One of the most tangible risks a creditor faces is that the debtor’s assets will in practice be emptied out before the action or the enforcement proceedings are concluded. Against that risk the legal order has provided a protective mechanism that can be brought into play before the stage of final attachment is ever reached.
Preliminary attachment is governed by Article 257 et seq. of the Enforcement and Bankruptcy Act No. 2004 and is a provisional legal protection measure serving to safeguard monetary claims and claims for security. The creditor may seek the measure before commencing enforcement proceedings, or may raise it at the same time as those proceedings. The function of the measure is to restrict the debtor’s freedom to dispose of their assets; its practical value is particularly high in relation to debtors inclined to conceal, hide or transfer assets to third parties in order to avoid payment.
The court decides on the basis of the existence of the claim and the urgency of the request; once the decision is carried out by the enforcement office, the creditor obtains an actual security over the debtor’s assets. In this briefing note we examine systematically the legal framework of the institution, how the application is made, the manner in which the decision is implemented, and the remedies available against it.
Preliminary Attachment as an Institution
Definition and Function
The institution is set out in Articles 257 to 268 of the Enforcement and Bankruptcy Act No. 2004 and constitutes a provisional protective measure aimed at securing monetary claims and claims for security.
Where, before the stage of final attachment has been reached, a danger emerges that the debtor’s assets will be moved beyond the creditor’s reach, the creditor may apply to the court and obtain a provisional seizure of those assets. The debtor is thereby prevented from transferring or disposing of their property to third parties in bad faith. The ultimate purpose is that the claim may actually be collected upon the conclusion of the action to be brought or the enforcement proceedings to be commenced thereafter.
Legal Nature of the Measure
Preliminary attachment is not an executory but a preservative measure; it serves not to convert assets into money but to keep them where they are. Although its actual implementation is carried out by the enforcement office, the power to decide belongs to the court. Given that its effect is to restrict the debtor’s power of disposition directly, it constitutes an interference with the right to property; that interference is nevertheless lawful, since it rests on a judicial decision and on the conditions laid down in the statute.
The provisional character of the decision also imposes a duty of continuation on the creditor: the measure must be supported by an action on the merits or by enforcement proceedings. If that step is not taken within the periods prescribed by the statute, the preliminary attachment lapses of its own accord.
Distinctions from the Interim Injunction
Both institutions fall under the heading of provisional legal protection; their scope, aims, manner of implementation and consequences, however, do not coincide:
- As regards the claims to which they may be applied: Preliminary attachment is provided only for monetary claims and claims for security. An interim injunction, by contrast, may be deployed in respect of any right forming the subject of the dispute, for the purpose of protecting a legal interest.
- As regards the assets over which they may be established: Whereas an interim injunction may be established only over the right or the property forming the subject matter of the dispute, a preliminary attachment may be directed at any element of the debtor’s assets; the property need not be connected with the action.
- As regards the aim pursued: In preliminary attachment the aim is security alone. An interim injunction, on the other hand, may pursue three separate aims: protection, security and performance, that is, compelling performance.
- As regards the authority carrying it out: A preliminary attachment decision may be implemented only through the enforcement office. In the case of an interim injunction, depending on the nature of the decision, either the enforcement office or the court registry is engaged.
- As regards duration and fate: An interim injunction, unless otherwise ordered, subsists until the action becomes final. A preliminary attachment, by contrast, becomes ineffective of its own accord if the creditor fails to bring an action or commence enforcement proceedings within the statutory period.
Conditions for Granting the Measure
The claim must be monetary in nature
For a preliminary attachment to be sought, the claim must be a monetary claim or must be capable of being asserted in money. The legal relationship from which the claim arises and the document on which it is based are of no importance in this respect. By contrast, the measure is not available in respect of obligations of delivery directed at the return in kind of movable or immovable property, or obligations of service having as their object the performance of work.
