Malta
1. Are freezing orders (or their equivalent referred to below) available in civil legal proceedings in this jurisdiction and what is their effect?
Yes, Maltese law provides for various forms of precautionary acts which allow an applicant to secure its rights in pursuit of a claim. Such precautionary warrants serve as interim remedies, preventing the dissipation or disappearance of assets held by the respondent in Malta pending the outcome of proceedings. The most commonly used forms of precautionary acts include:
(i) the garnishee order, pursuant to which monies of the respondent which are held by third parties (referred to as garnishees) are deposited in Court by the garnishee/s by virtue of a Court order and preserved in the Court registry pending the final judgment; and
(ii) the warrant of prohibitory injunction, pursuant to which the respondent may be restrained from doing anything which might be prejudicial to the applicant. A warrant of prohibitory injunction may also be demanded by an applicant to secure a debt or any other claim amounting to not less than €11,647. The object of such a warrant is to restrain the respondent from selling, alienating, transferring or disposing inter vivos the relevant property.
2. Are other interim orders commonly made in conjunction with a freezing (or equivalent) order?
No. Furthermore, it is not possible for an applicant to obtain an asset disclosure order alongside a precautionary warrant. An applicant is, however, required to indicate and notify a list of garnishees, i.e. entities and/or individuals, such as banks, who would presumably hold assets in the name of the respondent. In filing a precautionary garnishee order, it is usually advisable to indicate or identify, as garnishee/s, all local banks in Malta and the name of the employer of the respondent, if known.
3. Briefly what is the relevant legal test?
The applicant must show that it has a claim against the respondent by stating the origin and nature of the debt or claim to be secured. In the case of a prohibitory injunction, the applicant must also prove, prima facie, that it possesses the right which the warrant being sought preserves and that unless the warrant is issued, the prejudice that would be caused to the applicant would be disproportionate to the acts to be restrained.
The applicant is then bound to bring its underlying claim within twenty days from the issue of the warrant. Otherwise, the effects of the warrant will cease and the applicant will be liable for all damages and interest incurred by the respondent.
4. Briefly what is the process for obtaining a freezing (or equivalent) order?
The applicant prepares an application on the relevant prescribed form. The application must contain the origin and nature of the debt or claim sought to be secured and in the case of a debt or a demand which may be satisfied by the payment of a sum of money, the amount of the demand. The application must be confirmed on oath by the applicant.
In the case of a warrant of prohibitory injunction, a hearing is scheduled and the Court may receive any evidence it may deem fit. An order will be made as soon as possible and no later than one month from the day when the warrant was filed and confirmed on oath.
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 will not be liable to a penalty or compensation if its claim is ultimately unsuccessful, although it might be ordered to pay the relevant costs of the proceedings (including the respondent’s costs).
However, if the respondent makes a successful application for the warrant to be revoked, the Court may order the applicant to pay a penalty of not less than €164.69 and not more than €6,988.12 to the respondent, in addition to damages for any losses suffered by the respondent that were caused by the issue of the warrant.
6. Can it be sought against third parties?
A warrant of prohibitory injunction may only be sought against the respondent in the underlying or prospective proceedings. However, a third party garnishee (for example, a financial institution holding the respondent’s assets) which is notified of it by way of a garnishee order is still required to ensure that it does not knowingly assist the respondent in breaching the terms of the precautionary act. A garnishee order will be served on the third party in writing by the Court.
7. What assets are covered by a freezing (or equivalent) order?
This varies depending on the type of precautionary act being filed. However, the assets generally covered include monies, movable property (including shares in commercial partnerships, insurance policies, credit securities and intellectual property rights) and immovable property. The execution of precautionary warrants is limited to assets held by the respondent in Malta.
8. Can a freezing (or equivalent) order be made in support of substantive proceedings abroad?
No, precautionary warrants filed in Malta must be followed up by substantive proceedings in the Courts and tribunals in Malta.
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.
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 relevant legislation lists property which may not be subject to attachment on the issuing of a garnishee order. This includes the first €698.81 of the respondent’s monthly salary. The respondent may also apply to the Court for a counter-warrant on one of several grounds, including (i) that the amount claimed is not prima facie justified or excessive and (ii) that it would be unreasonable to maintain the precautionary act, or that the precautionary act is no longer necessary or justifiable.
12. What happens after a freezing (or equivalent) order is granted?
The applicant will typically notify third parties (such as banks) of the precautionary warrant in order to preserve and deposit the respondent’s assets in Court. When the warrant being sought is a warrant of prohibitory injunction, the application for the warrant is appointed for hearing in the manner detailed in question 4 above.
13. Who pays the costs of the application for a freezing (or equivalent) order?
Either the applicant or the respondent may be ordered to pay for the costs of obtaining the precautionary warrant, which is usually decided at the final determination of the underlying litigation.
14. What protections are there typically in a freezing (or equivalent) order for third parties to such orders?
(i) If the respondent is an employer, the order may not be attached upon any salary or wage (including bonus, allowances, overtime, and other emoluments) of the employees of the respondent.
(ii) A precautionary warrant only affects third parties outside of the jurisdiction in certain circumstances.
(iii) As regards assets outside of the jurisdiction, a precautionary warrant 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?
A party (whether it is a party to the proceedings or a third party) found to be in breach of a precautionary warrant may be found to be in contempt of Court and shall on conviction be liable to imprisonment for a term up to one month, or to a fine of not less than €232.94 but not more €2,329.37, or to both. There is no definition at law on the mental element required to prove that an individual has acted in contempt of Court, however, local jurisprudence establishes that:
(a) knowledge of the existence of the precautionary warrant; and
(b) an intention to disobey the Court order is required in proving contempt of Court.
If a garnishee breaches a garnishee order, the Court may, on application by the applicant, issue such orders as may be required. This may include an order for the garnishee’s personal arrest for up to three months, in order to force them to lodge the relevant property with the 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)?
Yes, in the case of garnishee orders. A garnishee must deposit the relevant property of the respondent in Court, in accordance with the order. If the garnishee does not comply with the Court order it will be liable to the applicant for resulting damages and interest.
17. Can a freezing (or equivalent) order be enforced abroad?
The precautionary warrant obtained in Malta may not be directly enforced overseas. Depending on the relevant jurisdiction, a definitive judgment obtained in pursuit of a claim must be recognized and enforced abroad, pursuant to which, depending on the laws of the relevant jurisdiction, a person may enforce and execute their claim/s in accordance with the judgment.
18. Can freezing (or equivalent) orders from overseas jurisdictions be enforced in this jurisdiction?
Precautionary warrants obtained overseas may not be directly enforced in Malta. The applicant must first obtain recognition of a judgment (unless it is given by a competent Court in the EU) and enforce it in Malta, pursuant to which it may request and file the relevant executive warrants in Malta.
Contact
Maria Margo Zammit Fiorentino Associate Guido de Marco Advocates Valletta, Malta mzfiorentino@demarcoadvocates.com www.demarcoadvocates.com
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