A freezing injunction (“zabezpieczenie roszczenia”) is an interim court order which prevents a party from disposing of or dealing with its assets. A freezing injunction is therefore an essential tool for those looking to protect assets to ensure those assets are available to satisfy a court order. Under Polish law, in all civil cases to be examined either by a state court or by arbitration tribunal, each party may demand that the court issues a freezing injunction to secure claims of the applicant (Article 730 of the Civil Procedure Code).
When will an application for a freezing injunction be made?
An application for a freezing injunction is usually made prior to court proceedings being issued. An application prior to proceedings can protect assets if the applicant fears that the other party will dispose of those assets before a judgment can be obtained.
However, a freezing injunction can be also sought during the course of proceedings or even after judgment is given, to prevent the disposal of assets before the judgment is enforced.
Typically, the freezing injunction is being enforced by the bailiff through seizing money on the defendant’s bank accounts or by imposing a mortgage on defendant’s property.
When will the court grant a freezing injunction?
The court has a wide discretion to grant a freezing injunction, and will do so only when it considers that it is necessary. The following conditions must be satisfied:
- the Polish court must have jurisdiction;
- the applicant must demonstrate to the court that he has a good arguable case - although the applicant does not need to show that the case will definitely succeed, he needs to show that his claim is justified and highly probable and
- there must be a real risk of the disposal or use of the assets.
When making its decision the court will analyse the evidence and the arguments raised by the applicant (the potential defendant is not aware about the application, so he will not be able to make any statement at this stage). The court will take all relevant factors into account and will weigh the damage caused to the subject of the injunction against the benefit to be gained by the applicant.
It is very important for the applicant to act quickly when bringing an application for a freezing injunction. Any delay in applying for a freezing injunction will make it more difficult to convince the court that the injunction is necessary. Delay also increases the risk that the assets in question will already have been dissipated by the time any injunction is granted.
An application for a freezing injunction will be decided on by a judge.
A freezing injunction application usually is made 'without notice' to the other party, that is, without the other party being present at or aware of the application. This prevents the potential defendant becoming aware that their assets might be frozen and dealing with the assets before a freezing injunction can be granted.
The application for the freezing injunction must be supported by documents and other evidence showing a real risk that assets will be dissipated if the order is not given. Typically, the applicant should present evidence showing that financial situation of the defendant is deteriorating. It could be financial statements showing losses or at least a drop in revenues on a year-to-year basis. The evidence must be accurate and provide all relevant documentation and information.
As the potential defendant is not aware about the application, the applicant must disclose all relevant material to the court including material which may be unfavourable to him. This includes matters raised by the other party in correspondence and any relevant defenses. The duty of full and frank disclosure is ongoing. Any incorrect information or omission which is subsequently discovered must be corrected immediately, even subsequent to the granting of freezing injunction.
Failing to comply with the obligation of full and frank disclosure may result in the court setting aside the freezing injunction.
Advantages of obtaining the freezing injunction
Obtaining the freezing injunction puts the applicant in a very favourable position. The tactical advantages for the applicant are as follows:
- it preserves assets for enforcement purposes;
- it assists in asset tracing claims by forcing the party subject to the injunction to disclose the details of its assets;
- it is a forecast of the future judgement which may lead to faster settlement of an underlying claim; and
- the injunction process may lead to a resolution of the underlying dispute without the need for a trial, saving time and costs.