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Fighting fraud: obtaining searching, freezing & tracing orders
A comparative Guide
2003
Canada
Czech Republic
Denmark
England & Wales
France
Germany
Hungary
Italy
The Netherlands
Poland
Romania
Russia
Scotland
Spain
Switzerland
United States
Fighting Fraud: obtaining searching, freezing & tracing orders
2003
2
Canada (Ontario)Power Budd LLP
Salima [email protected]
Czech-RepublicCMS Cameron McKenna
Jaroslav [email protected]
DenmarkDania Advokater
Jacob Strandgaard [email protected]
England & WalesCMS Cameron McKenna
Duncan [email protected]
FranceCMS Bureau Frances Lefebvre
Didier [email protected]
Germany CMS Hasche Sigle
Dr Claus-Peter Fabian [email protected]
HungaryOrmai és Társai CMS Cameron McKenna
dr. Tamás [email protected]
Italy CMS Adonnino Ascoli & Cavasola Scamoni
Laura Opilio [email protected]
The NetherlandsCMS Derks Starr Busmann
Leonard [email protected]
PolandCMS Cameron McKenna
Michal [email protected]
RomaniaCMS Cameron McKenna
Adelina Elena Marin [email protected]
Russia CMS Cameron McKenna
Sergei Yuriev [email protected]
ScotlandCMS Cameron McKenna
Valerie [email protected]
SpainCMS Bureau Frances Lefebvre
Esther Adroher [email protected]
Switzerland CMS von Erlach Klainguti Stettler Wille
Fabienne [email protected]
United States (New York)Thacher Proffitt & Wood
John Doherty [email protected]
For more information
If you would like further information on the rules applicable in each jurisdiction,
please do not hesitate to contact:
Disclaimer: This commentary is not a full review of the topic it covers and does not purport to give legal advice. If you would like to receivespecific legal advice, please contact your usual CMS contact.
All liability for damages arising from the information provided is explicitly excluded.
Fraud, in all its many forms, knows no
national boundaries. The revolution in
information technology has enabled
fraudsters to move funds quickly and
easily between accounts across the world.
The victims of fraud range from banks and
other financial institutions, to small
companies and individuals.
The essential weapons of those acting
for the victims of fraud, seeking to recover
funds, are the powers of the civil courts to
grant search orders to assist in tracing of
missing funds; and when they have been
located, to make freezing orders to prevent
removal of the funds. Those acting to
recover funds increasingly need to take
action in many different jurisdictions,
often simultaneously.
This Guide aims to assist the victims of
fraud and those acting for them by providing
a comparison of the powers of the civil
courts across various jurisdictions in Europe
and North America, to grant search and
freezing orders.
We hope you find the Guide informative
and useful.
Tony Marks
CMS Cameron McKenna
April 2003
Fighting Fraud: obtaining searching, freezing & tracing orders2003
3
Introduction
Canada (Ontario)
Czech Republic
Denmark
England & Wales
France
Germany
Hungary
Italy
The Netherlands
Poland
Romania
Russia
Scotland
Spain
Switzerland
United States (New York)
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20
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24
25
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Fighting Fraud: obtaining searching, freezing & tracing orders
2003
Fighting fraud: A comparative Guide to powers in different jurisdictions to obtain searching, freezing and tracing orders
Country / jurisdiction
4
The summary below reflects the position
in relation to Ontario law only as each
Canadian province has its own procedure
and laws.
Freezing orders• Available in both criminal and civil
proceedings (called a “Mareva
injunction” in civil proceedings).
• Usually sought on an urgent,
without notice, basis to ensure
element of surprise and can be
obtained before proceedings are
issued (as well as during or after).
• A claimant must show:
- a strong prima facie case (i.e.
more than a “good arguable case”
as under English law);
- grounds for the claimant’s belief
that the defendant has assets
within the jurisdiction of the court;
- persuasive evidence that the
defendant will remove or dispose
of assets if the order is not granted.
• A claimant must provide an undertaking
to be liable in damages to the defendant
in case the injunction turns out to have
been unjustified and the defendant
suffers damages as a result.
• A defendant is permitted to deal with
his assets in the ordinary course of his
business or living.
• A claimant does not acquire any title
or proprietary interest in the frozen
assets or any advantage or priority
over other creditors.
• An injunction can freeze any asset to
which the defendant has title, provided
the assets are within the jurisdiction
of the court and can be the subject
of execution.
• The court will sometimes order the
defendant to list his assets and their
location in an affidavit.
• A claimant may be ordered to bear
any expenses incurred by a third party
(for example a bank) in complying
with the order.
Search orders• Available in civil proceedings and
usually obtained without notice
and in secret prior to the
commencement of the action to
ensure the element of surprise.
• The order must include the
claimant’s undertaking in damages
as with freezing orders.
• Authorised persons (typically the
claimant and/or a limited number
of his employees or agents, his
solicitor and an independent third
party e.g. an accountant) are
permitted to inspect and search
the defendant’s premises.
• If the defendant fails to comply
with the order the claimant has no
right to force entry; his remedy is
to pursue contempt proceedings.
• To obtain such an order the claimant
must show that very serious harm,
actual or potential, will be suffered
if the order is not granted (can include
damage to the claimant’s case due
to the disappearance of evidence).
• Search orders are also available in
criminal proceedings.
Tracing orders• The Fraudulent Conveyances Act
assists a creditor in recovering
property where the debtor has
Fighting Fraud: obtaining searching, freezing & tracing orders2003
Canada(Ontario)
5
conveyed or transferred it to others
with the intent to defeat, delay or
defraud the rights of creditors.
• The Act permits the creditor to set
aside the transfer to the third party so
that it is returned to the debtor/
transferor and is then available for
seizure by creditors. Any transfer of
property made with the intent to
defeat, hinder, delay or defraud creditors
is void, notwithstanding if the transfer
was made for valuable consideration,
unless the transferee acquired the
property bona fide without notice. The
claimant must show an intent to defeat,
hinder, delay or defraud creditors by
both the debtor and the transferee. In
certain circumstances this is subject to
certain presumptions.
• Only applies to property against which
a judgment could be executed.
• To succeed a claimant must in practice
show that the property was transferred
for little or no consideration compared
to its market value at the time of
the transfer.
• No requirement to show the debtor’s
insolvency at the time of the transfer
and the claim is not subject to any
limitation period.
• A claimant is not able to claim relief
against the proceeds of any transferred
property under the Act (certain rights
are available under the Assignment
and Preferences Act).
General• The Absconding Debtors Act
(Ontario) provides that where a
resident of Ontario leaves the province
with the intention of defrauding his
creditors or to avoid being arrested
or served with process and the
debtor has property against which a
judgment could be executed within
Ontario he shall be deemed to be
an absconding debtor, in which case
his property within the jurisdiction
may be seized in order to satisfy the
debts. This relief is only available in
pending proceedings.
Fighting Fraud: obtaining searching, freezing & tracing orders
2003
6
Freezing orders• Available in civil proceedings in the form
of an “interlocutory order” pursuant to
the Act on Civil Proceedings.
• Granted by the court if it is considered
necessary to regulate the parties’
relationship or if there is concern that
the execution of a future court decision
might be in jeopardy.
• May be served on a person who is
not a party to the proceedings (e.g.
on a bank holding the account of
a defendant).
• The order may be issued before as
well as during proceedings.
• An order can generally only be issued on
the basis of a motion. The court must
decide whether or not to pursue the
motion without unnecessary delay, and
in any case no later than seven days
from the filing of the motion. If the
motion is filed before the start of the
main proceedings, the court will ask the
claimant to file with the court the
petition to start the main proceedings
within a certain period, failing which the
order will become void.
• The claimant will be liable for any
damage caused by an interlocutory
order becoming void (an interlocutory
order becomes void if the petition
regarding the main proceedings is
dismissed, the time limit for which it
was issued has passed, or the reasons
for which it was issued no longer apply).
• Available in criminal proceedings if the
circumstances of a particular case
indicate that the money has been used
for, or gained by, criminal activity. Can
be issued by the court or by the policewith the consent of the prosecutor or
by the prosecutor himself. The order
must be delivered to the bank holding
the account, and once the bank has
blocked the account the decision must
also be delivered to the account holder.
• Also available against the account of
a third party not accused of committing
the crime.
