor.
This feature examines the injunction process from the perspective of 10 legal experts in the area of commercial dispute resolution. They detail the process in their jurisdiction, looking at the injunctions available and the tools used to aid discovery of assets.
We include expert examination from Austria, Germany, The Netherlands, USA, United Kingdom, Cayman Islands, Turkey, Spain, Turks & Caicos Islands and the Dominican Republic. Readers with an interest in a particular jurisdic¬tion can dip into the content for the specifics they require.