International Law

Freezing assets under French Law-A Strategic Weapon

By Rick Rein

Recovery of a loss is always the key. Therefore, ensuring recovery is a necessary component of any litigation, especially when assets can disappear. French law provides a useful tool to creditors to freeze assets before trial.

Freezing orders require an order, which can be obtained without notice to the debtor. To do so, the creditor must provide prima facie evidence of the existence of a claim. The creditor must show that its claim seems valid. Courts often scrutinize this condition. The creditor must also show the existence of a threat to its ability to recover a claim against the debtor. Courts accept objective proof such as bank account statements demonstrating that the debtor has financial difficulties and subjective proof such as a debtor's behavior in failing to respond to demand letters.

A creditor can freeze a wide range of assets--bank accounts, real property, stock, claims to a third party's assets and future assets such as future rents. But, it is imperative to identify the assets prior to applying for the freezing order as the freezing order needs to specify the assets frozen.

Creditors then have three (3) months to effectuate the freezing order. In most cases, a bailiff executes the order. For real property, a form is recorded against the property.

The debtor is informed of the order only after execution. The debtor has the right to contest the order before the judge that granted it and if that fails, the debtor can appeal. However, in most cases, unless the creditor gave wrong information in the application, the appeal will be denied.

The creditor also must bring an action against the debtor one (1) month of execution of the order. Significantly, that action can be commenced in a foreign court or in an arbitration. Once a judgment is obtained, and all possible appeals need notbe exhausted, a creditor can take possession of the assets. How that is accomplished depends on the asset.

Since a freezing order is relatively simple under French law, a creditor should always consider this strategy as a part of an overall litigation plan.

Full post as published by International Asset Recovery Law Blog on December 10, 2008 (boomark / email).