Search orders• Only available for criminal proceedings.
• The Czech constitution states that this
can be done only with a written decision
of a judge and that such decision must
be justified (i.e. if there is a reasonable
suspicion that there is on the premises
any thing, person or material for the
purposes of criminal activity). The
conditions under which a search of
other premises may be ordered are not
as strictly stipulated as those for the
search of residential premises.
Tracing orders• Available as an interlocutory order in
civil and criminal proceedings (known
as “adhesion proceedings”).
• Generally, if information on the asset is
kept at an official registry, such as the
Land Registry, Securities Centre, or
Registry of Motor Vehicles, the asset
can be traced.
• A claim can be brought against a
defendant or against a third party
who now has ownership of the asset.
The third party would then be entitled
to claim damages against the person
who fraudulently sold it the asset. If
the victim is no longer the owner of
the asset, he may only claim
damages against the person who
Fighting Fraud: obtaining searching, freezing & tracing orders2003
Czech Republic
7
committed the fraud and against
other transferors of the asset who
were not bona fide.
• If the proceeds from the sale of an
asset are in the form of money in a
bank account, banks are obliged to
provide information to the court, on
request, for the purposes of the
civil proceedings.
• Criminal proceedings can only be
brought against the defendant and not
against any third party in possession of
the asset. If the decision requires
additional evidence, the court will not
make a decision regarding the adhesion
proceedings and will require the victim
to bring civil proceedings.
Evidence• Evidence may be secured by way of
court proceedings if there is concern
that such evidence might not be
available later, or only obtainable with
great difficulty.
• Once the investigation of a crime
has been commenced and if the
investigation is successful, the victim
of fraud is entitled to inspect and take
copies of the documents held in the
prosecutor’s files Such documents can
also be used as evidence in civil claims.
• In general, it is not possible to obtain
disclosure of any documents before
the proceedings begin.
• After the civil proceedings begin the
parties are obliged to refer to all
evidence that supports their arguments.
This means there is no limitation on
the evidence that can be referred to
the court (including the evidence
examined in the criminal proceedings).
The court itself determines what
evidence will be examined.
• Attorneys are liable to maintain the
confidentiality of all facts learned in
relation to the provision of legal services.
This duty can be lifted only by the
client or following the demise of the
client or expiration of the legal entity's
legal representation. The duty of
confidentiality does not affect the
legal obligation to prevent a criminal
offence being committed as stated in
the Act on Criminal Proceedings.
• Other providers of financial and
professional services (bankers, auditors,
accountants etc.) are liable to maintain
the confidentiality of all facts learned
in relation to the provision of their
services. This duty may be overridden
only under special circumstances e.g. as
a result of a court order (or prosecuting
authority in criminal proceedings) or as a
result of their legal duty to do so e.g.
reporting to a supervisory authority or
to a superior body.
• In criminal proceedings it is not possible
to use evidence that has been obtained
illegally. Any actions of the prosecutor
or police have to be in accordance with
the criminal procedure legal provisions.
In civil proceedings, the parties are
entitled to refer to all evidence that
supports their case, irrespective of how
it has been obtained. The court itself
determines which of the proposed
items of evidence will be examined.
Fighting Fraud: obtaining searching, freezing & tracing orders
2003
8
Freezing orders• Available in both civil and
criminal proceedings.
• In civil proceedings, this can take the
form of an “attachment” to funds or
assets until a creditor has obtained a
judgment confirming his claim for
money on a debtor or while proceedings
for such are pending.
• In order to obtain an attachment,
the claimant must substantiate his
claim and demonstrate that his
chances of recovering the debt will
diminish significantly if the attachment
is not granted.
• The bailiff can require the claimant to
provide security for possible damages
to the defendant, and will often do
so. Attachment is a preliminary action,
subject to subsequent confirmatory
action before a high court.
• Alternatively, assets can be frozen by a
restraining injunction, and the defendant
can be ordered not to pursue certain
actions, e.g. to dispose of or remove
assets. If necessary the court can take
the asset into custody, and may receive
assistance from the police to do so.
• To obtain a restraining injunction,
the claimant must demonstrate that
the defendant’s use or intended use
of the assets is contrary to the
claimant’s rights.
• An injunction will not be granted if
subsequent criminal punishment or
civil compensation can satisfy the
claimant’s loss sufficiently, or if such an
injunction would be disproportionate
to the claimant’s potential loss.
• The bailiff can require the claimant to
provide security for possible damages to
the defendant. An injunction is also a
preliminary action, subject to subsequent
confirmatory action before a high court.
• In criminal proceedings, a freezing
order prevents the defendant (or a
third party) from disposing of his assets
or funds involved in or suspected of
being involved in a crime.
• Such orders are commonly used by the
police during their investigations or
during proceedings and must be put
before a judge for validation. If a court
order cannot be awaited without risk or
jeopardizing the purpose, a preliminary
freezing action may be executed by
the police but will be subject to
confirmation by a court order to be
requested within 24 hours.
• The purpose of a freezing order in
criminal proceedings must be to secure
evidence, assets expected to be subject
to confiscation, or assets subject to
recovery by the rightful owner. Such
orders may also be used to remove
things suitable for committing violence
or to prevent absconding (by freezing
a passport and similar personal
documentation) or as security for
court costs and damages payable.
Search orders• Available in both civil and
criminal proceedings
• In civil proceedings, the search of a
person's home or business location is
very restricted and can only be ordered
at the discretion of a bailiff if a debtor
or defendant has been summoned to a
court hearing and has failed to attend.
• The bailiff carries out the search, and
can only search for funds or assets
Fighting Fraud: obtaining searching, freezing & tracing orders2003
Denmark
9
with the purpose of levying execution.
Searching paperwork, documents, etc
is not allowed.
• In bankruptcy cases the trustee in
bankruptcy is granted access to the
debtor’s home and business, and can
as such search the debtor’s documents,
financial records, etc. If necessary the
trustee may apply to a judge in the
bankruptcy court for assistance to carry
out a search.
• In criminal investigations, only the
police can carry out a search (or
seizure). It requires a court order,
unless awaiting the court order
jeopardizes the purpose of the search.
The police must substantiate to the
court that the defendant is the suspect
of a crime punishable by prison
sentence, unless the search is outside
his home (e.g. open garages, unlocked
cars, gardens).
Tracing orders• Available in both civil and
criminal proceedings.
• In civil proceedings the right to trace
assets is relatively limited and only
available on the request of a claimant
if the claimant can prove or substantiate
his claim. If the claim is disputed, and
the dispute has merits, the bailiff can
refer the settlement of the claim to
the regular courts.
• As part of criminal investigation a
judge can order assets to be seized
or frozen by police during the
investigation or trial. The rightful
owner can then, via the police/
prosecution, make a claim to have
the assets returned to him.
Evidence• In criminal cases the court can order
people (other than the defendant
or charged person) to disclose
documents or other evidence and
to testify under oath.
• In civil proceedings each party
supplies his own evidence, although
parties usually disclose information
requested by the counterparts, as they
otherwise risk a prejudicial effect on
their case.
• In exceptional cases a judge can issue
an order of discovery.
• A debtor appearing before the judge
or deputy judge can be ordered to
reveal his financial situation and his
assets and their whereabouts.
• In bankruptcy cases the receiver may
summon anyone with knowledge of
the debtor’s financial situation before
the bankruptcy court to give evidence
as a witness. Lying or withholding
of information can be prosecuted
as perjury.
General• Correspondence and other information
between a lawyer and his client
are confidential.
• In criminal investigations, this can only
be overcome when the police become
aware that a lawyer has committed
indictable crimes or where a lawyer
has a suspicion of money laundering.
• Banks have a duty of confidentiality
concerning information on their clients.
Board members, local board members,
members of bank councils, CEO’s or
other employees may not disclose or
otherwise exploit any confidential
Fighting Fraud: obtaining searching, freezing & tracing orders
2003
10
information, which they have access
to as a result of their position.
• If a bank suspects that a transaction
has a connection to money laundering
it has an obligation to inspect it and,
if suspicious, to delay the transaction
until the police are informed or to
inform the police as soon as possible
after the transaction is complete.
• Land and real estate ownership
information is accessible to the public,
and information on ownership,
mortgages, easements and
encumbrances is available in writing
or by telephone from local courts, or
electronically via the Internet.
