Lebanon
1. Are freezing orders (or their equivalent referred to below) available in civil legal proceedings in this jurisdiction and what is their effect?
Yes. An applicant has the right to apply to the judge (Head of Execution Bureau) for a conservatory attachment (freezing order) of the respondent’s movable (with some exceptions) and immovable assets within the jurisdiction.
2. Are other interim orders commonly made in conjunction with a freezing (or equivalent) order?
The judge can order interim measures with the freezing order (for example, for a charge to be recorded on the title of targeted real estate) or for the safeguarding of the attached assets (for example, the judge can make an order that assets be put in a secure place under the supervision and in the custody of a guardian, which can be an important measure in the case of the attachment of moveable assets).
The Court would not typically require the respondent to provide disclosure in an affidavit of the nature, value and location of his, her or its assets. Usually, the applicant conducts a search over the respondent’s assets prior to applying for the freezing order and provides evidence of these assets to the judge.
3. Briefly what is the relevant legal test?
The debt claimed by the applicant must be due, if it is not proven in a deed, the judge would approve the application for the freezing order if evidence of the existence of the debt is submitted to him. The law prohibits a freezing order in respect of debts that are not due or subject to an unsatisfied condition, save in cases where there is a fear of insolvency or bankruptcy or escape of the respondent.
4. Briefly what is the process for obtaining a freezing (or equivalent) order?
The applicant must make an application (which can be made without notice) to the judge and provide details of the respondent, the claim for which the freezing order is sought (and documents sustaining the claim) and assets they wish to attach/freeze as security for their claim. If the assets consist of real estate properties, the applicant must provide proof of ownership of these properties retrieved from the Real Estate Registry (attesting that they belong to the respondent). The legal representatives for the applicant must submit, with the application, a power of attorney issued in their favor by the applicant (the power of attorney must be duly certified/legalized at the place of issuance). Some judges require submission of the original documentation substantiating the claim.
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 may be ordered by the judge to put up counter-security. The type and amount of the counter-security is left to the discretion of the judge.
6. Can it be sought against third parties?
Yes, the applicant may apply to the judge for a freezing order of debts owed by third parties in favor of the respondent. The third party in question must notify the judge, within five days from the date of their notification of the freezing order, of the debts they owe in favor of the respondent.
Note that bank accounts cannot by law be the subject of a freezing order in the context of civil proceedings (except if explicitly authorized by the bank account holder in the bank account opening documentation, which in reality is rare/never done).
7. What assets are covered by a freezing (or equivalent) order?
Save for the exceptions set out at 11 below, all movable and immovable assets (including real estate assets) belonging to the respondent in Lebanon (not worldwide) can be covered by the freezing order.
The freezing of a movable property prevents transfer of ownership of that property and the creation of any charges over it.
The freezing order does not prevent transfer of ownership of movable properties whose ownership is recorded in a special registry (such as cars), and of real estate properties; however, in case of transfer of ownership, the new owner will bear the consequences of the attachment (i.e. they acquire the asset at their own risk and enforcement over the assets is still possible).
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 after or prior to commencing the substantive underlying claim.
11. Are there typically any exceptions to the general prohibition on the respondent’s use of assets subject to a freezing (or equivalent) order?
Certain rights and assets can only be frozen up to certain limits, such as, wages, severance, and pensions of public servants and employees of the private sector. The respondent will only be prohibited from using the frozen share of his assets. He can freely dispose of the part which is in excess of that frozen share. For example, the frozen share of the respondent’s salary will be withheld by their employer (if they are notified of the freezing order) and the salary in excess of that share can be paid to the respondent.
The law prevents a freezing order in respect of certain assets, including assets of state and public legal bodies, assets of foreign countries (save for certain exceptions), private correspondence, trade establishments, rights attached to a person, authors’ rights to their artistic work, family compensation, cost-of-living compensation, sums granted to employees and servants as a basis for living, bedding and clothing items that are necessary for the respondent and their family, the respondent’s tools and books necessary for their profession (with a value that does not exceed two million Lebanese pounds) and items or sums of money dedicated to family allowance by virtue of a judge’s decision.
In principle, a freezing order cannot be applied to bank accounts held by the respondent due to a banking secrecy law.
No exception usually applies for legal expenses.
If the respondent is a corporate business, in principle they can keep assets or funds to use in the ordinary and proper course of business, except for any amounts that are subject of a freezing order in the hands of third parties.
12. What happens after a freezing (or equivalent) order is granted?
The applicant must file his substantive action within no later than five days from the date of the freezing order (if he has not done so prior to the issuance of the freezing order). Failure to file this action within this deadline would, on the application of the respondent, result in the cancellation of the freezing order.
The respondent can challenge the freezing order within no later than five days from the date of service of the order upon them. The respondent can also apply for the lifting of the attachment order if they present suitable security in return.
If the order targets real estate assets and/or movable assets (whose ownership is recorded in a special registry), the freezing order must be served, through the execution officer, on the Real Estate Registrar and/or holder of the concerned special registry. The execution officer must also serve the order on the respondent.
If the order targets third parties’ debts, the order must be served on these third parties.
The attachment will remain in effect until the Courts dealing with the substantive action have determined the claim. If the claim succeeds on the merits, the judgment (on the merits) can be enforced against the attached assets.
13. Who pays the costs of the application for a freezing (or equivalent) order?
The costs are borne by the applicant. In certain cases, these costs can be recovered in the enforcement process.
14. What protections are there typically in a freezing (or equivalent) order for third parties to such orders?
The order results in the freezing of the asset in the hands of the third party from the date of service of the freezing order upon him. It also prevents him from paying or delivering it to the respondent or exercising a set-off against his debt. The third party will be considered as a guardian over the asset.
Further:
(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 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 certain circumstances;
(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.
15. What are the consequences of breach of a freezing (or equivalent) order?
The respondent is considered a guardian of the frozen assets and responsible for any damage or loss sustained by said asset. Moreover, the respondent who resists the execution of the freezing order, may be subject of a criminal sentence and fine.
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 subject to the laws of the relevant jurisdiction.
18. Can freezing (or equivalent) orders from overseas jurisdictions be enforced in this jurisdiction?
In general, no. A judgment issued by a foreign Court would be recognized and enforced by the Courts in Lebanon providing it satisfies a number of conditions, including, the requirement that is has acquired res judicata. In principle, freezing orders issued in overseas jurisdictions are temporary decisions that have not acquired res judicata and, thus, they are unenforceable in Lebanon. However, a freezing order issued by a foreign Court could be used to sustain an application for a freezing order lodged before the Lebanese judge.
Contacts
Jean Baroudi Managing Partner Baroudi & Associates Beirut, Lebanon jean.baroudi@baroudilegal.com www.baroudilegal.com Lea Ferzli Senior Associate Baroudi & Associates Beirut, Lebanon lea.ferzli@baroudilegal.com www.baroudilegal.com
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