Chile
1. Are freezing orders (or their equivalent referred to below) available in civil legal proceedings in this jurisdiction and what is their effect?
Yes. The effect of the freezing order will be to prohibit the respondent from dealing with the assets subject to the freezing order until further order of the Court. The effect of the freezing order in other countries will depend on local law.
2. Are other interim orders commonly made in conjunction with a freezing (or equivalent) order?
Yes. The civil procedure code establishes the following types of interim orders:
(i) naming a depositary of the assets;
(ii) naming of a supervisor who monitors earnings and spending of a company; and
(iii) the prohibition of entering into contracts related to certain assets.
3. Briefly what is the relevant legal test?
The applicant must show that:
(i) they have a good arguable case in the underlying substantive claim or prospective claim;
(ii) there is a real risk of unjustified dissipation (for example, for the purposes of frustrating or impeding the satisfaction of a judgment or award);
(iii) the assets that are the subject of the freezing order will be disputed at trial (if the assets themselves are not disputed, the applicant shall provide evidence that the respondent does not have enough resources to comply with the judgment or award); and
(iv) the freezing order is proportionate to the applicant’s underlying claim. Where the applicant does not provide enough evidence to fulfil the test, the order may be granted but it will automatically lapse if further evidence is not provided within ten days.
4. Briefly what is the process for obtaining a freezing (or equivalent) order?
The applicant will make an application to the Court explaining the reasons for seeking the order, the basis on which the relevant test is met, and provide supporting evidence. An application can be made with or without notice to the respondent. Where it is made without notice, the applicant shall give formal notice to the respondent within five business days from when the order is granted, which may be extended by the Court. After this notice, the respondent can file a writ challenging the freezing order. If it is made with prior notice, the respondent can respond to the application and challenge the order.
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?
Providing security in relation to freezing orders is not mandatory. Security is only mandatory in cases where:
(i) the underlying claim has not yet been filed; and
(ii) when the applicant does not provide enough evidence to fulfil the legal test and offers to provide it afterwards (due to the urgency in obtaining the order).
6. Can it be sought against third parties?
The freezing order may only be granted in respect of assets which are property of the respondent. Third parties cannot be made the subject of the order itself. A third party that is not subject to the freezing order (for example, a financial institution holding the respondent’s assets) but which is notified of it, is required to ensure that it does not knowingly assist the respondent in breaching the terms of the freezing order. Notification is completed by an official from the Court.
7. What assets are covered by a freezing (or equivalent) order?
Any kind of assets (tangible or intangible), whether within the jurisdiction (a domestic freezing order) or outside (a worldwide freezing order). The recognition and enforcement of worldwide freezing orders depends on the local jurisdiction.
8. Can a freezing (or equivalent) order be made in support of substantive proceedings abroad?
No.
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 law requires the applicant to issue its claim within ten business days, which may be extended by the Court for up to thirty business days) or following judgment to assist with enforcement.
11. Are there typically any exceptions to the general prohibition on the respondent’s use of assets subject to a freezing (or equivalent) order?
Yes. If the freezing order prevents the respondent from concluding contracts related to specific assets, the respondent may use them in the ordinary course of business. Some assets cannot be frozen, such as books, instruments or tools that the respondent requires to perform its job or profession, as well as alimony payments and life insurance policies. There is also a prohibition on freezing salaries, save for anything that exceeds approximately US$2,500. There is no exemption relating to reasonable legal expenses.
12. What happens after a freezing (or equivalent) order is granted?
The applicant will typically serve the freezing order on third parties (such as banks) if they might hold the respondent’s assets. Assuming the original order was obtained without notice (as is often the case), the applicant shall give notice to the defendant within five business days (which can be extended by the Court), after which the respondent may challenge the order.
13. Who pays the costs of the application for a freezing (or equivalent) order?
In principle, the applicant will pay for the costs of obtaining and enforcing the freezing order. However, the Court may order the respondent to pay these costs as part of the final judgment or award in the underlying claim.
14. What protections are there typically in a freezing (or equivalent) order for third parties to such orders?
(i) After it has been served with the order, a third party may not exercise any rights of set-off arising prior to its notification of the freezing order. If that party intends to access those assets, it may file its own application for a freezing order.
(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 if recognized by the Courts of the foreign nation.
(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 or the law of any contract between itself and the respondent or (b) any orders of the Courts of the country where the assets are located. The respondent can challenge the decision of a third party if the freezing order is not recognized in Chile.
(v) Applicants undertake to pay the reasonable costs of any third party which have been incurred as a result of the order, and to compensate them for any loss caused by it.
15. What are the consequences of breach of a freezing (or equivalent) order?
A respondent or third party who breaches a freezing order may be held in contempt of Court and may be imprisoned. This would be imposed via separate proceedings before a criminal Court.
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)?
Yes, the third party has a duty to care as it is considered a custodian.
17. Can a freezing (or equivalent) order be enforced abroad?
In principle yes, although this is subject to the laws of the relevant jurisdiction. The applicant must obtain the Court’s permission and enforcement itself will be a matter of local law.
18. Can freezing (or equivalent) orders from overseas jurisdictions be enforced in this jurisdiction?
No. Chilean Courts have ruled over the last 20 years that only final judgments or awards are recognized in Chile. Interim measures issued during a proceeding held overseas are not enforceable.
Contacts
Sergio Yavar Partner Guerrero Olivos Santiago, Chile syavar@guerrero.cl www.guerrero.cl Pablo Rioseco Associate Guerrero Olivos Santiago, Chile prioseco@guerrero.cl www.guerrero.cl
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