Czech Republic
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 preliminary injunction (the Czech alternative to the English law based freezing order) until a specified time or further order of the Court.
2. Are other interim orders commonly made in conjunction with a freezing (or equivalent) order?
No.
3. Briefly what is the relevant legal test?
The applicant has to provide a statement of the facts:
(i) showing, amongst other things, that there is a risk that enforcement of the (subsequent possible) judgment would be jeopardized;
(ii) justifying the preliminary injunction, and it must be clear what kind of preliminary injunction the applicant seeks.
4. Briefly what is the process for obtaining a freezing (or equivalent) order?
The applicant makes an application to the Court, including setting out the reasons for the application and the basis on which the relevant test is met. The applicant has to pay the fee for the preliminary injunction as well as monetary security. There is no need to notify the respondent before such action.
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. In order to secure compensation for damage or other harm resulting from a preliminary injunction, the applicant is obliged to deposit a security of CZK 10,000 no later than the same day on which the applicant files the application for a preliminary injunction with the Court, or CZK 50,000 in cases concerning relations between entrepreneurs arising from business activities. There is the possibility to increase the security if the case requires it.
6. Can it be sought against third parties?
A preliminary injunction may also impose an obligation on someone other than the party to the proceedings, but only if that party can fairly be required to do so. A third party may thus be subject to a preliminary injunction only in so far as it facilitates the performance of the respondent’s obligations under the injunction. For example, if an obligation is imposed on a party not to deal with funds in an account with a monetary institution, the monetary institution may be ordered not to disburse the funds in the account or otherwise deal with them in accordance with the instructions of the party as the account holder. A third party may not be bound by a preliminary injunction unless expressly named and included in the order.
7. What assets are covered by a freezing (or equivalent) order?
Any tangible or intangible assets within the jurisdiction of Czech Courts.
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?
A preliminary injunction may be issued both before the commencement of proceedings and after the commencement of proceedings.
11. Are there typically any exceptions to the general prohibition on the respondent’s use of assets subject to a freezing (or equivalent) order?
No. However, a general prohibition on the respondent’s use of assets subject to a preliminary injunction is not that common in the Czech Republic, because the prohibition only applies to specific assets named in the order, and such preliminary injunction must not cause undue harm to the respondent.
12. What happens after a freezing (or equivalent) order is granted?
A copy of the order imposing a preliminary injunction must be sent to the parties, or their representatives, and to those on whom the preliminary injunction imposes an obligation. A copy of the order granting a preliminary injunction ordering a party not to deal with certain immovable property is also in most cases sent to the competent land registry. The presiding judge of a chamber of the Court shall, when ordering a preliminary injunction, order the applicant to file a law suit with the Court within a time limit to be determined by the judge. The judge may also provide that the preliminary injunction shall last only for a specified period of time.
13. Who pays the costs of the application for a freezing (or equivalent) order?
The applicant has to pay the fee for the application of the preliminary injunction as well as deposit the monetary security.
14. What protections are there typically in a freezing (or equivalent) order for third parties to such orders?
(i) If the Court prohibits a party from disposing of a certain assets, the respondent may not transfer such assets by a purchase agreement or gift or conclude any other similar contract. Further, the respondent is prohibited from encumbering such asset with a lien, a right corresponding to an easement, a right of pre-emption with the effects of a right in rem, a lease right and other rights which constitute legal defects/burdens on the assets. The prohibition of legal disposition must be distinguished from physical disposition of the assets (for example, refraining from construction or other alterations).
(ii) A legal act that disobeys such prohibition will be void.
(iii) The applicant has to deposit a security which would be used to pay any damages arising from the preliminary injunction.
(iv) If the preliminary injunction has lapsed or has been revoked for any reason other than because the decision/judgment on the merits has been made or because the applicant’s right has been satisfied, the applicant will be liable to compensate any person who has suffered damage or other harm caused by the preliminary injunction.
15. What are the consequences of breach of a freezing (or equivalent) order?
A legal act that disobeys such prohibition will be absolutely void and there is a risk that the disobeying entity may be charged with a crime of obstructing the execution of an official decision. Further, a fine may be repeatedly imposed on the disobeying entity.
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, in principle.
17. Can a freezing (or equivalent) order be enforced abroad?
Yes, in principle.
18. Can freezing (or equivalent) orders from overseas jurisdictions be enforced in this jurisdiction?
In general, yes, if the preliminary injunctions (or their equivalent) were issued in EU. The enforcement of other preliminary injunctions will depend on the country of origin and if there is a mutual agreement concluded between such country and the Czech Republic.
Contacts
Mgr. Ing. Tomáš Jelínek Senior Associate Eversheds Sutherland Prague, Czech Republic tomas.jelinek@eversheds-sutherland.cz www.eversheds-sutherland.com Eliška Miklíková Associate Eversheds Sutherland Prague, Czech Republic eliska.miklikova@eversheds-sutherland.cz www.eversheds-sutherland.com
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