Spain
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 a type of interim injunction intended to prevent the disposal of assets by the respondent party, in order to secure a potential judgment that may subsequently be granted by the Court, in favor of the applicant.
Spanish Courts are only competent for granting freezing orders of assets within the Spanish territory. Depending on EU legislation and international treaties signed by Spain, freezing order resolutions can be referred to foreign Courts for their enforcement in their respective countries. However, bank accounts within the EU may be subject to EU freezing orders granted by Spanish Courts, based on Regulation (EU) No 655/2014 of the European Parliament and of the Council of 15 May 2014 establishing a European Account Preservation Order procedure to facilitate cross-border debt recovery in civil and commercial matters.
2. Are other interim orders commonly made in conjunction with a freezing (or equivalent) order?
This varies from case to case and is dependent on whether the application for a freezing order is made in conjunction with another type of interim injunction.
Freezing orders can coexist with any other injunction provided for in Spanish Procedural law. However, most commonly, freezing orders are granted together with a freezing order annotation injunction. This provides for disclosure of the existence of the freezing order over registered assets (such as real estate assets) in the relevant public registries.
3. Briefly what is the relevant legal test?
The Spanish Civil Procedural Law provides for the granting of freezing orders as a means of reserving assets to facilitate the enforcement of a potential judgment that would require the respondent to do one of the following:
(i) pay a sum of money;
(ii) pay the returns produced by any kind of asset; or
(iii) delivering an amount of consumable goods that have a market or listing price.
For the securing of potential judgments that would impose obligations on a respondent other than the three categories listed above, freezing orders can only be granted if the applicant proves to the Court that other types of injunctions would be less affective and a greater hardship for the respondent.
Additionally, as for any other injunction in Spanish law, the following requirements also apply:
(i) periculum in mora: that there is danger in delay and the applicant may be prejudiced in enforcing a judgment or award;
(ii) fumus boni iuris (likelihood of success on the merits of the case): that in the Court’s provisional conclusion the applicant has a reasonable likelihood of success on the merits of the case; and
(iii) provision of security: that unless expressly provided otherwise, the applicant must provide financial security to cover the losses incurred by the respondent caused by the interim measure.
4. Briefly what is the process for obtaining a freezing (or equivalent) order?
The burden of proof is on the applicant to show that the interim injunction meets the necessary legal requirements outlined above (periculum in mora, fumus boni iuris and provision of security). The Court will specify the form, amount and time in which security must be provided by the applicant. The provision of security is a pre-requisite to the making of a freezing order and the requirement on the respondent to comply with the order. Generally, the applicant must provide sufficient security in a prompt and effective manner. The Court will determine the level of security required in accordance with the nature and content of the claim and its assessment of the grounds for the application.
Generally, the Court will decide whether to grant the freezing order after hearing the respondent’s arguments. However, the applicant may obtain an order on an expedited ex parte basis where the Court is satisfied that there are reasons of urgency or that holding a hearing may jeopardize the success of the interim measure. The respondent may then lodge an objection within twenty days of receiving notification of the freezing order (such objection does not suspend the freezing order).
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 applicant shall provide security for potential losses caused to the respondent’s assets, as set out above.
6. Can it be sought against third parties?
Only the applicant and the respondent are parties to the order. However, obligations may arise from the order on third parties, such as banking entities for the freezing of bank accounts belonging to the respondent. In such cases the third party is not a party to the order, only given notice thereof. Nonetheless, fines may be imposed on third parties for lack of compliance with the obligations derived from the order. For more information on breaching fines, please, see the answer to question 15 below.
Where the ownership of assets is unclear, the Secretary of the Administration of Justice (Court clerk) will decide whether the property belongs to a third party, and if so whether the third party should be put on notice of the freezing order. This starts a process by which the third party can raise objections, as appropriate.
For reference to asset stripping, please, see the answer to question 15 below.
7. What assets are covered by a freezing (or equivalent) order?
Any kind of assets located within the Spanish territory can be the object of a freezing order. The Court will determine which assets are to be subject to the freezing order first based on the greatest liquidity and the least hardship for the respondent.
However, certain assets are exempt from seizure by law (i.e. the amounts of salary that do not exceed the minimum salary set by law, non-luxurious furniture, household goods and clothes, or non-economic copyrights). For more information on the kinds of assets exempt from seizure by law, please, see the answer to question 11 below.
8. Can a freezing (or equivalent) order be made in support of substantive proceedings abroad?
In the same way that a Spanish freezing order can be enforced by foreign Courts in their respective territories, foreign freezing orders can be enforced in Spain on the terms provided for in EU legislation and international treaties signed by Spain. However, bank accounts within the Spanish territory may be subject to EU freezing orders granted by EU Member States Courts, based on Regulation (EU) No 655/2014 of the European Parliament and of the Council of 15 May 2014 establishing a European Account Preservation Order procedure to facilitate cross-border debt recovery in civil and commercial matters.
9. Can a freezing (or equivalent) order be made in support of arbitration proceedings or awards?
Yes, subject to local law requirements and/or formalities by a party to an arbitration agreement or a party to a pending arbitration process.
Spanish law provides for the possibility of any type of injunction in arbitrations, both national or international, and both held in and outside of Spain. The only requirement is that the parties had not expressly agreed to exclude this possibility.