The claim must not be secured by a pledge
For the request to be granted, the claim must not be secured by a pledge, since a pledge already provides sufficient security. Where the claim is covered by a pledge, a preliminary attachment may not be ordered to the extent that the value of the pledged property covers the claim. Where the pledge is insufficient to cover the whole of the debt, the measure may be sought in respect of the uncovered balance.
The claim must have fallen due
Article 257 of the Enforcement and Bankruptcy Act No. 2004 makes the availability of preliminary attachment conditional upon the claim not being secured by a pledge and upon its having fallen due. At the decision stage the court is under a duty to verify whether the claim has genuinely matured. If it has not, the measure may not, as a rule, be ordered.
There must be a danger of concealment of assets or of flight
In respect of claims that have not yet fallen due, the statute provides an exception. Where there are strong indications that the debtor is concealing assets or engaging in conduct in bad faith calculated to prejudice the creditor’s right, the creditor may nevertheless make the request (Enforcement and Bankruptcy Act, Art. 257(2)). In that event the court may, notwithstanding that the claim has not fallen due, order the attachment with a view to protecting the creditor, having regard to the debtor’s conduct.
Obtaining the Decision
Court with Jurisdiction
The request is made by a petition submitted by the creditor to the court. Subject-matter jurisdiction is determined according to the general provisions. In applications made before an action is brought, subject-matter jurisdiction is established by reference to which court would have jurisdiction over a dispute arising from the claim to which the measure relates.
If the claim falls within the sphere of the general courts, the general courts may decide; if it falls within the sphere of the specialised courts, the specialised courts may do so. The enforcement court, for its part, has no power to order a preliminary attachment. Once an action has been brought, the request may be addressed only to the court before which the action is pending.
The Petition and Supporting Evidence
It is not regarded as sufficient for the creditor merely to assert that a claim exists; the creditor is also expected to place the foundations of that assertion before the court. Since the measure interferes gravely with the debtor’s assets, the court may not decide before reaching a sufficient conviction as to the existence of the claim and its maturity. The content of the petition and the supporting documents are therefore decisive for the process.
The evidence that may be relied upon in the application includes written contracts, invoices and instruments such as promissory notes and cheques; bank records and account statements; a court judgment establishing the claim; documents forming the basis of enforcement proceedings; and correspondence, e-mails and commercial book entries between the parties. Witness evidence is resorted to only exceptionally.
The petition, which is to be drawn up in written form, is expected to state the following matters clearly:
- The amount and nature of the claim and the legal relationship from which it arises
- The date on which and the reason for which the claim fell due
- Concrete explanations, if any, as to the likelihood of the debtor concealing assets
- A schedule of the evidence relied upon and the documents held
- The type of security proposed and the amount requested
- The property or rights over which the attachment is sought
The evidence must be annexed to the petition and, in respect of evidence not held, the place from which it is to be obtained must be indicated.
The Security Regime
As a rule, the provision of security is required in preliminary attachment decisions; the purpose is to cover the loss the debtor would suffer should the creditor turn out to be in the wrong. The matter is regulated in Article 259 of the Enforcement and Bankruptcy Act No. 2004. In some cases, however, no security is taken at all, and in others the matter is left to the court’s discretion. Three possibilities must accordingly be distinguished:
- Where the claim is based on a court judgment, no security is required; since the judgment carries the force of res judicata, the existence of the claim is established by a judicial decision.
- Where the claim is based on a document having the character of a judgment — such as a notarial deed, an enforceable bill of exchange or a final administrative decision — the court decides in its discretion whether security is to be taken.
- Where the claim is based neither on a judgment nor on a document having the character of a judgment, that is, where it is based on an ordinary document, a contract or an invoice, security is invariably taken unless a special provision applies; in that event the security is a mandatory condition for the decision to be given.
What is the amount of the security?
The statute prescribes no fixed rate for the security, leaving the determination of the amount to the discretion of the judge. In practice the courts mostly take as their basis a rate of between 10% and 15% of the amount of the claim, and may order a higher sum where factors such as the nature of the matter and the state of the debtor’s assets so require.