Mortgages on movables and cars can
be voluntarily registered in two separate
court administered registries, which
also have public access.
• Danish and foreign companies in
Denmark have to be registered in the
Danish Commerce and Companies
Agency. The agency keeps publicly
accessible registers of public and
private limited companies, commercial
foundations, European Economic
Interest Groupings, financial institutions
(banks and insurance companies),
co-operative societies, partnerships,
commercial associations and a number
of other enterprises with limited liability.
Ownership information of a company
is not accessible in the registry.
However, ownership of more than 5%
of the share capital must be disclosed
in the annual accounts of a company
with limited liability if it is an
“A/S” company.
Fighting Fraud: obtaining searching, freezing & tracing orders2003
11
Freezing orders• Freezing orders or injunctions
(formerly known as “Mareva Orders”)
are a means by which a party to
proceedings or intended proceedings
can be restrained from removing
assets from the jurisdiction of the
Court or restrained from dealing with
assets wherever located.
• Available in civil proceedings at any
time, although usually obtained before
proceedings are issued. Typically, draft
pleadings will need to be produced to
the Court to demonstrate a real
intention to commence a claim.
• Usually made without notice to the
defendant to ensure element of
surprise. In that case, the claimant
is subject to a duty to make full and
frank disclosure of all relevant matters
to the Court. If such disclosure is not
made the order can be overturned
regardless of the merits of the claimant’s
case or entitlement to the order.
• A claimant must give an undertaking
to the Court to pay any damages
which the defendant (or any other
party served with or notified of the
order) sustains if it turns out that the
order should not have been granted.
If the claimant has insufficient assets
within the jurisdiction to support the
undertaking he will be required to
provide appropriate security.
• A claimant must show a good arguable
case and a risk that the defendant will
dispose of assets or remove assets
from the jurisdiction so as to make it
likely that any judgment against the
defendant could not be satisfied in
the absence of a freezing order.
• Order cannot be used oppressively, for
example to cause the defendant to
cease trading. Defendant usually
allowed to continue using assets, for
example, to pay employees and trade
creditors and to discharge reasonable
living expenses and/or legal fees.
• Can freeze assets legally and
beneficially owned by the defendant,
including those located outside the
jurisdiction and in support of foreign
proceedings, but usually limited to the
amount of the claim so that the
defendant is free to deal with assets
above that sum.
• A defendant and any third parties who
fail to comply with the order are in
contempt of Court and liable to a fine
and/or imprisonment. Third parties
who knowingly assist in a breach of
the order are guilty of contempt (for
example if a bank pays money out of
the defendant’s bank account). A
freezing order does not, however, bind
third parties outside the jurisdiction (for
example a foreign branch of a bank
with a presence in England).
• Order usually contains a provision
requiring the defendant to disclose
information about his assets or about
the alleged fraud, but cannot be used
as a “fishing expedition”.
• In criminal proceedings, a restraint
order can be obtained which has the
effect of freezing assets suspected of
being funded by the proceeds of
crime. The order may be granted by
the High Court after application by
the prosecuting authority e.g. Crown
Prosecution Service, the Serious Fraud
Office or Customs & Excise.
Fighting Fraud: obtaining searching, freezing & tracing orders
2003
England & Wales
12
Search orders• A search order can be obtained
against a party to proceedings or
intended proceedings in order to
preserve evidence which is or may be
relevant or for the purpose of
preserving property which may be the
subject of proceedings.
• Formerly known as “Anton Piller” orders.
• In civil proceedings search orders
are available by application to the
Court (usually without notice to
the defendant).
• A claimant must show real grounds
for suspecting that the defendant is
destroying or will destroy documents
or would not comply with an order
for disclosure.
• A search order must be supervised by
a Supervising Solicitor who must be
experienced in the operation of search
orders and who is independent of
the claimant.
• The Supervising Solicitor’s obligations
include, amongst other things, listing all
material removed from the defendant’s
premises and explaining the terms and
effect of the order to the defendant.
• As a matter of principle the Court in
England and Wales may order a search
of premises located overseas, but in
practice it is unlikely to do so.
• Extremely effective tool in determining
the whereabouts of assets and proceeds
of the fraud.
• Search orders can also be obtained in
criminal proceedings, either from the
County Court (e.g. under tax legislation)
or from the Magistrates’ Court
(search warrants). Evidence obtainedfrom a search in criminal proceedings
cannot be used directly in civil
proceedings but transcripts of the
evidence used in court in the criminal
proceedings are permitted.
Tracing orders• It is possible to make a claim for the
return of fraudulently obtained assets
on the basis that the claimant has a
“proprietary claim” to such assets;
this can include the proceeds of assets
obtained by fraud. The prospects of
succeeding on such an application are
based upon the claimant’s interest in
the property or proceeds.
• A claimant can pursue both personal
claims against the fraudster and
proprietary claims against the fraudster
and others, at the same time.
• Tracing claims can be more effective
than personal claims as they can prevent
the defendant from dealing with the
claimant’s money so that the defendant
cannot use it until the entitlement to the
funds has been established even, for
example, to pay his reasonable expenses.
• A defendant is also obliged to inform
the claimant what has happened to all
the claimant’s money that has passed
through his hands i.e. not limited to
the defendant’s current assets.
• Tracing rules are flexible – basic
principle is “just and convenient”.
• A defence to a tracing claim exists if
the defendant received assets bona
fide without notice, so that he takes
free of the claimant’s claims.
General• “Tipping off” i.e. alerting the alleged
fraudster to the fact that he is being
investigated by the authorities, is an
offence. Banks can now apply in
private for an interim declaration.
• Other options to protect assets
include applying for the appointment
of a receiver, for example where an
asset needs managing and cannot
simply be frozen, or, where the claim
cannot be disputed, applying for the
appointment of a provisional liquidator.
Fighting Fraud: obtaining searching, freezing & tracing orders2003
13
Freezing orders• Available in both civil and
criminal proceedings.
• In civil matters, an order to freeze
funds is typically used as a means of
enforcement, and is commonly called
a garnishment or attachment. A
garnishment may be a protective
measure, in which case it is merely
aimed at making the asset unavailable.
• Beyond this limited purpose, a
garnishment can be used as the first
step in a procedure leading to a form
of compulsory surrender of the asset
garnished. Generally speaking,
garnishment procedures are instituted
by creditors in whose interest it is
to make the their debtors' assets
unavailable or to liquidate them.
• In criminal matters, a decision to
freeze funds stems from a request by
a judge and not that of a creditor.
• In both cases, a bank account may
be garnished.
• In criminal matters, the purpose is to
freeze the disputed assets, thereby
permitting a stabilization of the situation
during the ongoing proceedings.
• In the instance of garnishment for
security, a creditor must possess
proof of a claim, which may not
be enforceable, and obtain the
court's permission to carry out
the garnishment.
• In both cases, a creditor always
institutes the procedure: the creditor
therefore controls the timetable.
• Two bodies of rules apply to
attachments, depending on whether
personality or real property is
being seized.
• In criminal matters, the attachment
procedure takes place in the context
of the wider criminal proceedings. It is
therefore up to the judge to decide,
for example, to affix seals to assets or
to freeze a bank account, depending
on what he feels is in the best interests
of his investigation.
• Whether the attachment falls into a
civil or criminal procedure, its effect is to
make the assets attached unavailable to
the defendant, (but sometimes only
temporarily).
• Some assets, such as remuneration,
cannot be attached as they are too
closely tied in with the debtor's
personal survival.
• In civil matters, the attachment itself
grants no proprietary rights to the
creditor to the things attached.
• In principle, enforcement procedures rely
on the judge's power of distraint, which
is necessarily limited to national territory.
Thus, the jurisdiction of the French judge
is exhausted in the event that assets
located abroad are to be attached,
and the ruling enforced.
Search orders• Usually only available in
criminal proceedings.
• The search can take place at any stage
of an investigation, depending on the
requirement of the investigating judge.
• In civil matters, if documents are
located during the course of the
garnishment procedure, they may
be placed before the court. The civil
and criminal procedures often merge.
Fighting Fraud: obtaining searching, freezing & tracing orders
2003
France
14
Tracing orders• An owner can file a claim against
the holder or current occupant of
a material asset.
