A freezing order, often referred to as a Mareva injunction, is one of the most powerful interim remedies available in Cyprus litigation. It is designed to prevent a defendant from disposing of, transferring, hiding or otherwise dealing with assets in a way that may frustrate the enforcement of a future judgment.
In practical terms, a freezing order does not give the claimant ownership of the defendant’s assets. Nor does it operate as a form of early execution before the case has been decided. Its purpose is protective. It preserves the position until the court has had the opportunity to determine the dispute, so that a successful claimant is not left with a judgment that cannot realistically be enforced.
Freezing orders are particularly important in commercial disputes, fraud claims, shareholder disputes, debt recovery matters, breach of contract claims and cross-border litigation where assets may be moved quickly between jurisdictions. In Cyprus, they are frequently used where there is evidence that a defendant may dissipate assets, transfer funds abroad, move assets to related companies or otherwise place assets beyond the reach of the claimant.
Because of their serious consequences, freezing orders are not granted lightly. The Cyprus courts recognise their importance, but they also recognise that such orders can be intrusive and commercially damaging if granted without proper justification. For this reason, the applicant must satisfy specific legal requirements and must present the case with care, accuracy and fairness.
The Legal Basis for Freezing Orders in Cyprus
The principal legal basis for interim injunctions in Cyprus is section 32 of the Courts of Justice Law, Law 14/1960. This provision gives the court power to grant an injunction where it appears just or convenient to do so.
Cyprus courts have long accepted that this power includes the jurisdiction to grant Mareva-type freezing orders, following the principles developed in English common law. The remedy has become an established part of Cyprus civil litigation, particularly because Cyprus is a common law jurisdiction and because many commercial disputes involving Cyprus companies have an international element.
The usual requirements under section 32 are that:
there is a serious question to be tried;
there is a probability that the applicant is entitled to relief; and
unless the order is granted, it will be difficult or impossible to do complete justice at a later stage.
Even where these requirements are met, the granting of a freezing order remains discretionary. The court must still be satisfied that, in all the circumstances, it is just and convenient to grant the order. This means the court will weigh the risk of injustice to the claimant if the order is refused against the risk of injustice to the defendant if the order is granted.
Effect of the New Civil Procedure Rules
Cyprus introduced new Civil Procedure Rules in 2023. These rules modernised civil procedure generally, including the approach to interim applications. They did not remove or materially alter the essence of freezing orders. The underlying principles remain substantially the same: the applicant must show a serious case, a sufficient likelihood of entitlement to relief, and a real need for interim protection.
However, the new procedural framework, together with amendments to section 32, has clarified and expanded the court’s ability to grant interim relief in certain situations. In particular, Cyprus courts may now grant interim measures before substantive proceedings are filed, after judgment, and in support of proceedings or arbitration which are pending, concluded or anticipated, whether in Cyprus or abroad, provided the necessary connection with Cyprus exists.
This is important in cross-border disputes. Previously, questions could arise as to whether the Cyprus court had jurisdiction to grant free-standing interim relief in aid of foreign proceedings outside the EU framework. The current position is clearer. The court may consider interim relief where the respondent is within the Cyprus jurisdiction, where the relevant assets or the subject matter of the remedy are in Cyprus, or where there is another sufficient connection with Cyprus making it appropriate for the Cyprus court to act.
That said, the wider jurisdiction does not mean that freezing orders are automatic. The court will still examine the evidence carefully and will still require the applicant to satisfy the traditional safeguards.
Domestic and Worldwide Freezing Orders
A freezing order may be domestic or worldwide.
A domestic freezing order normally restrains the defendant from dealing with assets located in Cyprus. This may include bank accounts, shares in Cyprus companies, immovable property, receivables, vehicles or other movable and immovable property.
A worldwide freezing order goes further. It restrains the defendant from dealing with assets outside Cyprus as well. Such orders are particularly useful where the defendant has an international business structure, foreign bank accounts, overseas companies or assets held through nominees or related entities.
Worldwide freezing orders are serious remedies and the court will consider carefully whether the order is justified. The applicant must usually show that there is a sufficient connection with Cyprus and that the order is necessary to protect the effectiveness of the proceedings or the enforcement of a future judgment.
The court will also consider whether the order is proportionate. A freezing order should not be used oppressively or as a means of putting improper commercial pressure on the defendant. Its purpose is to preserve assets, not to punish the defendant or secure an unfair tactical advantage.
Risk of Dissipation
One of the most important elements in a freezing order application is evidence of a risk that assets may be dissipated.
It is not enough simply to say that the defendant has assets or that the claimant is worried about enforcement. The applicant must usually place before the court facts from which the court can infer that there is a real risk that, unless restrained, the defendant may dispose of, conceal or move assets in a way that would make enforcement difficult.
