Luxembourg
1. Are freezing orders (or their equivalent referred to below) available in civil legal proceedings in this jurisdiction and what is their effect?
Yes. Under Luxembourg law, the procedure to be followed in order to freeze assets of a debtor is called a “saisie-arrêt” and shall be referred to as an attachment for the purposes this briefing.
Upon service by an applicant (the applicant under the claim), the attachment will freeze all the assets of the respondent that are in the hands of a third party, usually a bank. The asset freeze will not be limited to the amount due to the applicant. At a later stage (for example, following a judgment or settlement agreement), the frozen assets may be used to make payments to the applicant for the amount owed.
2. Are other interim orders commonly made in conjunction with a freezing (or equivalent) order?
No.
3. Briefly what is the relevant legal test?
When an attachment is served on the basis of a judgment, an arbitral award or any other enforceable title (titre exécutoire), such title must impose an enforceable obligation on the respondent, and the enforceable title must comprehensively set-out the enforceable obligation.
When the attachment is served following a presidential authorization, in order to obtain such authorization the applicant must prove that the protective measure being requested relates to monies that are owed to him (créance). This receivable must meet certain conditions prescribed by law, i.e. be certain (certaine) and due (exigible), although its exact amount may not be certain until the time of the application for validity (liquide).
4. Briefly what is the process for obtaining a freezing (or equivalent) order?
If the applicant has an enforceable title or a private title, he can immediately serve an attachment, which will be validated by a Court decision at a later stage.
If he has no such title, the applicant will file an ex parte application which sets out the reasons for his claim and the basis for the claim. Such application will be filed without notice to the respondent. If it is done without notice, the applicant has a duty of full and frank disclosure (devoir de loyauté). The applicant will need to obtain an enforceable title via a judgment against the respondent, alongside with a validation of the attachment by the competent Court at a later stage.
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?
No. The applicant may however be held liable for damages caused to the respondent.
During the validation process of the attachment, the respondent may request that the applicant provides security after the freezing order is served following the Luxembourg civil procedure. However, there is only limited case law on this topic.
For completeness the Luxembourg civil code provides that no security for the payment of costs and damages resulting from a lawsuit may be required from a natural or from a legal person with domicile or in the territory of an EU Member State, a Member State of the Council of Europe or a State with which Luxembourg has signed an international treaty providing for the exemption of such security.
6. Can it be sought against third parties?
Yes, a third party to the underlying or prospective proceedings, or even a party having no link to the proceedings, may be made a party to an attachment where there is good reason to believe that its assets are in fact the assets of the respondent in the underlying litigation or will be available to the defendant to meet a judgment or arbitral award.
7. What assets are covered by a freezing (or equivalent) order?
The attachment covers all assets (monies, shares, etc) owed by the respondent or any third party to the respondent. Worldwide freezing orders do not exist per se in Luxembourg. The attachment allows the freezing of any potential receivable.
The European Account Preservation Order (“EAPO”) enables a Court in another EU country to freeze funds in a bank account of a debtor in another EU country. The procedure may be used in cross-border cases only, whereby the Court carrying out the procedure or the country of domicile of the applicant must be in a different Member State to the one in which the debtor’s account is held.
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 or following judgment to assist with enforcement of such judgment.
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. On the day when the attachment is served on the third party, all assets held by the third party and belonging to the respondent become unavailable to the respondent (even assets which exceed the value of the claim).
However, the respondent will be able to use assets acquired following the notification of the attachment.
12. What happens after a freezing (or equivalent) order is granted?
The procedure is initiated by the attachment being served upon a third party, usually a bank. Such attachment will be served by a Luxembourg bailiff (huissier de justice). As previously mentioned, the attachment will either be based:
(i) on a judgment, an arbitral award or any other enforceable title; or
(ii) if no such enforceable title is available, the attachment will have to be based on a judgment delivered by the president of the competent district Court following an application by the applicant.
Following service of the attachment on the third party, such party is prohibited from delivering to the respondent the funds and/or assets held on the day of service of the attachment. Should the third party remit the frozen assets, it may be held liable.
The second procedural step is the notification of the attachment to the respondent (dénonciation de saisie-arrêt), including the delivery of a summons of validation of the attachment (assignation en validité). Such notification will have to be delivered within eight days of the service of the attachment, since in Luxembourg the attachment is always made without notice.
The third and final procedural step will entail notifying (contre-dénonciation) the third party that the attachment and the summons of validation have been notified to the respondent. Such notification can include a request from the applicant for the disclosure of assets (assignation en déclaration affirmative) by the third party, should the attachment be based on an enforceable title.
The respondent may challenge the attachment and file a summons to obtain the cancellation of the attachment (assignation en rétractation) and/or a summons to have it limited to the amount of the applicant’s claim (assignation en cantonment) as soon as practicable after the service of the attachment on the third party.
13. Who pays the costs of the application for a freezing (or equivalent) order?
The applicant will pay the costs of the attachment proceedings. The respondent may be ordered to pay for certain costs, which is usually decided at the final hearing of the proceedings.
14. What protections are there typically in a freezing (or equivalent) order for third parties to such orders?
Following an attachment, all the monies in the bank account are frozen and may not be used or liberated by the third party. Should the monies be released, the third party may be held liable for damages for an amount equal to the applicant’s claim.
However, any settlement account with a system operator or a settlement agent, as well as any transfer via a Luxembourg or foreign credit institution to such a settlement account, may not be frozen, sequestered or blocked in any way by an applicant (other than the system operator or the settlement agent), a counterparty or a third party.
15. What are the consequences of breach of a freezing (or equivalent) order?
If the assets are frozen in the hands of a third party and the third party decides to remit the assets to the respondent, it may be held liable for the payment to the applicant of an amount equivalent to its claim.
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?
No, it is limited to Luxembourg (except for the specific EAPOs).
18. Can freezing (or equivalent) orders from overseas jurisdictions be enforced in this jurisdiction?
No.
Contact
Philippe Sylvestre Partner Brucher Thieltgen & Partners Luxembourg philippe.sylvestre@brucherlaw.lu www.brucherlaw.lu
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