• In matters involving personality, a
claim for ownership of personality
seized may be prevented if the current
possessor has acquired it under lawful
conditions (i.e. in good faith).
• The above point is an exception to the
usual rule that the owner must always
be entitled to recover possession of
his assets if he has been deprived of
them unjustly.
• If the person who has embezzled
funds has utilized them to acquire an
asset, it is possible to bring an action
for recovery of this asset, in particular
using the procedure of forced sale.
• If the embezzled funds have been
used to purchase an asset that is in
the hands of a third party, there is no
possibility per se of filing action
against the owner on the basis of the
embezzlement. The plaintiff can at
best attempt to prove, through the
process of Paulienne action (in which
a creditor can have declared void
certain transactions by a debtor which
are prejudicial to his interests) that
the asset has been placed in the
custody of the third party only for the
purpose of violating the rights of the
creditors of the perpetrator of the
embezzlement, thereby permitting the
attachment thereof.
• The result is that generally, the
claimant claims funds because he has
been the victim of embezzlement,
however it hardly matters whether
these funds are his – which would
imply that they can be identified, for
example because they have been
deposited on a separate account -, or
are from any other origin.
General• Banks are prohibited from providing
direct replies to individuals questioning
them concerning a debtor’s assets.
Fighting Fraud: obtaining searching, freezing & tracing orders2003
15
Germany
Freezing orders• Available in civil and
criminal proceedings.
• In civil cases can only be used for
money claims – not proprietary or
repossession claims.
• Can usually be obtained without
hearing the proposed defendant if the
purpose of the order would otherwise
be placed at risk or undermined.
• Can be obtained before and after
proceedings have been commenced
(until judgment obtained).
• Can include all assets legally owned
by the defendant - tangible, intangible,
moveable, land and assets
located abroad.
• Entitles the claimant to have all assets
of which he is aware attached by a
further court order (for example a
garnishee order in the case of debts
owed to the defendant, a charge in
the case of land or by seizure in the
case of moveables). The consequence
of seizure is that the creditor has
preferential rights in relation to
those assets.
• The attachment does not entitle the
claimant to realise the value of the
respective assets by way of sale.
Realisation requires a judgment in the
claimant’s favour following a full trial.
• A claimant must show:
- the existence of a claim; and
- the enforcement of a judgment is
being endangered. This would be
the case if, for example, the
judgment needs to be enforced
outside one of the signatory states
of the Brussels or Lugano Conventions
or if the defendant has transferred or
is about to transfer or sell assets
without consideration.
• Disclosure not generally ordered as
part of freezing order.
Preliminary injunction• Used to secure claims other than
payment claims such as:
- contractual claims for repossession;
- proprietary claims; and
- claims for removal or retrieval
of assets.
• Can be obtained without hearing
the proposed defendant where
circumstances require immediate action.
• A claimant must show:
- existence of a claim; and
- that enforcement of claim, if it
succeeds at trial, is being endangered.
• Relief available is wide and includes:
- a restrictive or preventative order
(Unterlassungsverfuegung); and/or
- the appointment of a receiver over
certain assets (sequestration);
and/or
- specific performance
(Regelungsverfuegung).
Search orders• In civil proceedings, search orders can
only be obtained for the purpose of
enforcing or executing a judgment, an
attachment order or a preliminary
injunction. They are therefore only
obtainable once the claimant has
obtained a provisional or final legal
decision on the claim from the court.
• A court order is required if the place
to be searched is the place of
residence or the business premises of
the defendant although this can be
Fighting Fraud: obtaining searching, freezing & tracing orders
2003
16
waived in extremely urgent cases. Thedefendant is given an opportunity to
be heard before the search order is
made unless the purpose of the search
would be placed at risk, in which case
the order will be made without hearing
the defendant.
• The search is undertaken by the bailiff
and either the defendant, a member of
his family, a local government officer, a
police officer or two adults must be
present as witnesses while the bailiff
carries out the search. In extremely urgent
cases the bailiff can undertake the search
immediately without a court order.
• In criminal proceedings, a search
order must specify the criminal act
which was the reason for the search
and the purpose and extent of the
search. Such a search must be carried
out within six months of the order
and is carried out by the police. The
Judge, the Public Prosecutor, a local
government official or two members
of the relevant local authority must be
present. If the defendant objects to
any documents being inspected, only
the Public Prosecutor or the Judge
may carry out an inspection of such
documents. (In civil proceedings there
is no corresponding provision. The
bailiff may carry out an inspection of
such documents).
Tracing orders• Can claim against property in the
hands of a party not directly involved
in the fraud, by way of an arrest order
or by way of an interim injunction.
• In criminal proceedings it is also
possible to obtain a security order
over the relevant asset or assets
purchased with the proceeds.
General• The Public Prosecutor may invoke a
criminal investigation and if the
investigation is successful, the victim
of fraud is entitled to inspect and
take copies of the Public Prosecutor’s
files and use such evidence to pursue
civil claims.
• In criminal proceedings a freezing
order may transfer ownership of
assets to the state, but the rights of
the victim of the fraudster take priority
against those of Public Prosecutor (but
not against other creditors) regardless
of when the orders were obtained.
Fighting Fraud: obtaining searching, freezing & tracing orders2003
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Freezing orders• Although available in both criminal and
civil cases, in practice the Hungarian
courts are very reluctant to grant freezing
orders in relation to civil law proceedings.
• Freezing orders therefore currently
tend to be used either in criminal
investigations or as a tool to assist
in the future enforcement of an
outstanding debt or monetary claim.
In the latter case, assets are typically
frozen by the court with the court
enforcement officer subsequently
enforcing against the frozen assets.
• There are currently very limited
examples of cases where a court has
issued a freezing order in connection
with a civil law matter, in order to
"protect" the position of a claimant in
such proceedings. However, in certain
circumstances, it might be possible to
achieve this.
• In relation to civil law matters, a
freezing order can be issued if the
court determines that the enforcement
of a future court decision might be in
danger, i.e. the losing party would
dispose of assets and has no other
assets which would cover the claim.
• In order to obtain a freezing order, the
applicants must:
- have filed their statement of claim
with the relevant court or
arbitral tribunal;
- demonstrate that their chances of
successfully enforcing the future
court decision will diminish
significantly; and
- substantiate (by public documents
or by private documents with full
probative force) that they do have
an existing claim, that such claim is
for a quantifiable amount and that
the claim has fallen due.
• A freezing order can be made in
respect of all or over specified assets
owned by the respondent party.
• Once a freezing order has been made,
the affected party is permitted to use
their assets in the ordinary course of
business or living. However the
alienation/disposal of, or the creation
of any kind of encumbrance over, the
frozen assets is prohibited.
• A freezing order in respect a bank
account will normally specify a threshold
above which no money can be removed
from the account.
• In order to issue a freezing order, the
applicant must submit a motion to the
court. The court must decide within
eight days of receipt of the motion and
may issue the freezing order without
having first notified or having heard
from the affected party. Once the
freezing order has been issued, it is
always served on the affected party
and the affected party may appeal. In
any event, once a freezing order has
been issued it is effective and must be
followed without delay and regardless
of the initiation of an appeal.
Search orders• Available in criminal proceedings and in
court enforcement proceedings.
• Depending on what stage the
proceedings have reached, the police,
the public prosecutor or the judge
may issue a search order.
• In court enforcement proceedings, the
court enforcement officer may inspect
Fighting Fraud: obtaining searching, freezing & tracing orders
2003
Hungary
18
and search the judgment debtor's
residence and other premises, any
property and assets and documents on
his business activities. Frisking however is
not allowed in the course of execution.
Tracing orders• The court enforcement officer may
seize assets subject to a freezing
order, but where such assets are held
by a third party, the court enforcement
officer can only seize such assets if
there is no dispute that such assets
are owned by the party subject to the
freezing order.
• If a third party does dispute that
the relevant assets are owned by a
party affected by a freezing order,
the applicant may initiate a special
proceeding, requesting the court to
oblige such third party to accept
and co-operate with the seizure
of/enforcement over the relevant assets.
• The applicant may also initiate
proceedings if a third party holds/
owns the asset in bad faith or obtained
such assets by way of fraud.
• In criminal proceedings, the assets that
constitute evidence or are subject to
seizure or confiscation pursuant to the
provisions of the Hungarian Criminal
Code, may be traced from anybody
regardless of whether or not such third
party holds/owns such assets in good faith.
