Tracing, Freezing and Discovery orders securing the execution  of a foreign judgment in Cyprus.

Obtaining a favourable judgment is unfortunately not the end of the story for litigants as this should, following its issue, be executed and/or enforced, taking also into account the fact that many judgment debtors either fail or simply refuse to pay their respective judgment debt!

This risk and danger drastically increases in cases where a judgment is issued in a foreign jurisdiction and involves various jurisdictions, Cyprus being one of them. In case of complicated/multi-layer company structures, enforcement of such judgments naturally becomes much more difficult. In such instances it is somewhat crucial to trace and freeze any potential assets located in the Cypriot jurisdiction to prevent the alienation of such assets to foreign jurisdictions. Discovery and/or freezing orders are available in relation to foreign judgments, once of course these are recognised and registered in the Cypriot jurisdiction, which then carry the same force and effect as a judgment issued by the Cypriot courts.   

Injunctive relief after recognition of the foreign judgment

The Cypriot courts have the power to order injunctions that are more frequently encountered up until the issuing of a judgment, even after the judgment. In fact, in this post judgment instance the approach to injunctive reliefs/remedies changes and the courts should more readily grant such orders as the court is then no longer so concerned to protect the defendant as the cause of action has already been proven and there are always good reasons for assisting judgment creditors.

With a discovery order, otherwise named Norwich Pharmacal issued in aid of execution and once a foreign judgment has been obtained and recognised in Cyprus, the court orders the judgment debtor to disclose what assets he has and where they are located. This discovery order can be ancillary to a freezing injunction so as to give it effectiveness or it can be a separate order.

A freezing injunction otherwise largely known in Cyprus as a “Mareva injunction”, following the leading case of the Court of Appeal called Mareva Compania Naviera SA v International Bulk Carrier SA [1975] 2 Lloyd’s Rep 509, can be granted after judgment to restrain assets from being removed from the Cypriot jurisdiction. Such freezing injunctions have proven to be most prevalent and have indeed been widely used for the protection of assets in Cyprus. The purpose of a Mareva is to ensure that a judgment or an arbitral award will be satisfied and effectively enforced. One of the first cases which confirmed the use of freezing injunctions in Cyprus was the Supreme Court’s case of Nemitsas Industries Ltd v S&S Maritime Lines Ltd and Others (1979) 1 C.L.R. 302.

Available to the judgment creditor is also the so-called “Chabra order” used where there are grounds to believe that a third party is in possession or control of assets to which the judgment debtor (defendant) is beneficially entitled.

Another injunctive relief is the appointment of a receiver to manage the assets within the jurisdiction that are held by the judgment debtor in order to aid the execution of the judgment debt. This order is usually ordered as ancillary to a freezing injunction, essentially as a measure to secure that the freezing injunction will be adhered to.

EU Judgments

The EU judgments can be recognised via the EU Regulation No. 1215/2012 (the ‘Regulation’) which sets a relatively straightforward procedure for the recognition of such judgments (see the article in our website “Enforcement of Foreign Judgments in Cyprus”) and through some other EU regulations pertaining to uncontested claims or small claims that will not be examined in this article as it would be unusual to encounter a post-judgment injunctive relief in these cases by reason of their nature.

Pursuant to article 40 of the Regulation, a judgment given in a Member State shall carry with it by operation of law the power to proceed to any of the protective measures which exist under the law of the Member State where enforcement is sought. Therefore after the recognition of the judgment, the successful litigant can apply for post-judgment injunctive reliefs as analysed above. The issuing of such injunctions by the Cypriot courts is conditional on, inter alia, the existence of a ‘real connecting link’ between the subject matter of the measures sought and the territorial jurisdiction of the contracting state of the court before which those measures are sought.

Non-EU Judgments from countries with which Cyprus has a Bilateral Treaty
 
In Cyprus, the rules concerning the procedure on recognition, enforcement and execution of foreign judgments are contained in Law No. 121(1)/2000.  This Law applies where the judgment issued is by a non-EU country with which Cyprus has concluded an agreement for mutual recognition and enforcement of judicial decisions and arbitral awards.

Cyprus is bound by various Bilateral Treaties relating to the recognition & enforcement of foreign judgments with countries like the Russian Federation, Ukraine, China, Belarus, Georgia, Egypt etc. Cyprus is also a signatory to various Multilateral Conventions relating to the same. The types of enforceable judgments or orders are usually specified in the said Treaties.

Once the judgment is recognised by the Cypriot courts it carries the same force and is enforced in the same way as if originally issued by the Cypriot court and therefore the aforementioned injunctive reliefs are available in the hands of the judgment creditor.  

Non-EU Judgments from countries with which Cyprus has no Bilateral Treaty
 
A foreign judgment has no direct operation in Cyprus but it may be enforced by action or counterclaim at common law.
 
A judgment creditor seeking to enforce a foreign judgment, which was obtained in a country outside the EU and with which Cyprus has not concluded a bilateral treaty, has the option of bringing an action on that foreign judgment, applying for a summary judgment on the ground that the defendant (judgment debtor) has no defence. The judgment creditor can, instead of filing an action on the basis of the foreign judgment, file an action afresh relaying in the statement of claim the facts that constitute the cause of action.     

The creditor can, in the meantime, also apply for interim injunctions to secure the enforcement of the judgment.