Blog » FREEZING INJUNCTIONS IN HUNGARY 2 – WHICH ONE TO CHOOSE?
FREEZING INJUNCTIONS IN HUNGARY 2 – WHICH ONE TO CHOOSE?
06 March 2017
What kind of freezing injunctions can be sought in Hungarian business litigations, and what are their effects to the defendant?
After addressing some base questions of freezing injunctions in our previous article, available here, now we share the 3 (three) types of freezing injunction available in Hungary, to prevent the frustration of judgement during litigation by the defendant.
This is a second article of a three-part article series on freezing injunctions in Hungarian business litigation, which focuses on the types of injunctions available in Hungary.
Types of freezing injunctions
The following 3 types of freezing injunctions are available for you in Hungary:
- freezing bank accounts of defendant;
- freezing movable or immovable assets of defendant;
- freezing company assets by restricting the business transactions of defendant.
Freezing bank accounts
In case you have a pecuniary claim, you can seek the freezing of bank accounts of the defendant.
In case the freezing injunction is granted, the court bailiff first offers the option to the defendant to transfer the amount to him voluntarily, in the absence of which he blocks the bank account of the defendant, and the money precised in the injunction order will be transferred by the bank to a secured bank account.
Given that the defendant does not have access to this secured bank account, this money serves as a guarantee for satisfaction, and once you have the enforceable judgment, this can be paid to you.
Freezing movable or immovable assets
This means the seizure of the assets of the defendant by the court bailiff.
But before thinking that you have found the Holy Grail of freezing injunctions, you have to know, that you cannot seek this kind of freezing injunction in every case ,and it cannot be sought for “every” assets.
According to the case law of Hungarian Courts, you can seek movable or immovable asset freeze only if you have proprietary claim in respect of a given asset, or in case, if your claim is at least somehow connected to a given movable or immovable asset belonging to the defendant.
This is the case, when the litigation is about a purchase contract, and you want to acquire the ownership title of a real estate or other tangible asset. The same goes for the case, where you sue the defendant for money based on a secured loan contract, and you have a mortgage on his real estate or other business asset, securing the loan as pecuniary claim.
However, if you have a mere pecuniary claim, without direct connection to a determined tangible asset, you cannot seek the movable or immovable asset freeze, by pretending that in case of enforcement of the judgment, you could seek satisfaction from these assets, too.
Restricting business transactions
The third kind of the asset freeze, when the court restricts the business transactions of the defendant, by providing, that any business transaction, outside the normal course of business, can be executed by the defendant only, if an independent chartered accountant confirms that the transaction does not endanger the satisfaction of the claim.
You can request this freezing injunction against your corporate defendant instead of the bank account freeze or asset freeze, mentioned above, however, the judge will order this type of asset freeze also “ex officio” in case the bank account freeze against the defendant was unsuccessful.
When it comes to the question, which are the transactions outside the normal course of business of the defendant, well, this question can be answered only on a case-by-case basis.
The purpose of this type of asset freeze is to preserve those important business assets of the defendant, which form the basis of his business activity (e.g. tools, machinery, etc.), by leaving him able to further pursue its usual business during the whole litigation.
To take an example, a defendant, manufacturing tyres, could not alienate the factory itself and the other tools and instruments, making him able to manufacture the tyres, but the selling of the tyres as end-products would be possible under the effect of this freezing injunction.
Another example can be on one hand the long-term lease contract of the company seat of the defendant which is within the normal course of business, so the payment of rent could not be restricted, while the contracts planned to be concluded for launching a new activity, not pursued before by the defendant, can be outside the normal course of business, and therefore restriced.
Before choosing which type of freezing injunction you seek, it is worth to consider the above mentioned, to find the one best matching your interest and does not frustrates entirely the defendant.
Given that any of the injunctions has considerable and lasting effect on the defendant, judges will be reluctant to apply the most powerful, if the purpose can be attained with less strict measures.
Even if the judge is not bound by the request of the claimant, when considering which freezing injunction to apply, and it can order bank account freeze instead of asset freeze, with a careful planning and smart choice, you save time and give a greater chance that the judge really orders the injunction sought against the defendant.
In the next article, we will explore the circumstances that the judge considers when deciding upon an application for freezing injunction, as well as the case law of Hungarian courts.
CAN YOUR DEBTOR ESCAPE LIQUIDATION BY SETTING OFF CLAIMS IN HUNGARY?
The initiation of a liquidation procedure is an effective debt collection method, since the debtor may only avoid being liquidated by paying the claim if the conditions specified in the Act on Bankruptcy Proceedings and Liquidation (Bankruptcy Act) are met. For this reason, in the case of liquidation, one of the most common defences of the debtor is the reference to offsetting. But can the debtor refer to offsetting without limitation during liquidation? In our short article we answer this question.Read more »
SZIGET FESTIVAL FINED RECORD HUF 30 MILLION FOR GDPR BREACHES – WHAT WENT WRONG?
A few days prior to the first anniversary of the entry into force of the GDPR the Hungarian Data Protection Authority imposed the biggest data protection fine in Hungary so far. The target was the biggest Hungarian festival organizer company thanks to whom the public may enjoy the SZIGET, the VOLT or the Balaton Sound Festival. The Data Protection Authority reviewed the check-in system of the festival and the data processing in relation with the check-in. In our short article we summarize the mistakes the Authority identified.Read more »
CONSTRUCTION TRUSTEESHIP IN HUNGARY - GETTING PAID IN CONSTRUCTION PROJECTS AS SUBCONTRACTOR
Construction trusteeship, as mandatory collateral management of major private construction projects in Hungary, strives for protecting subcontractors against non-paying general contractor, by allowing direct payments from employer under certain conditions. How does it work in practice and what are the limits of subcontractor protection? We address these issues in this article.Read more »