Evidence• In criminal cases, the judge may order
third parties to disclose documents or
other evidence.
• In civil cases, a judge can only order
that a court, other authority, public
notary or other organisation, disclose
documents or other evidence, if the
applicant is not entitled to request
such disclosure directly from such
persons/bodies.
Fighting Fraud: obtaining searching, freezing & tracing orders2003
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Freezing orders• Available in both civil and criminal
proceedings at any time.
• In certain cases, the order can be
made in the absence of the defendant
particularly if the claimant is able to
produce evidence to show that if the
defendant is given notice the
effectiveness of the freezing order
might be prejudiced. In those cases a
further hearing will be scheduled at
which the defendant has the right to
be present.
• To obtain a freezing order the
claimant must produce:
- evidence of a risk that the defendant
will not be able to meet the losses
suffered by the claimant;
- evidence in a summary proceeding
of his right (“fumus boni iuris”);
- evidence to show that, if the order
is not granted, the claimant will
suffer loss from the delay (“periculum
in mora”); and
- evidence that the defendant
has assets to which the freezing
order can attach (NB the burden
of identifying assets lies on
the claimant).
• Once granted, the defendant must be
notified of the freezing order, where-
upon a Public Officer determines
which assets have been frozen and
nominates a custodian. The order only
extends to assets identified by the
Public Officer and binds third parties
who are holding the defendant’s
assets (for example banks where the
defendant has an account).
• The claimant usually applies for a
general freezing order to enable the
Public Officer to freeze any subsequently
identified assets (up to a certain value),
subject to the judge’s authorisation.
Alternatively, the freezing order is made
specific to a single asset, and, if the
claimant discovers further assets, he
must make a fresh application for a new
freezing order to include these assets.
• The defendant loses any right to deal
with, or dispose of, the frozen assets
until the end of the proceedings.
• The judge may request the claimant
to give an undertaking to pay any
damages which the defendant may
sustain.Failure to comply with this
request may lead to the freezing order
being made ineffective.
• In theory, the freezing order can
extend to assets outside the Italian
jurisdiction, but in practice such an
order is unlikely to be effective.
• The freezing order only covers
the assets to which the defendant
has legal title and not assets
beneficially owned (unless the
claimant applies for the disposal of
assets to be revoked).
• There is no obligation on the defendant
to disclose any further assets that the
claimant has not identified.
• In criminal proceedings a freezing
order can be issued by the judge on
the request of the Public Prosecutor
whenever there is a risk that the
defendant cannot guarantee the
payment of the fee. The fee includes
the costs of the criminal proceedings
and, if payable, a fine - the amount of
which varies according to the gravity
of the crime. For simple fraud, the
fine may be up to Euro 1.000,00.
Fighting Fraud: obtaining searching, freezing & tracing orders
2003
Italy
20
Search orders• Only available in criminal proceedings.
• The Public Prosecutor can apply for a
search order to gather evidence of the
alleged fraud.
• The Public Prosecutor usually issues
the search order himself, alternatively
issue can be delegated to the Police
(i.e. it does not require an order from
the court).
• It is possible for evidence obtained in
criminal proceedings to be released to
the judge in the civil proceedings
provided that the claimant has
produced evidence of his right (“fumus
boni iuris”) and evidence of the
damage which will result from any
delay (“periculum in mora”).
Tracing orders• It is not possible, in general terms, to
make a claim against a party who has
received property belonging to the
claimant, but who is not directly
involved in the fraud.
• It is a criminal offence to buy goods
when the purchaser reasonably
suspects that the goods are proceeds
of a fraud (even if the purchaser is not
involved in the fraud).
• It is possible to request the judge to
freeze assets in civil proceedings where
the origin of property is in doubt, until
the court has determined the ownership
of the property and that no fraud
is involved.
• A claimant can also apply to have a
disposal of assets set aside where the
disposal has decreased the possibility
of the claimant obtaining compensation
for the fraud.
General• Article 700 of the Italian Civil Procedure
Code provides a generic emergency
remedy to obtain any precautionary
measure not expressly set out or
regulated by the Code in order to
prevent “an irreparable and imminent
damage” (for example, an order
preventing a third party from disposing
of goods).
• If a fraud has been committed both
criminal and civil proceedings may be
issued. If a party has suffered loss
because of a fraud, he has a right to
decide whether to bring civil proceedings
to obtain compensation or to enter
into criminal proceedings and to ask
for compensation before the Criminal
Court. The criminal prosecutors face
fewer limits on their powers to obtain
evidence. If a report to the police
authority and/or the Public Prosecutor
is produced and criminal proceedings
are instituted, this evidence can then
be used in the civil proceedings. This
transfer process may, however, increase
the cost of and delay proceedings.
• The violation of or non-compliance
with, any of the orders mentioned
above is a criminal offence if
committed with intentional
will (“dolus”).
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Freezing orders• Available in both civil and criminal
proceedings usually before proceedings
are issued but also after proceedings
have been issued or judgment given.
• If a freezing order is obtained before
proceedings are issued proceedings
must be commenced within 14 days.
• Usually made without notice to ensure
the element of surprise.
• To obtain a freezing order the claimant
must file a petition with the President
of the Court. The petition
should include:
- the name of the petitioner and the
name of the defendant;
- a clear description of the grounds
upon which the request is based;
- the nature of the assets to be frozen.
If the freezing order is in relation to
real property or moveable property
it is necessary to state that there is
a real risk of dissipation of the
assets if the order is not granted. It
is not necessary to provide evidence
of that risk.
• The application does not have to be
supported by evidence.
• Written notice of the freezing order
must be given to the defendant and
to any third parties affected by the
order, within a number of days after
the arrests have been placed.
• An order only freezes those assets
identified by the President of the Court
which can include:
- assets legally and beneficially
owned by the defendant;
- assets available as at the date the
order was made and/or which will
come into the defendant’s hands
as a result of contracts in existence
at time the order was made.
• It is unclear under Dutch law whether
a claimant can freeze assets out of
the jurisdiction.
• A claimant does not have any
proprietary rights over frozen assets.
• The order will exempt assets which are
necessary to enable the defendant to
provide for his living and expenses but
this exemption does not cover legal fees.
• The claimant does not have to give an
undertaking to the court to pay any
damages that the defendant (or any
other party) may sustain as a result of
the order unless the court attaches
such a condition (this is rare). However,
in the event that the claimant is found
liable, for example if the court finds
that he did not have a good claim, he
must pay damages to the defendant.
This involves the defendant filing
a counterclaim.
• If the claimant becomes aware that
the defendant has acquired further
assets not sequestered under the
order, a new order may be applied for.
If made, this is as an additional order
rather than an amendment to the
original order.
• An order binds third parties holding
the defendant’s frozen assets (for
example banks where the defendant
has an account).
• In civil proceedings the defendant is
not required to disclose any further
assets to the claimant which are not
specified in the order. In some criminal
proceedings the defendant may be
required to provide information as to
his assets.
Fighting Fraud: obtaining searching, freezing & tracing orders
2003
The Netherlands
22
• It is a criminal offence punishable by a
fine or up to 4 years’ imprisonment not
to comply with a freezing order. These
penalties equally apply to third parties
bound by the order. In addition the
claimant can seek compensation from
the defendant or a third party who
has failed to comply with the order.
Search orders• Only available in criminal proceedings.
• The District Attorney has the discretion
whether to apply for a search order.
Such an order can only be obtained
from the court.
• Evidence obtained as a result of a
search order in criminal proceedings
can be released to the judge in civil
proceedings. The evidence can also be
released to the claimant if the claimant
notifies the district attorney that he is a
victim of the defendant’s actions and is
then regarded by the district attorney
a victim.
Tracing orders• In civil proceedings it is possible to
pursue a claim (“revindication”)
against a party who has received
assets belonging to the claimant but
who is not directly involved in the
fraud. It is possible to pursue an asset
even though it has been purchased by
a third party unless the third party
acquired the property for value and in
good faith and the property was not
registrable (land, aeroplanes, ships are
all registrable).
• It is not possible either in civil or
criminal proceedings to pursue a
tracing claim against an asset which
has been purchased with the money
from the fraud.
