An Increasing Demand for Cross-Border Asset Protection
Imagine uncovering fraudulent behaviour in a high-stakes commercial dispute, only to find that the assets you may eventually enforce against are being quietly siphoned away by the defendant company. In such circumstances, swift action is vital to secure those assets wherever they are located, ensuring that by the time a final judgment or arbitral award is obtained, there remains something to enforce. For internationally active clients, obtaining a worldwide freezing order through the Cypriot courts can prove decisive. Cyprus, with its adaptable common law framework and a judiciary willing to act expeditiously in granting cross-border injunctions, has established itself as a crucial jurisdiction for this form of relief.
What Does a Worldwide Freezing Order Achieve?
A worldwide freezing order - commonly known as a Mareva injunction - serves as a powerful legal safeguard. It prevents a defendant from disposing of assets not only in Cyprus but across jurisdictions worldwide. Importantly, it does not amount to the seizure of property; rather, it preserves the value of assets so they remain available for enforcement once a final judgment or arbitral award is secured. In practice, such orders can halt financial transfers that might otherwise frustrate the outcome of proceedings. They are often coupled with disclosure obligations, requiring the defendant to reveal the nature, value, and location of their assets.
Legal Basis: How Cyprus Deals with Freezing Orders
The authority of Cypriot courts to grant freezing orders stems from Section 32 of the Courts of Justice Law (Law 14/60). This provision empowers judges to issue interim injunctions whenever it is considered “just and convenient” to do so. While this discretion is broad, it is firmly anchored in precedent: Cyprus adheres to the English common law tradition, including the established Mareva doctrine. Both Cypriot and foreign case law guide the courts in shaping their approach to such injunctions.
What Must a Successful Applicant Demonstrate?
From our team’s experience, several elements are critical for securing a worldwide freezing order.
- A serious issue to be tried - The applicant must establish that there is a genuine legal claim. Absolute proof is not required at this stage, but the case must be credible rather than speculative.
- A real prospect of success - The court must be satisfied that the claim has a reasonable chance of succeeding at trial.
- Risk or irreparable harm – The applicant must show that, without the order, it would be difficult - or even impossible - for justice to be served effectively at a later stage.
A key consideration is the real risk of asset dissipation. This is often the most demanding hurdle: applicants must put forward convincing evidence that the respondent may conceal, transfer or diminish assets in order to frustrate enforcement of a judgment.
Finally, the courts balance the order against potential unfairness. If the injunction is overly broad, founded on weak evidence, or if the applicant has acted in bad faith, the court is unlikely to grant the relief.
Can a Freezing Order Be Obtained Without Notice?
In many cases, yes. Freezing orders are often sought ex parte - that is, without notifying the defendant or having them present at the hearing. This approach is intentional: if a party is likely to dissipate assets, advance warning would allow them to do so before the order is granted, defeating its very purpose.
However, proceeding without notice imposes a significant duty on the applicant. Speed is essential, but so too is full and frank disclosure. The applicant must present all material facts to the court, including those that may undermine their own case. Failure to do so can result in the injunction being discharged at the return date hearing, when the respondent has the opportunity to challenge the order.
Building the Case: Evidence and Procedure
Applications for freezing orders must be comprehensive and supported by detailed evidence. The affidavit should set out:
- The factual background underlying the claim;
- The legal grounds on which the claim is based;
- An explanation as to why the Cypriot courts have jurisdiction to hear the matter;
- Evidence indicating a real risk of asset dissipation by the respondent;
- Details of known assets and their possible locations.
In addition, the applicant must provide an undertaking in damages—a binding commitment to compensate the respondent if the court subsequently determines that the injunction was wrongly granted, for example, due to a failure to comply with the duty of full and frank disclosure.
What About Assets Outside Cyprus?
Cypriot courts have the power to grant freezing orders with extraterritorial effect. This means that assets located in jurisdictions such as England, Switzerland, Dubai, or the British Virgin Islands can fall within the scope of the order.
Enforcement abroad, however, is not automatic. It depends on the existence of treaties and the approach of the foreign courts, and often requires coordination with local counsel in the relevant jurisdiction.
What is automatic, though, is the obligation on the respondent not to deal with their foreign assets once the order is made. Breaching this restriction can amount to contempt of court in Cyprus, which is punishable by sanctions – typically imprisonment.
Why Cyprus Is Frequently Chosen
Cyprus has established itself as a prominent centre for asset-holding structures, particularly involving entities from Eastern Europe and the CIS. As a result, Cypriot worldwide freezing orders are often sought and granted in connection with corporate disputes litigated before Cypriot courts.
To illustrate, we draw on three examples from our practice:
- Claimant A acquired a minority stake in Company B. Other shareholders attempted to dissipate Company B’s assets, leaving Claimant A holding shares in a worthless entity. The District Court of Limassol granted a worldwide freezing order, preventing any transfers of Company B’s assets.
- Claimant C brought proceedings in Switzerland against individual D for fraud. D colluded with Company E in Cyprus to conceal assets through sham investments, including a EUR 10 million stake in a Singapore shoe-repair kiosk. The Cypriot court granted a worldwide freezing and disclosure order against Company E in support of the conspiracy claim.
- A group of 20 individuals and companies (“G”) orchestrated a scheme to strip value from individual F’s minority investment. The company in which F invested extended unsecured, low-interest loans to shell companies controlled by G. These loans were unlikely to be repaid, given G’s control over both borrowers and lenders. F brought conspiracy proceedings in Cyprus, obtaining a worldwide freezing order against all members of group G to preserve assets for eventual enforcement of the final judgment.
A Few Lessons from Practice
Our experience shows that freezing orders are either refused altogether or later discharged at the return date hearing when applicants make critical missteps. The most common are:
- Delay in making the application. It is difficult to persuade the court of urgency if the applicant has waited, for example, six months before applying. An application should be made promptly once the risk of dissipation comes to light or when the facts giving rise to the claim first arise (where earlier events demonstrate the risk).
- Failure to be candid about the risk of dissipation. In one case, a freezing order was lifted because the applicant had relied on the respondent’s conduct as evidence of dissipation, yet failed to disclose that the respondent owned an oilfield—an asset which could not realistically be sold without years of government approvals.
- Weak jurisdictional nexus to Cyprus. Where an applicant relied solely on the fact that the respondent held some assets in Cyprus, but the dispute otherwise had no meaningful connection to the jurisdiction, the court confined the order to Cypriot assets and refused to extend it worldwide.
- No assets left to freeze. In another case, K entered into a grain trading arrangement with offshore company L, knowing that L’s only asset was the grain itself. Once L sold the grain, transferred away the proceeds, and began winding up, there was nothing left to freeze, and the court refused to grant the order.
Final Thoughts
Worldwide freezing orders are far from routine. They are granted only in exceptional circumstances and where the justification is compelling. Yet, when obtained, they often mark the difference between a judgment that can be meaningfully enforced and one that is worthless in practice. English and Cypriot courts alike have described them as the “nuclear weapon” of litigation.
At our firm, we support clients through every stage of the process - from assessing risks to formulating enforcement strategies - ensuring that their rights remain protected, wherever assets may be located.
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Fortior Law is a dynamic and growing international dispute resolution practice. Our Nicosia office is able to assist clients in their applications for worldwide freezing orders and other interim relief throughout Cyprus. For more information, reach out to your contact at Fortior or to [email protected]. We can also assist with worldwide freezing orders in other jurisdictions. See our article on English worldwide freezing orders here.