This risk may be shown in different ways. For example, evidence that the defendant has already transferred assets, moved money abroad, closed bank accounts, used nominee structures, failed to explain transactions, acted dishonestly, ignored payment obligations, or taken steps inconsistent with normal commercial conduct may support an application.
In fraud cases, the nature of the alleged wrongdoing may itself be relevant, although it will not always be enough on its own. The court will want to see a clear factual basis. A freezing order should be based on evidence, not suspicion.
At the same time, the applicant does not need to prove the underlying claim at the interim stage. The court is not conducting a full trial. It is deciding whether interim protection is necessary until the dispute is finally determined.
Ex Parte Applications and Urgency
Freezing orders are often sought on an ex parte basis, meaning without giving prior notice to the defendant. This is because giving notice may defeat the purpose of the application. If the defendant is warned in advance, there may be time to transfer funds, dispose of assets or take other steps before the court hears the application.
Under Cyprus law, ex parte relief requires urgency or special circumstances justifying the application being heard in the absence of the other side. The court will expect the applicant to explain why notice should not be given and why immediate intervention is necessary.
Because the defendant is not present at the first hearing, the applicant has a strict duty of full and frank disclosure. This is one of the most important duties in any ex parte application. The applicant must disclose not only the facts that support the application, but also material facts that may assist the defendant or may cause the court to hesitate before granting the order.
This includes weaknesses in the applicant’s case, possible defences, relevant correspondence, delays, previous settlement discussions, jurisdictional issues and any other matter that a fair-minded judge would want to know before making an order in the absence of the defendant.
Failure to comply with this duty can have serious consequences. The court may discharge the freezing order, even if there might otherwise have been grounds to grant it. The duty is not a formality. It is a fundamental safeguard against abuse of the ex parte procedure.
The Undertaking in Damages
A claimant who obtains a freezing order will normally be required to give an undertaking in damages. This means that, if it later turns out that the order should not have been granted, the claimant may be required to compensate the defendant for loss suffered as a result of the order.
This is another important safeguard. A freezing order can affect a defendant’s business, reputation, banking relationships and ability to deal with assets. The undertaking in damages helps ensure that the applicant approaches the remedy responsibly and does not seek an order lightly.
In appropriate cases, the court may also require security in support of the undertaking. This will depend on the circumstances, including the financial position of the applicant, the potential impact of the order and the nature of the dispute.
What Assets Can Be Frozen?
Freezing orders may apply to a wide range of assets. These can include bank accounts, shares, immovable property, vehicles, receivables, contractual rights, beneficial interests and other forms of movable or immovable property.
In Cyprus, freezing orders are commonly directed at bank accounts and shares in Cyprus companies. They may also be used where the defendant holds property in Cyprus or where Cyprus entities form part of a wider corporate structure.
A freezing order may also be combined with ancillary disclosure obligations. For example, the defendant may be ordered to disclose details of assets up to a specified value. Asset disclosure can be extremely important because a claimant may not know where the defendant’s assets are located or how they are held.
In some cases, the court may also grant related orders against third parties, including companies or persons who hold assets on behalf of the defendant. These are sometimes referred to as Chabra-type orders, where assets are held by a third party but are alleged to be beneficially owned or controlled by the main defendant. Such orders require careful legal and factual preparation.
Limits and Exceptions
A freezing order does not usually prevent the defendant from living or operating entirely. Standard exceptions are often included to allow the defendant to deal with assets in the ordinary and proper course of business, pay ordinary living expenses, pay reasonable legal expenses, and deal with assets above the frozen amount.
This is important because the purpose of the order is not to destroy the defendant’s business or prevent ordinary life. It is to preserve sufficient assets to meet the claim, if the claimant ultimately succeeds.
The defendant may apply to vary or discharge the order. For example, the defendant may argue that the order is too wide, that the amount frozen is excessive, that there was no real risk of dissipation, that material facts were not disclosed, or that the order interferes unfairly with legitimate business operations.
The court may maintain the order, vary it, require further undertakings, require security, narrow its scope or discharge it altogether.
What Happens After the Order Is Granted?
Where a freezing order is granted ex parte, the court will normally set a return date. The order must then be served on the defendant, and the defendant will have an opportunity to appear before the court and oppose the continuation of the order.
At the return hearing, the court may hear arguments from both sides. The defendant may file evidence challenging the order, and the applicant may respond. The court will then decide whether the order should remain in force, be varied or be discharged.
In practice, the first few days after a freezing order is granted are critical. The order must be served properly and quickly. If banks or other third parties need to be notified, this should be done carefully. The terms of the order must be followed exactly. Any failure by the applicant to comply with procedural obligations may create problems later.