• It is possible, but very difficult, to
pierce the corporate veil in civil
proceedings. In criminal proceedings
the District Attorney has a number of
special provisions to pierce the
corporate veil. In these circumstances,
persons within a company or persons
outside the company but who control
those who committed the crime may
be regarded as the perpetrators.
General• “Gagging orders” have been available
since 1 January 2002. The petitioner files
a request with the court that handles or
has handled the case.
Fighting Fraud: obtaining searching, freezing & tracing orders2003
23
Freezing orders• Available in both civil and criminal
proceedings. The procedure governing
civil and criminal orders is virtually
the same. In civil law they are known
as “interim orders”, and are available
before civil proceedings are issued in
which case proceedings must be filed
within 2 weeks. In criminal proceedings
they are only available after charges
have been filed.
• Application always made without
notice to the defendant.
• A claimant must show that he has a
claim and that a freezing order is
necessary to enable him to enforce
any judgment.
• An order may be conditional on the
claimant giving a deposit to secure
possible claims from the defendant
arising from the freezing order.
• An order must specify the method of
securing the claim, such as:
- seizing debts due to the defendant
(for example salaries) or
other assets;
- granting a charge over the
defendant's property; and
- preventing the defendant from
selling or encumbering property if
such property is not registered.
• A defendant is not permitted to use
monies which are frozen to meet his
living expenses and/or legal fees.
However, assets which are necessary
for the defendant's financial survival
(for example, tools of his trade) are
usually excluded from the order. He is
also permitted to pay employees'
wages from frozen monies, in priority
to other claims.
• An order does not provide the claimant
with any proprietary rights over the
defendant's assets.
• An order only secures assets specifically
identified in the order and up to the
value of the claim. It would not usually
cover assets owned by the defendant
which are outside the jurisdiction
without an order from the relevant
foreign Court.
• An order does not require the defendant
to disclose information regarding his
assets to the claimant.
• An order can bind third parties, for
example banks holding monies which
are subject to the freezing order.
Order will also freeze monies
subsequently paid into the account.
Search orders• Only available in criminal proceedings.
• Search is carried out by the Public
Prosecutor or the Police and may, in
cases of urgency, be conducted without
an order. Before the search commences
the respondent must be informed of
the purpose of the search.
Tracing orders• It is possible to make a claim against
a party not directly linked with the
fraud but who holds/controls the
proceeds of the fraud (a proprietary
claim similar to that in English law),
usually by way of separate proceed-
ings. The claimant must simply show
an infringement of ownership (i.e.
there is no requirement to show
“fault” or “lack of good faith” on the
part of the party in possession of the
asset) – although a defence is available
if a person has held the moveable
asset for three years in good faith.
This type of claim may only be made
when the asset is a tangible one.
Tracing claims cannot be made against
the proceeds of an asset, unless there
has been unjust enrichment.
General• No power to prevent disclosure of any
freezing order to the defendant or
third parties.
• Third parties who fail to comply with
a freezing order are liable to a fine
and/or damages.
• There are no pecuniary sanctions
for non-compliance with a search
order, although in some cases, non-
compliance may constitute a crime.
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2003
Poland
24
Freezing orders• Available in both civil and criminal
proceedings only after proceedings
have been commenced (with the
exception of a landlord's claim for
recovery of rent).
• Generally obtained without notice to
the defendant except for a “judicial
freezing order”, this being an order
obtained by the parties to litigation
(or their creditors) over the goods
forming the subject of the litigation.
• A claimant must show the existence
of a claim and a risk of dissipation of
assets if the order is not granted.
• A claimant must identify as precisely as
possible the assets which are to be
frozen; he may also ask the court to
order public authorities or the defendant
to disclose details of further assets.
• An order does not cover assets necessary
for the defendant and his family to
earn a living. If the defendant is a
corporate entity all its assets are frozen.
• A defendant is permitted to use his
own money to pay living expenses
and/or legal fees.
• A claimant does not obtain proprietary
rights over the frozen assets; usually
at the end of the proceedings the
assets are sold by auction.
• A special type of order can be obtained
which freezes the defendant’s bank
accounts in which case a third party
(the bank) may be obliged to pay the
debt (i.e. monies in the account)
direct to the claimant.
Search orders• Only available in criminal proceedings
in the form of search warrants issued
by the Public Prosecutor (prior to
proceedings) or the Court vested with
the case, and only enforceable by
the Police.
• Only available in serious cases, for
example the enforcement of an
imprisonment warrant or a Court
decision, to prevent danger to a
person’s life, physical integrity or
estate and to protect national security
or public order etc.
• In certain civil cases a judge has a
power to search a relevant site in
order to gain a clearer overview of the
case, in this situation prior notice
must be given to the parties so that
they can be present.
Tracing orders• A claimant can pursue proceedings
against a third party who has received
property belonging to the claimant and
who is not directly involved in the fraud.
• A third party purchaser of goods
cannot raise a defence that he has
acquired the property in good faith if
the property was fraudulently obtained
by the seller.
• The claim can only be to recover the
direct proceeds of the fraud and not
assets purchased with such proceeds.
Such assets can, however, be subject
to special seizure or freezing orders.
• It is often possible to obtain an order
against not only a company but its
members and directors, ie to pierce
the corporate veil.
General• “Gagging orders” are not
generally possible.
• Non-compliance with any criminal or
civil order is a criminal offence and
penalties can include imprisonment
(up to three years) and/or a fine. Such
penalties can be imposed against third
parties bound by the order.
Romania
Fighting Fraud: obtaining searching, freezing & tracing orders2003
25
Freezing orders• Available in both civil and criminal
proceedings until judgment is rendered.
• May be obtained prior to the issue of
court proceedings, though it will
require the deposit with the court of
the equivalent amount of the sum
which is being requested to be “frozen”.
• In civil cases can be used for payment,
proprietary and repossession claims.
• A claimant must show the existence of
the claim and must demonstrate that
his chances to enforce the judgment
(to recover the debt) will diminish
significantly if the order is not granted
or the judgment against the defendant
could not be satisfied without the
freezing order.
• An order does not cover certain assets
of individual defendants and their
families necessary to earn a living. All
assets of a legal entity may be frozen
including tangible, intangible, movable
or immovable property and assets
located abroad. Note, however, the lack
of international treaties dealing with the
mutual recognition of court awards.
• Defendant’s bank accounts and
securities may be garnished.
• Orders are obtained without notice to
the proposed defendant based on
claimant’s motion. Such motions
generally are considered by the court
within one day after the filing.
• A claimant will be liable for any
damages caused by the order to the
defendant and third parties if the
judgment is not in his favour.
• May entitle the claimant to have all
assets of which it is aware attached by
a further court order.
• Attachment does not entitle the
claimant to realise the value of the
assets by way of sale. Realisation will
be by way of a sale at public auction
following a full trial.
• Disclosure not ordered as part of the
award of a preliminary injunction.
• Order will bind third parties.
• Relief available preventing or restricting
sale or disposal of assets by the proposed
defendant or a third party in possession.
Search orders• In civil proceedings, search orders can
only be obtained for the purpose of
enforcing a final judgment or a
preliminary injunction.
• A court may require information from
any third parties (including
governmental authorities) for the
purposes of identifying assets prior
to issuing a preliminary injunction or
after final judgment.
• In criminal proceedings the searching
of residential premises requires a court
order, to conduct the search in other
premises the decision of an authorised
investigator is enough. Evidence
obtained from a search in criminal
proceedings may be used in adjacent
civil proceedings.
Tracing orders• In both civil and criminal proceedings,
a court order will be effective to trace
assets in the hands of third parties.
Disclosure• Available in civil proceedings.
• Each party presents its own evidence to
support its case at trial. At the court’s
Fighting Fraud: obtaining searching, freezing & tracing orders
2003
Russia
26
discretion, a party may be required to
give oral testimony at trial.
General• During criminal proceedings, an
application for civil proceedings may
be lodged and the two proceedings
can run concurrently. Moreover,
during/after the criminal proceedings
the Public Prosecutor can be required
to hand over any evidence necessary
for the civil proceedings.
• Company information can be
obtained from the Unified State
Register of Legal Entities: for example,
address, registration number and
place of registration.
• Property information is also available
from the Unified State Register of
Immovable Property and Transactions
with Immovable Property: for example,
the identity of the owner of a particular
item of immovable property (including
land and buildings), whether there are
any outstanding security interests over
the same and a transaction history.