The function of the security is to ensure that the loss the debtor would suffer as a result of a preliminary attachment obtained without justification is made good. The greater the risk of loss the attachment will create, therefore, the higher the security the court determines may be.
Examination and Decision Procedure
The process opens with the creditor’s written application. The court as a rule assesses the request on the papers without holding a hearing; decisions are therefore most often given without the debtor being heard. In the course of the examination the following questions are answered first: Does the claim genuinely exist and has it fallen due? Is the assertion supported by a written document? Is there a danger of concealment of assets on the part of the debtor? Has the creditor offered adequate security?
If the creditor has established the assertion with convincing evidence and the other conditions are also met, the court orders the preliminary attachment. The decision permits a provisional attachment to be placed over the debtor’s assets.
The creditor who obtains the decision must apply for enforcement within 7 days; if that step is not taken, the decision loses its validity.
Implementing the Decision
Application to the Enforcement Office
The decision obtained from the court must not remain on paper; the attachment must actually be carried out. That operation can be effected only through the enforcement office.
Under Article 261 of the Enforcement and Bankruptcy Act No. 2004, the creditor must apply to the enforcement office, with the original of the decision or a certified copy of it, within 10 days from the date on which the decision was given. A failure to act within that period renders the decision ineffective.
For details on the implementation of attachment, our note entitled What Is Attachment? may be consulted.
The Competent Enforcement Office
As a rule, enforcement of the decision is sought from the enforcement office within the judicial district of the court that gave it. If the property to be attached is situated in another judicial district, the competent enforcement office arranges for the attachment to be carried out by way of judicial assistance, by sending a letter of request to the enforcement office of the relevant place.
Obligation to Commence Proceedings or Bring an Action (Enforcement and Bankruptcy Act, Art. 264)
The provisional character of the measure imposes on the creditor the duty of rendering the outcome permanent. Article 264 of the Enforcement and Bankruptcy Act No. 2004 expressly requires that action be taken within specified periods following the implementation of the preliminary attachment.
The period running after the attachment is carried out
Within 7 days from the date on which the preliminary attachment is implemented, the creditor must either commence enforcement proceedings — by way of proceedings on a judgment, proceedings without a judgment, attachment proceedings specific to bills of exchange, or bankruptcy — or bring an action in respect of the principal claim. If the attachment was carried out in the creditor’s absence, the period begins to run at the moment the record of attachment is served on the creditor.
Remedies Against the Decision
Objection by the Debtor and Third Parties
The debtor, or third parties whose interests are prejudiced, may object to a preliminary attachment decision by applying to the court that gave the decision. The objection must be raised within 7 days of the implementation of the decision. The period is preclusive; if it is not used in time, the right to object is extinguished.
The moment at which the period begins to run varies from person to person. If the debtor is present at the time of the attachment, the period begins at the moment the attachment is actually carried out. If the debtor is not present, the date on which the record of attachment is served is taken as the basis. For third parties, the starting point is the date on which they learn of the attachment; it is therefore important that the moment of knowledge should be capable of proof.
The matters on which an objection may be based are the following: the court’s lack of jurisdiction — this objection may be raised only by the debtor; the non-fulfilment of the substantive conditions of the measure, for instance that the claim is not a monetary claim, that it is secured by a pledge, or that it has not yet fallen due; that no security was provided at all or that the security provided was inadequate; and, finally, that the attachment was obtained without justification or in bad faith.
Complaint and Lifting Against Security
The complaint procedure (Enforcement and Bankruptcy Act, Art. 16 et seq.)
Where the debtor or third parties whose interests are infringed take the view that the attachment operation has been carried out in a procedurally irregular manner, they may lodge a complaint with the competent enforcement court within 7 days of the date on which they learned of the operation.
The principal defects that may form the subject of a complaint include the application of the attachment to property other than that targeted, service not effected in accordance with the proper procedure, a record of attachment drawn up incompletely or unlawfully, and an attachment carried out in manifest breach of the procedural provisions.