The freezing order in the arbitration procedure can be requested by either party, both before the Arbitrator or the competent Court, although arbitrators have no power to enforce them, so Court intervention is ultimately needed in any case.
The requirements are the same stated above generally regarding freezing orders in Spain. No additional requirements apply.
10. At what stage of proceedings can a freezing (or equivalent) order be sought?
Although there is no formal deadline for applying for a freezing order, an application is generally made simultaneously with commencing the underlying lawsuit. Freezing orders may also be requested before the filing of the lawsuit if the applicant can satisfy the Court of the urgency or necessity of the matter (ex parte). An application for a freezing order may only be made after the filing of the lawsuit or pending an appeal if the application is based on facts and circumstances that justify that it should be made at that time.
11. Are there typically any exceptions to the general prohibition on the respondent’s use of assets subject to a freezing (or equivalent) order?
There is certain property that is unseizable, such as:
(i) pets;
(ii) inalienable property (such as public property, or mining resources);
(iii) rights that are ancillary to inalienable property which cannot be transmitted separately (such as easements of way over public property);
(iv) assets which do not, in themselves, have any patrimonial content (such as voting rights, or rights to personal and family privacy);
(v) assets expressly declared unseizable by any specific legal provision (such as road or rail operation permits and concessions);
(vi) furniture and household furnishings, as well as the clothes of the respondent and their family, insofar as they cannot be considered superfluous, assessed on a case by case basis;
(vii) in general, assets such as foodstuffs, fuel and others which are essential to provide the respondent and their dependents subsistence “with reasonable dignity”;
(viii) the books and instruments necessary for the exercise of the respondent’s profession, art or trade;
(ix) sacred property and property dedicated to the worship of legally registered religions;
(x) assets and amounts declared unseizable by treaties ratified by Spain;
(xi) remuneration which does not exceed do not exceed the minimum salary set by law, which is currently €1,134 per month based upon 14 payments per year (12 monthly payments plus traditional extra payments in August and December); and
(xii) salary amounts over the minimum salary to the extent permitted by special rules for their seizure.
12. What happens after a freezing (or equivalent) order is granted?
Once a freezing order is granted the Court will issue and serve the necessary documents upon the respondent and, if requested, the applicant.
Additionally, the Court will notify third parties when needed for the enforcement of the order.
13. Who pays the costs of the application for a freezing (or equivalent) order?
Freezing order procedural costs follow ordinary rules of litigation costs in Spain. Either party must bear their own expenses during the procedure. When final judgment is rendered, the Court will rule whether one of the parties is to pay the procedural costs (including lawyer’s costs, expert reports, etc) of the other and the sums thereof. Normally, the losing party is also ordered to pay the costs of the proceedings.
14. What protections are there typically in a freezing (or equivalent) order for third parties to such orders?
A third party notified of the order will benefit from the applicant’s security. There are generally no other protections, but the third party may bring a Court action if they claim to be the owner of property which is subject to the freezing order. Such Court action would be a separate action from the freezing order.
Third parties upon which obligations may be imposed by the order (for example, following notification of the order) have no other obligations than those notified to them by the Court. In the case of freezing of bank accounts, the order only comprises amounts existent in the account at the time of the order. Banking entities are only required to freeze the ordered amounts. However, banking entities must communicate to the applicant the freezing of the accounts and the frozen amount.
15. What are the consequences of breach of a freezing (or equivalent) order?
In the event of non-compliance with the freezing order, the applicant can apply to the Court for enforcement and seizure of assets. All persons and entities, whether a party to the order or a third party notified of the order, are obliged to cooperate in the enforcement proceedings and to deliver all documents and data in their possession as agreed, when requested to do so by the applicant and at the applicant’s expense.
If the respondent does not cooperate, the applicant may inform the Court so that they may decide what next steps are appropriate. Subsequently the Court, after hearing the interested parties, may impose periodic coercive fines on the uncooperative persons and entities, whether a party in the order or not, as well as order seizure of the assets. Fines may be imposed to third parties, even if they are not a party in the order, provided that an obligation is imposed on such third parties by the order (i.e. by notification).
Thus, continuous periodic fines until compliance and further orders are, in principle, the only consequences of breaching a freezing order. However, certain actions that go beyond a plain breach in the form of denial to comply, may constitute criminal offences. The attempt of the respondent to irregularly dispose of their assets to elude a freezing order may be constitutive of an asset stripping criminal offence.
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)?
Generally, no.
17. Can a freezing (or equivalent) order be enforced abroad?
Yes, but it will depend on the laws of the relevant jurisdiction where the freezing order is intended to be enforced. Please, see questions 1 and 8 for more information.
18. Can freezing (or equivalent) orders from overseas jurisdictions be enforced in this jurisdiction?
Yes. Foreign freezing orders may be recognized and enforced in Spain, subject to applicable international regulations and treaties. Please, see questions 1 and 8 for more information.
Contacts
Kiko Carrión Partner, Litigation, IP, and Life Science Department Eversheds Sutherland Madrid, Spain kcarrion@eversheds-sutherland.es www.eversheds-sutherland.com Eduardo Buitron Legal Director, Litigation and Health & Life Sciences Eversheds Sutherland Madrid, Spain ebuitron@eversheds-sutherland.es www.eversheds-sutherland.com
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