Estonia

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 the Court revokes the freezing order or substitutes it with another interim measure.

The Court may revoke the freezing order at the request of the respondent if the circumstances change and, above all, the cause for the freezing order ceases to exist or a deposit fee is offered. However, non-monetary freezing orders may be cancelled or amended by substitution with a monetary payment only with the consent of the claimant or for a good reason. The Court must cancel the freezing order if the principal claim is rejected, dismissed or the proceedings in the case are terminated.

2. Are other interim orders commonly made in conjunction with a freezing (or equivalent) order?

Only rarely. The Court considers the legitimate interests of the applicant, the circumstances of the case and the value of the monetary claim in deciding whether an additional interim measure would unreasonably burden the respondent or not. Consequently, other interim orders are usually only made if the freezing order alone does not ensure that the principal claim can be later satisfied. Additional interim measures to name a few could be:

(i) the establishment of judicial mortgage;

(ii) prohibition on the respondent to perform certain transactions or acts;

(iii) prohibition on a third party to perform certain obligations with regard to the respondent;

(iv) prohibition on the respondent to depart from their residence, arresting the respondent and imposition of a short-term custodial sentence on the respondent. The Court cannot make a disclosure order.

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 Estonia (although the Court will generally exercise greater caution in granting relief in respect of assets overseas unless there is a clear connection with Estonia);

(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);

(iv) the freezing order would allow the full satisfaction of the underlying substantive or prospective claim;

(v) the claim of the applicant is not backed by any other collateral providing similar protection to the applicant as the freezing order; and

(vi) the effect of the freezing order must not be unreasonably burdensome when considering the legitimate interests of the applicant, the circumstances of the case, the value of the claim and the financial situation of the respondent.

4. Briefly what is the process for obtaining a freezing (or equivalent) order?

The applicant makes an application (in writing) to the Court. The application must set out information of the underlying litigation, the reasons for the application and the basis on which the relevant test is met. The Court usually decides the application on the working day following the date of submission. The application is usually made without notice, but the Court may first hear the respondent if it is clearly reasonable to do so. The respondent can also challenge the order after it has been 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 general rule is that the Court will order the applicant to pay a deposit fee in return for the freezing order The Court may order that the deposit fee is not payable in full or in part, or order its payment in instalments if:

(i) the applicant due to economic or other reasons cannot be reasonably expected to provide a deposit fee, and failure to pursue the underlying substantive claim may result in grave consequences for them; or

(ii) if requiring the deposit fee would be unfair to the applicant for any other reason. If the underlying substantive claim is unsuccessful, the applicant must provide compensation for the harm caused to the respondent or a third party.

To receive such compensation, a corresponding claim must be filed, and the compensation can in certain circumstances be paid from the deposited fee.

6. Can it be sought against third parties?

Yes. A third party to the underlying proceedings or prospective proceedings may be subject to the obligations deriving from the freezing order if there is good reason to suppose that the assets of the third party 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.

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 defendant in breaching the terms of the freezing order.

7. What assets are covered by a freezing (or equivalent) order?

Any tangible or intangible assets 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. If the freezing order is requested before commencement of the claim, the applicant must set out the reasons for not issuing the claim immediately. If the Court agrees with the reasons, it may set a time limit during which the applicant must issue the claim (maximum time limit is one month).

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. The respondent may use:

(i) assets with a total value equal to the estimated monthly subsistence minimum (applies to natural persons);

(ii) assets for ordinary living expenses, etc;

(iii) assets for ordinary and proper course of business.

Although the law does not explicitly state that legal expenses ought to be taken into account when determining the value of assets not subject to the freezing order, the Court can only make a freezing order which is not overly burdensome to the respondent. Therefore, in theory the Court must also consider the possible legal expenses incurred by the defendant when determining the amount of assets not subject to a freezing order. In practice however, the legal expenses are not usually considered.

12. What happens after a freezing (or equivalent) order is granted?

If the applicant must contact an enforcement agent, registrar or another person (for example, a bank) or agency for the enforcement of the freezing order, then the applicant (or the Court if requested) must send the order to the relevant registrar (for example, business registrar) or another relevant agency or person (such as, a bailiff) for enforcement.

The respondent has the right to challenge the freezing order after it has been made.

However, if the freezing order was made to secure non-monetary claims, these freezing orders may be revoked or amended by substitution with a monetary payment only with the consent of the claimant or for a good reason.

The Court must revoke the freezing order if the principal claim in the underlying litigation is rejected, dismissed or the proceedings in the case are terminated.

13. Who pays the costs of the application for a freezing (or equivalent) order?

The applicant will at first pay the costs of obtaining and effecting the freezing order. At the end of the underlying litigation, the Court will decide based on the proportion of the claim satisfied (or unsatisfied), whether the costs associated to the freezing order will be paid by the applicant, the respondent or split between them in any other way.

14. What protections are there typically in a freezing (or equivalent) order for third parties to such orders?

(i) A third party is not prevented from exercising any rights of set-off arising prior to its notification of the freezing order.

(ii) A freezing order only affects third parties if they are in possession of the assets owned by the respondent or if the respondent is entitled to the asset from the third party pursuant to an obligation.

(iii) A third party can claim damages for the freezing of the respondent’s assets from the applicant if the underlying litigation is unsuccessful.

(iv) If the assets belonging to a third party are mistakenly the objects of the freezing order, they must file a separate claim to the Court in order to annul the freezing order.

15. What are the consequences of breach of a freezing (or equivalent) order?

Any transactions carried out after a prohibition on disposal for the asset is visible from a corresponding register and are null and void regardless of the parties to the transaction. If there is no register for the specific asset and the freezing order is breached, the respondent is liable for the damage caused to the applicant. The bailiff may in some cases have the right to impose non-compliance levies. If the respondent has already been punished by a non-compliance levy, but fails to surrender a thing, to perform an act which cannot be substituted or to refrain from performing such an act prohibited by the freezing order, a pecuniary punishment or imprisonment could follow. The respondent cannot be held in contempt of 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)?

Usually no, but this might be the case for financial institutions if they have been notified of the freezing order and they fail to ensure that no restricted transactions are made via the affected bank account(s).

17. Can a freezing (or equivalent) order be enforced abroad?

Yes, in principle, although subject to the laws of the relevant jurisdiction. However, enforcement itself will be a matter of local law.

18. Can freezing (or equivalent) orders from overseas jurisdictions be enforced in this jurisdiction?

Generally not before a Court has made a decision on recognition and enforcement of the overseas freezing order (except for freezing orders made in EU and certain EFTA proceedings, which can be enforced without any Court proceedings).

Contact

Raiko Lipstok Partner Eversheds Sutherland Tallinn, Estonia raiko.lipstok@eversheds-sutherland.ee www.eversheds-sutherland.com

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