This application is not an objection; it is a supervisory mechanism enabling procedural errors to be remedied.
Lifting of the attachment against security
Another option open to the debtor and to third parties whose interests are prejudiced is, instead of resorting to objection directly, to provide valuable security capable of covering the creditor’s probable loss. By that route it may be requested that the decision not be implemented at all or, if it has been implemented, that it be lifted.
The method performs a balancing function in particular in ensuring that the debtor’s commercial activity is not interrupted and that the debtor’s standing in the market is not damaged.
Liability in Damages for Unjustified Attachment
A debtor and third parties who suffer loss as a result of a preliminary attachment carried out without justification may seek redress for that loss from the creditor who caused the attachment to be placed, by way of an action for damages.
In that action the creditor’s liability is not fault-based; for pecuniary damages to be awarded, it is not required that the respondent be at fault. The position is different as regards non-pecuniary damages, where the condition of fault is required.
Statutory basis
The basis of the liability is Article 259 of the Enforcement and Bankruptcy Act No. 2004:
Enforcement and Bankruptcy Act, Art. 259
"A creditor who requests a preliminary attachment shall, should the attachment prove to have been unjustified, be liable for all losses that the debtor and the third party may thereby suffer and shall be obliged to provide the security specified in Article 96 of the Code of Civil Procedure."
The liability in question is independent of fault, that is, objective in nature. It need not be proved that the creditor acted in bad faith; a finding that the attachment was unjustified suffices to give rise to the obligation to pay damages.
Situations regarded as unjustified
In the following situations the attachment is regarded as unjustified and a claim in damages may arise:
- The action brought has been dismissed
- The creditor has failed to commence proceedings within the period or has failed to pursue the action brought
- The measure has been ordered at the creditor’s request even though the claim had not fallen due
- It subsequently emerges that the security provided does not cover the extent of the claim
Asserting the claim in damages
The debtor may seek compensation for the direct and indirect losses arising from the unjustified attachment — such as damage to commercial standing, the obstruction of transactions and the termination of contracts — in a separate action under the general provisions.
The burden of proving that the loss occurred, its amount, and that it stems directly from the implementation of the preliminary attachment lies with the debtor. The court assesses whether a causal link exists between the loss and the attachment.
Statute of limitations
The limitation period prescribed for this action in damages is 2 years. The period begins to run on the date on which the preliminary attachment is lifted or lapses.
Realisation of the security
The security taken from the creditor may be used to cover the loss where the debtor’s claim in damages is upheld. The court may in that context order that the whole or a part of the security be paid to the debtor.
Independent Legal Assessment
Preliminary attachment is one of the instruments that most affects the outcome in the collection of commercial claims, because the measure often changes the debtor’s payment behaviour before the action is concluded. That same effect, however, turns against the creditor where the application is poorly constructed: by reason of the strict liability regime, a creditor who turns out to be in the wrong becomes liable to make good the resulting loss even in the absence of bad faith. In that respect the measure is an instrument that is both powerful and attended by risk.
The most fragile point of the process is the calendar. The 10-day period for applying for enforcement after the decision and the 7-day period for commencing proceedings or bringing an action after the attachment run independently of one another, and missing either of them leaves the decision without effect. In a specific file the following headings should be prioritised:
- Documenting, before the application, the monetary nature of the claim and its maturity
- Where a part is covered by a pledge, directing the request only at the uncovered balance
- Calculating in advance the burden of security according to whether the underlying document is a judgment, a document having the character of a judgment, or an ordinary document
- Monitoring separately the 10-day period allowed for enforcement of the decision and the 7-day period relating to the commencement of proceedings
- Identifying the property to be attached in concrete terms at the application stage and anticipating the need for a letter of request in respect of property situated in another judicial district
- Assessing from the outset the risk of damages that would arise should the request be refused or the action be lost
Independent Legal provides advisory services and conducts litigation at every stage in the protection of commercial claims, from the preparation of preliminary attachment applications through to the enforcement of the decision and the objection procedures to be pursued against it.