Austria
1. Are freezing orders (or their equivalent referred to below) available in civil legal proceedings in this jurisdiction and what is their effect?
Yes, they are available as interim injunctions. The respondent is prohibited from dealing with the assets referred to in the freezing order until a specified time (for example, a further hearing, judgment or payment) or further order of the Court.
2. Are other interim orders commonly made in conjunction with a freezing (or equivalent) order?
This depends on the asset. For example, when freezing real estate, a notice is entered in the land register. For other assets, there may be other methods of applying a public mark or putting it in storage. However, this is not necessarily done on a frequent basis. The assets subject to interim orders are individually referred to in the order in the vast majority of cases outside of criminal cases.
3. Briefly what is the relevant legal test?
(i) The applicant has a good arguable case in the underlying substantive claim or prospective claim;
(ii) the respondent has assets, which may be within or (in the case of a worldwide freezing order) outside the European Union (although the Court will generally exercise greater caution in granting relief in respect of assets overseas unless there is clear connection with the European Union);
(iii) there is a real risk of unjustified dissipation (for example, for the purposes of frustrating or impeding the satisfaction of a judgment or award); and
(iv) it is just, convenient and necessary for the prevention of further damage to grant the freezing order.
4. Briefly what is the process for obtaining a freezing (or equivalent) order?
The applicant files an application with the Court, in particular setting out the reasons for the application and the basis on which the relevant test is met. The necessary supporting evidence has to be provided with the application. The application is submitted only to the Court upon whose discretion it rests as to whether the respondent is notified prior to a decision on the freezing order. There will either be a hearing, where witnesses are interviewed and/or the respondent is able to contest, or, if the respondent is only subsequently notified, there will be a later return hearing at which the respondent can challenge the order assuming it is made.
5. Does the applicant have to provide any form of security or commit to compensation if its claim is ultimately unsuccessful and any freezing (or equivalent) order granted causes loss and damage to the respondent?
The applicant is not generally obliged to provide security but the Court may demand security prior to issuing an order, if the order would otherwise be deemed as posing too great a financial risk for the subject of the order. Additionally, the applicant may be obliged to provide security, if the proof submitted with the application is deemed insufficient, but the financial risk stemming from the freezing order may be mitigated by providing security. The applicant will be obliged to pay compensation, if the claim is ultimately unsuccessful.
6. Can it be sought against third parties?
Yes, a third party to the underlying proceedings or prospective proceedings may be made a party to a freezing order where there is good reason to suppose that its assets are in fact the assets of the defendant in the underlying litigation or will be available to the defendant to meet a judgment or arbitral award. Equally a third party which is not a party to the freezing order (for example, a financial institution holding the defendant’s assets) which is notified of it is still required to ensure that it does not knowingly assist the respondent in breaching the terms of the freezing order. Notification may be by way of phone call. Notification of third party is only effective once the third party is served the Court order document either as a hard copy or via an official electronic delivery network.
7. What assets are covered by a freezing (or equivalent) order?
Any tangible or intangible assets provided they are not perishable, whether within the jurisdiction (a domestic freezing order) or outside (a worldwide freezing order).
8. Can a freezing (or equivalent) order be made in support of substantive proceedings abroad?
Yes.
9. Can a freezing (or equivalent) order be made in support of arbitration proceedings or awards?
Yes.
10. At what stage of proceedings can a freezing (or equivalent) order be sought?
At any stage, including prior to commencing the claim (although the Court will expect the applicant to issue its claim promptly).
11. Are there typically any exceptions to the general prohibition on the respondent’s use of assets subject to a freezing (or equivalent) order?
Not typically, but the Court may impose limits to any freezing order, if deemed necessary and appropriate under the specific circumstances. Provisions can and are made for respondents to pay their reasonable living expenses or for businesses to pay their expenses necessary during the ordinary course of business.
12. What happens after a freezing (or equivalent) order is granted?
The applicant will typically notify third parties (such as banks) of the freezing order when they might hold the respondent’s assets. Assuming the original order was obtained without notice (as it often will have been), there will be a return hearing, whose date is stated on the face of the order, at which the respondent may challenge the order. At this point the original order will usually either be set aside, extended or replaced with a Court-sanctioned undertaking which has broadly the same effect as a freezing order until trial.
13. Who pays the costs of the application for a freezing (or equivalent) order?
The Court fees will have to be paid in advance by the applicant. Subsequently, either the applicant or the respondent may be ordered to pay for the costs of obtaining the freezing order, which is usually decided at the final determination of the underlying litigation.
14. What protections are there typically in a freezing (or equivalent) order for third parties to such orders?
(i) A third party is prevented from exercising any rights of set-off according to their obligations being specified in the freezing order. If the party holds assets of the respondent’s that are to be frozen, off-setting is not permitted.
(ii) A third party does not need to enquire as to the application of any money withdrawn by the respondent if the withdrawal appears to be permitted by the freezing order.
(iii) A freezing order only affects third parties outside of the jurisdiction in rare circumstances, where there is a treaty between the other jurisdiction and Austria. For freezing orders affecting third parties within other EU Member States, formalities and protection according to the Brussels Regulation apply. Generally, it is preferable to obtain a freezing order within the jurisdiction of the assets.
(iv) As regards assets outside of the jurisdiction, a freezing order does not prevent a third party from complying with (a) what it reasonably believes to be its obligations under the law of the country where the assets are located, unless directly contradicting the obligations under the freezing order or (b) any orders of the Courts of the country where the assets are located.
(v) Third parties obliged under a freezing order may take legal remedies at Court against the freezing order.
15. What are the consequences of breach of a freezing (or equivalent) order?
A respondent or a third party that is notified of obligations under a freezing order, who disobeys a freezing order may be fined, or as a last resort even imprisoned. A third party (that was not notified of the freezing order) may only be fined where they knowingly help or permit the respondent to breach the terms of the order. Depending on the specific circumstances, a breach of a freezing order may be classified as criminal conduct.
16. Does a third party notified of (but not a party to) a freezing (or equivalent) order owe a duty of care to the applicant (meaning it can be liable to the applicant for non-compliance)?
The order will specify what obligations apply to the notified party and if it imposes a duty of care to the applicant.
17. Can a freezing (or equivalent) order be enforced abroad?
Yes, in principle, although subject to the laws of the relevant jurisdiction. Within the European Union, a freezing order may be enforced, if the procedure for European enforcement under the Brussels Regulation has been complied with. Otherwise, this can only be sought with the permission of the Court and enforcement itself will be a matter of local law.
18. Can freezing (or equivalent) orders from overseas jurisdictions be enforced in this jurisdiction?
Freezing orders (or their equivalent) made in the EU and certain EFTA states can be enforced in Austria, as well as those issued by UK Courts in proceedings prior to 31 December 2020. Otherwise, even under an international treaty of mutual jurisdictional acceptance, an Austrian Court will first have to recognize the freezing order in Austria.
Contact
Aurelius Freytag Partner Eversheds Sutherland Vienna, Austria a.freytag@eversheds.at www.eversheds-sutherland.com
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