The claimant must also continue with the substantive proceedings. A freezing order is an interim remedy. It is not a substitute for properly pursuing the claim.
Breach of a Freezing Order
A freezing order is a court order and must be obeyed. A defendant who knowingly breaches the order may be exposed to contempt proceedings. Depending on the circumstances, contempt of court may lead to serious sanctions, including fines, sequestration of assets or imprisonment.
Third parties who knowingly assist in breaching the order may also face consequences. For this reason, once banks or other institutions are notified of a freezing order, they usually treat it with great caution.
It is also important that the defendant reads the order carefully. Not every dealing with assets will necessarily be prohibited. The order must be interpreted according to its terms, including any exceptions. If there is uncertainty, the safer course is usually to seek legal advice or apply to the court for clarification or variation.
Freezing Orders in Support of Foreign Proceedings and Arbitration
Cyprus is frequently involved in cross-border disputes because many international business structures include Cyprus companies, Cyprus bank accounts or Cyprus-held assets. As a result, freezing orders in Cyprus are often sought in support of foreign court proceedings or arbitration.
Following the procedural reforms and the clarification of section 32, the Cyprus courts now have a clearer basis for granting interim relief in aid of proceedings or arbitrations which are existing, anticipated or concluded, whether in Cyprus or abroad, provided there is a sufficient Cyprus connection.
This can be particularly useful where the main dispute is being heard abroad, but assets are located in Cyprus or the defendant is connected to Cyprus. It may also be relevant where a foreign judgment or arbitral award has been obtained and the claimant needs urgent interim protection before or during enforcement.
The exact route will depend on the nature of the foreign proceedings, the location of the assets, the identity of the respondent, the existence of a Cyprus company or Cyprus bank account, and the applicable legal framework.
Practical Considerations Before Applying
A freezing order application must be prepared carefully. The court will expect clear evidence, not general allegations.
Before applying, the claimant should consider the following:
What is the underlying cause of action?
What is the amount of the claim?
What assets are known or suspected to exist?
Are the assets in Cyprus, abroad, or both?
What evidence shows a real risk of dissipation?
Is the matter urgent?
Should the application be made with or without notice?
Are there any facts that must be disclosed against the applicant’s own case?
Can the applicant provide an undertaking in damages?
Has there been any delay?
Delay is particularly important. If the applicant waits too long after becoming aware of the risk, the court may question whether the matter is truly urgent. Delay does not automatically defeat an application, but it may weaken it, especially in ex parte cases.
The evidence should usually be presented by affidavit and supported by documents where possible. Bank transfers, company filings, emails, agreements, asset searches, correspondence and previous conduct may all be relevant.
A well-prepared application should be fair, precise and proportionate. Overreaching can be counterproductive. If the order sought is too wide, unsupported or oppressive, the court may refuse it or later discharge it.
Conclusion
Freezing orders are among the most effective tools available in Cyprus litigation where there is a real risk that assets may be dissipated before judgment. They can be used in domestic disputes, cross-border commercial litigation, fraud claims, shareholder disputes, debt recovery cases and proceedings involving foreign judgments or arbitration.
At the same time, they are exceptional remedies. The Cyprus courts will not grant them simply because a claimant is concerned about recovery. The applicant must present a serious case, show a sufficient likelihood of entitlement to relief, demonstrate that complete justice may be difficult or impossible without interim protection, and persuade the court that the order is just and convenient.
The 2023 procedural reforms have not changed the fundamental nature of freezing orders, but they have clarified and strengthened the court’s ability to grant interim relief in appropriate cases, including in support of foreign proceedings and arbitration where there is a sufficient connection with Cyprus.
For claimants, speed and preparation are essential. For defendants, immediate legal advice is equally important, particularly where an order has been granted without notice and there may be grounds to vary or discharge it.
How A. Danos & Associates LLC Can Assist
A. Danos & Associates LLC advises and represents clients in civil and commercial litigation before the Cyprus courts, including urgent interim applications and freezing order proceedings.
Our litigation team can assist with assessing whether a freezing order is available, preparing the necessary evidence, filing urgent applications, coordinating service of court orders, dealing with banks and third parties, and representing clients at return hearings or applications to vary or discharge interim orders.
We also assist in disputes with a cross-border element, including cases involving Cyprus companies, assets located in Cyprus, foreign proceedings, arbitration, enforcement of judgments and commercial fraud.
If urgent steps are required to preserve assets in Cyprus, early advice is essential. The strength of a freezing order application often depends on how quickly and carefully the evidence is gathered, presented and placed before the court.
