Cyprus
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 respondent is prohibited from dealing with the assets referred to in the freezing order (either within the jurisdiction or worldwide) 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?
Yes. The Court may also issue an ancillary disclosure order, requiring the respondent to provide disclosure in an affidavit of the nature, value and location of his, her or its assets.
3. Briefly what is the relevant legal test?
(i) There is a serious issue to be tried during the hearing process, i.e. the applicant has a good arguable case in the underlying substantive claim;
(ii) there is a possibility that the applicant is entitled to relief in their underlying substantive claim;
(iii) that, unless a freezing order is made, it shall be difficult or impossible to do justice at a later stage; and
(iv) the balance of convenience lies in favor of granting the freezing order. If the application is made without notice, the applicant must also show that there is a real risk of imminent dissipation of the respondent’s assets.
4. Briefly what is the process for obtaining a freezing (or equivalent) order?
The applicant makes an application to the Court, in particular setting out in an affidavit the reasons for the application and the basis on which the relevant test is met. An application can be made on or without notice to the respondent. Where it is made without notice, the applicant has a duty of full and frank disclosure and 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?
Yes. The applicant must provide a cross-undertaking in damages to the respondent (which can in certain circumstances be ordered to be backed by security).
6. Can it be sought against third parties?
Yes, a third party to the underlying 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, i.e. are amenable to execution. 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.
7. What assets are covered by a freezing (or equivalent) order?
Any movable or immovable property may form the subject-matter of a freezing order, 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, a freezing order can be issued in support of foreign judicial proceedings in another EU member state, pursuant to Article 35 of the Regulation (EU) No 1215/2012.
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?
In relation to domestic litigation proceedings, a freezing order can be sought at any time before the commencement of the claim, during the proceedings or following the issuance of a judgment, to assist with enforcement.
They may be sought in relation to foreign litigation or arbitration proceedings as well, as long as a jurisdictional link to Cyprus is established.
11. Are there typically any exceptions to the general prohibition on the respondent’s use of assets subject to a freezing (or equivalent) order?
There is now a standardized form used by Cypriot Courts for the issuance of freezing orders, which includes in the order specific provisions/exceptions that will generally provide that the respondent may deal with their assets:
(i) above a specified value;
(ii) in the ordinary and proper course of business;
(iii) for ordinary living expenses; or
(iv) for legal expenses.
The respondent may apply for the amendment of the freezing order in order for such exceptions to be included or existing exceptions to be altered.
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 for the purposes of ensuring the non-dissipation of the respondent’s assets. Assuming the original order was obtained without notice (as it often will have been), there will be a return date, stated on the face of the order, at which the respondent may challenge the order. Following the filing of an opposition by the respondent, the application will be fixed for an inter partes hearing and the Court will then decide whether to set aside/cancel the order or leave it in place until the end of the substantive proceedings.
13. Who pays the costs of the application for a freezing (or equivalent) order?
Either the applicant or the respondent may be ordered to pay for the costs of obtaining the freezing order, which is decided at the final determination of the underlying application for interim relief.
14. What protections are there typically in a freezing (or equivalent) order for third parties to such orders?
A freezing order does not create any direct obligations and/or rights and/or protections towards third parties for the benefit of the applicant. In particular, a third party is not prevented from exercising any rights of set-off arising prior to the freezing order, nor does a third party 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. However, once notified of the existence of a freezing order, a third party is prohibited from knowingly assisting or permitting the respondent to breach the terms of the order.
15. What are the consequences of breach of a freezing (or equivalent) order?
A respondent who disobeys a freezing order may be held in contempt of Court and may be imprisoned, fined or have their assets seized. A third party may only be in contempt of Court where they knowingly help or permit the respondent to breach the terms of the order.
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)?
No.
17. Can a freezing (or equivalent) order be enforced abroad?
Yes, in principle, although this will be subject to the laws of the relevant foreign jurisdiction.
18. Can freezing (or equivalent) orders from overseas jurisdictions be enforced in this jurisdiction?
In general, no, except for freezing orders (or their equivalent) issued by another EU member state.
Contact
Eleni Chrysostomides Senior Partner Chrysostomides & Co LLC Nicosia, Cyprus eleni@chrysostomides.com.cy www.chrysostomides.com
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