• Information obtained illegally is
not admissible.
• Information held by advocates
is confidential.
• Individuals are not required to
provide any evidence which would
incriminate themselves.
• Spouses and close family may also
refuse to give evidence.
Fighting Fraud: obtaining searching, freezing & tracing orders2003
27
Freezing orders• A pursuer (claimant) in an action for a
payment can seek a freezing order
either in the form of an “arrestment
on the dependence” or an “inhibition
on the dependence”.
• An arrestment on the dependence can
be easily obtained with little risk to
the pursuer if good cause can be
shown. It effectively “freezes” those
of the defender’s moveable assets
(both money and other items) which
are, in the hands of third parties on
whom the order is served who are
subject to the jurisdiction of the
Scottish courts and have a duty to
account to the defender.
• The arrestment operates as valid
security for the sum sued for, the
interest craved thereon and the
expenses of the action.
• An inhibition on the dependence can
be sought to prevent the defender
from dealing with his heritable (real)
property to the pursuer’s prejudice
pending the disposal of an action. For
example, an inhibition will prevent the
defender from selling his real estate
without the consent of the pursuer.
Search orders• An order under Section 1 of the
Administration of Justice (Scotland)
Act 1972 may permit a Commissioner
appointed by the Court to enter
premises for the purposes of preserving,
copying and removing specified items
and documents or categories of items
which are reasonably required in
connection with intended or ongoing
civil litigation. The address of the
premises, and the person who was
believed to hold the items and/or
documents in question must be given
in the application for the order.
Criminal proceedings• Section 10 Law Reform (Miscellaneous
Provisions) Act 1968 - subsisting criminal
convictions will be admissible in civil
proceedings where it is necessary to
prove their existence.
• It is possible to ask the Court to have
civil proceedings sisted (frozen) if there
are criminal proceedings relating to
the same circumstances.
• An order under Section 1 of the
Administration of Justice (Scotland)
Act 1972 must not be served at the
same time as a search warrant granted
in the course of a criminal investigation.
Disclosure• It is possible to obtain disclosure of
documents in the hands of a potential
opponent or a third party prior to
raising proceedings, by applying for an
order under the Administration of Justice
(Scotland) Act 1972 (either before or
after commencement of the action).
• Under such an order, the court may
order the inspection, photographing,
sampling, preservation, custody and
detention of documents and other
property (including land).
• The Court may order any person to
disclose information regarding the
identity of any person who might be a
witness in civil proceedings.
• Before making an order, the Court must
be satisfied that the applicant is already
able to state a prima facie case.
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2003
Scotland
28
• The application may be granted in the
absence of the respondent where the
documents (i) are essential to the
applicant’s case and (ii) are at risk of
destruction or concealment.
• It is open to the court granting the order
to attach such conditions to it as it sees
fit. The order will generally be granted
if a prima facie case is stated subject to
the applicant giving an undertaking in
damages and an undertaking not to use
the evidence recovered for purposes
other than the intended litigation. The
applicant also undertakes to commence
the main litigation within a reasonable
period if he decides to litigate.
• Recovery of documents (from the other
party or from third parties) after the
commencement of an action is obtained
by way of a commission and diligence
for recovery of documents. This is
allowed in order that the court may
be put in possession of documentary
evidence bearing upon the issues of
fact which have to be determined.
• The documents are made available by
order upon the “havers”, who are the
possessors of the documents, whether
party to the cause or not. An additional
procedure allows voluntary compliance
with the order, failing which a
commissioner may be appointed with
authority to require a waiver to appear
before him and to bring with him all
relevant documents in his possession.
• The Court will not grant authority for
the recovery of any document sought
unless it can be demonstrated that the
document has some relevance to the
depending case. The court will not
allow a “fishing expedition”.
• The call for documents must specify the
document or group of documents and
only in very exceptional circumstances
will a general call be allowed.
• Where fraud is an issue, the court
generally admits recovery which may
clear up what is likely to be obscure
or hidden.
• Documents and real evidence must be
lodged in the court at the time when
they are to be founded upon.
• Generally, there is no obligation to
disclose documents to the other party
or to disclose those which assist the
other party’s case in the absence of a
court order.
• There is no rule that the documents
sought to be recovered should be
admissible in evidence, but the question
of their admissibility may be raised
and decided at proof when a party
seeks to use them as evidence.
General• Solicitor/client communications are
privileged. This is superseded only
where fraud or some other illegal act
is alleged against a party and where
his legal adviser has been directly
concerned in the carrying out of the
transaction which is the subject matter
of the inquiry.
• Documents prepared in contemplation
of litigation are generally privileged.
Contemporaneous accident reports
and eyewitness accounts do not fall
within the scope of this privilege and
are generally discloseable.
• Searches of information filed at
Companies House, the Land Register,
the Register of Sasines, the Books
of Council and Session and the
Personal Register are easily
obtained at low cost.
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29
Freezing orders• Available in civil and criminal
proceedings.
• The magistrate may order the retention
of the defendant’s assets during the trial,
to safeguard the efficacy of a future
judgment. In civil proceedings, a petition
from the claimant is necessary, and the
judge may not issue a freezing order
that is more draconian than the one
requested. In criminal proceedings, no
petition is necessary.
• The subject of the order may retain his
necessary clothing, furniture, books, tools
needed for his work, food, and money
needed for his and his family’s livelihood.
There is a scale determining how much of
the defendant’s salary may be retained.
• The claimant has a preferential right
to the assets retained by the court,
except when a judgment establishes
that a third party has a prior right.
Other creditors may proceed against
the remaining assets when the claimant
has been paid off.
Search orders• Not available in civil proceedings.
• Criminal proceedings: if necessary,
the examining magistrate may make
an order allowing entry into private
domiciles and the requisitioning of
private correspondence if necessary.
The magistrate will require very strong
justification for the request before
making an order which breaches an
individual’s right to privacy.
Tracing orders• An action may be brought against the
current owner of assets which were
obtained by fraud, provided that the
owner did not purchase them in good
faith, in which case he will be protected.
Similarly, assets obtained with
fraudulently obtained money may be
the subject of an action, if the buyer
knew that the money was obtained
by fraud.
Disclosure • In civil proceedings any party may
request disclosure from a non-party.
The judge will make an order for
disclosure if it appears relevant to his
decision. The judge may also require
the non-parties to give oral evidence
about the information they hold in
order for the court to decide whether
disclosure is necessary.
• The claimant may request the defendant
to disclose any documents which form
part of the basis of his claim. If the
defendant does not comply with the
request, the claimant may apply for an
order of the court, giving reasons why
the disclosure is necessary. The defendant
has a similar right in a counterclaim.
• In criminal proceedings any person can
be required to disclose documents which
the examining magistrate considers are
important for the case. The magistrate
may order the disclosure of private
correspondence and other documents;
the fundamental right to privacy will
be overridden when he considers that
the information is absolutely necessary
to give judgment.
• Each party must produce all the
documents and other evidence which
support its case. These documents are
filed with the court when the parties
Fighting Fraud: obtaining searching, freezing & tracing orders
2003
Spain
30
file their claim or defence; the general
practice of exchange with the other side
of all the documents on which a party
intends to rely is not part of Spanish
procedure. However, each party may
request from any of the other parties
the disclosure of documents which are
important to the case. If this is refused,
and the party urgently needs to see a
document held by the other side before
the trial begins, he may request an
injunction from the court.
• If a party is unable to bring a document
to the court, the party must indicate
where the evidence is situated, and
the judge will require it to be produced
by resolution of the court.
General• The Land Register and Companies
Register are public, and anyone with
a legitimate interest may obtain
warrants of their entries. The Land
Register contains details of the
ownership of land, mortgages and so
on, while the Mercantile (Companies)
Register has information on a company’s
constitution, date of incorporation
and management.
• A defendant has the right not to
say anything that would
incriminate himself.
• There are lower punishments for
persons who do not co-operate with
the prosecution of a crime if they are
protecting their close relatives.
• Information held by banks and
lawyers in relation to their clients is
confidential, and the court will only
override the duty to protect
important legal rights, and when
disclosure is the only possible way for
the magistrate to reach a decision.
• Information obtained illegally is
generally void and not admissible.
