Liechtenstein
1. Are freezing orders (or their equivalent referred to below) available in civil legal proceedings in this jurisdiction and what is their effect?
Yes, freezing orders are available where assets of the respondent are held by a third-party debtor (typically a bank). The respondent is prohibited from dealing with the assets referred to in the freezing order (which must be located within Liechtenstein) until a specified time (usually the final judgment in the proceedings) or until further notice of the Court.
2. Are other interim orders commonly made in conjunction with a freezing (or equivalent) order?
Yes. The Court typically requires the third-party debtor to disclose the nature, value and location of the respondent’s assets and to refrain from making any dispositions over those assets. It is also common for orders to be made seizing assets which are in the possession of the respondent (as opposed to a third party debtor) and taken into custody of the Court.
3. Briefly what is the relevant legal test?
(i) The applicant has a good arguable case in the substantive or prospective claim;
(ii) the respondent has assets in Liechtenstein; and
(iii) there is a reasonable risk of dissipation of those assets.
To satisfy (iii), the applicant must show that, without a freezing order, the respondent is likely to frustrate or impede the applicant's claim by damaging, destroying, concealing or disposing of the assets. If the respondent is domiciled outside Liechtenstein or if the judgment needs to be enforced abroad, (iii) does not apply.
4. Briefly what is the process for obtaining a freezing (or equivalent) order?
The applicant makes an application to the Court setting out:
(i) the proposed scope of the freezing order;
(ii) evidence in respect of the assets the freezing order should cover;
(iii) the proposed time period for the order; and
(iv) the grounds on which the relevant legal test is met. The application can be made on or without notice to the respondent.
The application should be made without notice to the respondent if giving notice would frustrate the effect of the freezing order. If the freezing order was made without notice, the respondent has the choice to file an objection and request a return hearing or appeal it directly.
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 Court can require the applicant to provide a security deposit, either upon the request of the respondent or if the Court deems it necessary. If the claim is ultimately unsuccessful, the applicant has to compensate the respondent for all pecuniary loss resulting from the freezing order.
6. Can it be sought against third parties?
Yes. A freezing order can simultaneously order:
(i) the respondent to refrain from disposing of or dealing with assets subject to the order; and
(ii) the third-party debtor (usually a bank) to refrain from following any instructions of the respondent.
Third-party debtors do not have any rights of participation in the freezing order procedure, except for the possibility to appeal the order. Third parties cannot be made subject to the terms of a freezing order through notification of its terms.
7. What assets are covered by a freezing (or equivalent) order?
Freezing orders are usually targeted at funds deposited with Liechtenstein banks. In the case of physical assets within the jurisdiction, other interim measures may be sought, such as seizure orders where the assets are taken into the custody of the Court.
8. Can a freezing (or equivalent) order be made in support of substantive proceedings abroad?
In principle yes, but only where the foreign substantive proceedings lead to a decision that will be enforceable in Liechtenstein. It may therefore be necessary to bring a claim in Liechtenstein directly in order to freeze the assets of a respondent.
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 substantive proceedings. When this happens the applicant must commence substantive proceedings promptly (usually within four weeks).
11. Are there typically any exceptions to the general prohibition on the respondent’s use of assets subject to a freezing (or equivalent) order?
Freezing orders usually provide that a respondent may deal with their assets above a specified value. If the respondent is an individual, the Court will order that a minimum of CHF 1,980 remains available each month to cover ordinary living expenses. Other than that, there are limited exceptions.
If part of the frozen assets is needed for maintenance of the respondent (including, for companies, administrative costs in the ordinary course of business and legal expenses), they can apply for part annulment of the order to cover those costs. The Courts handle such requests restrictively. The respondent must demonstrate that they do not have any other assets (whether in Liechtenstein or abroad) that could be used instead.
12. What happens after a freezing (or equivalent) order is granted?
The Court sets a deadline within which proceedings must be commenced (usually four weeks), if they are not already underway. In the case of bankable assets, the freezing order is served on the third-party debtor, who is ordered to recognize or reject the applicant’s claim and to disclose the value of the frozen assets of the respondent. The respondent may appeal the freezing order within 14 days. If the application was made without notice, the respondent can file an objection with the first instance Court and request that the freezing order be set aside.
13. Who pays the costs of the application for a freezing (or equivalent) order?
The applicant bears the costs of the freezing order. Depending on the outcome of the substantive proceedings, the applicant may claim for reimbursement of these costs from the respondent.
14. What protections are there typically in a freezing (or equivalent) order for third parties to such orders?
(i) The third-party debtor may appeal the freezing order;
(ii) third parties have a right of set-off against amounts that were owing by the respondent before the freezing order was made;
(iii) third parties are entitled to be reimbursed for costs incurred in indicating the nature, value and location of the respondent’s assets.
15. What are the consequences of breach of a freezing (or equivalent) order?
If a third-party debtor knowingly ignores or is otherwise responsible for breaching a freezing order, they may be liable for all damages resulting from non-compliance. The law does not provide any consequences for the respondent where the assets are held by a third party-debtor.
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?
There is no bilateral treaty giving extraterritorial effect to Liechtenstein freezing orders. Any enforcement abroad is subject to local law.
18. Can freezing (or equivalent) orders from overseas jurisdictions be enforced in this jurisdiction?
No. In certain cases, however, foreign arbitration tribunals can apply for enforcement of their interim injunctions in Liechtenstein.
Contact
Hannes Arnold Senior Partner Gasser Partner Rechtsanwälte Vaduz, Liechtenstein hannes.arnold@gasserpartner.com www.gasserpartner.com
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