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Freezing orders• Available in both civil and criminal
proceedings.
• Can be obtained at any time including
before proceedings are commenced,
but in civil cases proceedings must be
instituted within 10 days of service of
the freezing order. The usual time
period between filing a request for a
freezing order and the order being
obtained is 1-2 days.
• Is always obtained without notice to
the proposed defendant. It is then
served on the defendant.
• To obtain an order the claimant
must show:
- the existence of a claim;
- one of the following circumstances
(pursuant to Article 271 of the
Swiss Debt Enforcement and
Bankruptcy Law):
(a) the defendant has no fixed
domicile in Switzerland;
(b) the defendant is concealing his
assets, absconding or making
preparations to abscond so
as to evade fulfilment of
his obligations;
(c) the defendant is passing
through or belongs to the
category of persons who visits
fairs and markets, for claims
which by their nature must be
fulfilled at once;
(d) the defendant is not domiciled
in Switzerland, and none of the
other grounds for a freezing
order is fulfilled, provided the
claim has a sufficient connection
with Switzerland or is based on
an enforceable court judgment
or on a recognition of debt.
There is no clear definition of
“sufficient connection with
Switzerland” which is a question
of fact in each case. The mere
fact that the defendant owns
property in Switzerland, however,
would not be sufficient; and
(e) the creditor holds a provisional
or definitive certificate of
shortfall against the debtor.
- the existence of assets owned by
the defendant which are within the
jurisdiction. Details of the assets
must be specified in the order.
• The following assets can be frozen:
- assets legally owned by the defendant;
- assets belonging beneficially to the
defendant but which are held by a
third party, in which case the
defendant’s right as against the
third party is frozen;
- only assets within the jurisdiction.
• Following the making of the order the
defendant can appeal against the order
to “de-block” certain assets which he
requires to cover his living expenses
and/or to carry out his trade. Assets
cannot, however, be released to meet
the defendant’s legal expenses.
• The order does not provide the claimant
with any proprietary rights over the
defendant's assets. If, however, the
claimant succeeds in enforcement
proceedings, the assets are publicly
sold by the debt collection office and
the proceeds used to satisfy the
claimant's judgment.
• The defendant is not required to disclose
any further assets to the claimant which
are not specified in the order.
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2003
Switzerland
32
• Third parties served with the order
must provide precise information on
the existence and extent of the assets
belonging to the defendant and held
by them, provided that the claimant
has established the existence and
location of the assets. It is sufficient if
the claimant indicates the main domicile
of a bank which he believes is holding
the defendant's funds. The bank has
to indicate if the defendant has a bank
account with a branch of the bank, if
served with the order. In practice banks
only provide such information over
the telephone.
Search orders• Only available in criminal proceedings
upon application to the District Attorney.
Tracing orders• No such orders available in
civil proceedings.
• In criminal proceedings, the District
Attorney can freeze assets which were
purchased with the proceeds of fraud
or other criminal activity. This is the
case even if the assets are owned by a
third party unless the third party
acquired the asset in good faith and
for value or if the freezing of the asset
would constitute an undue hardship
on the third party.
• In certain circumstances, such frozen
assets can be used to satisfy the
claims of the victims of the fraud.
General• In criminal matters the District
Attorney frequently orders a bank or
third party served with an order not
to disclose the order’s existence to
the defendant.
• Penalties for non-compliance with
freezing orders include imprisonment
and/or fines. This extends to third
parties served with freezing orders.
• Medical doctors, lawyers and clergymen
in a “confidential relationship” are not
obliged to disclose information and are
under strict secrecy obligations which
will be lifted by the supervisory authority
in exceptional circumstances only.
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The summary below reflects the position
in relation to New York law only as each
state has its own procedure and laws.
Freezing orders• Available in civil and criminal
proceedings (known as
“provisional remedies”).
• Order of attachment enables a
claimant to seize the defendant’s
property. Court directs the sheriff to
take constructive (sometimes actual)
possession of the property. Can be
granted prior to proceedings
being commenced.
• To obtain attachment order the
claimant must show:
- an underlying cause of action;
- it is probable that the claimant will
succeed on the merits of its case;
- one or more grounds for attachment
exist. The grounds are as follows:
(i) the defendant is not domiciled
within the State or is a foreign
corporation not qualified to do
business in the State;
(ii) the defendant resides or is
domiciled in the State and
cannot be personally served
despite diligent efforts to do so;
(iii) the defendant, with intent to
defraud his creditors or frustrate
the enforcement of a judgment
that might be made in the
claimant’s favour, has assigned,
disposed of, encumbered or
secreted the property, or removed
it from the State or is about to
do so;
(iv) the cause of action is based on
a judgment or order of a U.S.
Court or any other Court that
is recognised in New York
- the claim exceeds any known
counterclaims by the defendant
against the claimant.
• Preliminary attachment orders are
usually made without notice. However,
in order to make the attachment order
permanent notice must be given within
a prescribed time so that the order can
be confirmed by the Court. If the order
is based on grounds (i) – (iv) the order
must be confirmed within 10 days of
the order being levied by the Sheriff. If
not based on one of these grounds the
order must be confirmed within 5 days.
Failure to comply with these time limits
renders the order void.
• An attachment order must be directed
to the Sheriff of any County, or the
City of New York, where any property
in which the defendant has an interest
is located. It is also possible in some
cases to obtain a general order freezing
all assets up to a certain value, although
such orders are rare.
• A sheriff serves the attachment order
on the holder of the property (includes
third parties holding assets to which
the defendant is entitled e.g. garnishees)
this prevents the third party from
disposing of the defendant’s property
until further order.
• Preliminary injunctions and temporary
restraining orders are also available in
both criminal and civil matters, only
after proceedings have commenced
(although may be obtained at the
commencement of the proceedings).
• A claimant must give an undertaking in
damages in relation to a preliminary
Fighting Fraud: obtaining searching, freezing & tracing orders
2003
United States(New York)
34
injunction, in a sum fixed by the Court.
This must usually be supported by a
bond (also applies to attachment orders).
• A preliminary injunction may be
granted where it appears that the
defendant is threatening, or is about
to carry out an act in violation of, the
claimant’s rights in relation to the
subject matter of the action, so as to
make it likely that any judgment will
not be satisfied.
• A preliminary injunction can only be
obtained on notice to the defendant.
• A temporary restraining order may be
granted pending a hearing for a
preliminary injunction when it appears
that immediate and irreparable injury,
loss or damage will result unless the
defendant is restrained before the
hearing can be held. By its nature it
may be granted without notice to
the defendant.
• An attachment order does not attach
to funds held in trust for the defendant
where the trust was created by, or the
funds emanated from, someone other
than the defendant. Also exempt from
the order is 90% of a defendant’s
income earned within sixty days of, or
any time after, the attachment order is
delivered to the Sheriff.
• A claimant does not acquire any rights
over the defendant’s assets until
judgment has been obtained. The
judgment may then be satisfied out of
the attached assets.
• An attachment order can theoretically
apply to assets outside the US. In
relation to other US jurisdictions the
claimant must file the order in a Court
where the property is located so that
the Sheriff in that jurisdiction can
enforce the order.
• Normally, there is no requirement on a
defendant to disclose further assets. In
exceptional circumstances the
claimant can obtain such an order
where proceedings are already on foot.
Search orders• Only available in civil proceedings in
exceptional cases – not generally used.
• In criminal proceedings searches of
property and documents are conducted
by the prosecutor’s office and the
police. In order to obtain a search
order, a prosecutor must show that
there exists probable cause that the
police will find relevant evidence to a
crime within the specified premises.
• The prosecutor may also obtain records,
documents or other evidence from
third parties that are relevant to the
criminal investigation.
• New York law recognises the concept
of constructive trusts.
• Material obtained will first be used in
any criminal proceedings, and in some
cases civil proceedings will be stayed
pending the outcome of the parallel
criminal proceedings.
Tracing orders• It is possible for the claimant to bring a
claim against a person who has received
property from the fraudster if the
transferee has reason to know that the
transfer was made for the purpose of
frustrating the transferor’s creditors.
• It is possible to trace the proceeds of
fraud into assets purchased with such
proceeds, following judgment.
General• It can be contempt of Court to refuse
to comply with any order.
Fighting Fraud: obtaining searching, freezing & tracing orders2003
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