Seizure of debtors’ assets: no longer an automatic claimants’ privilege
Interim measures are usually the only way to ensure efficient safeguarding of a claimant’s interest. The most popular method: seizure of the debtor’s assets. If a debtor owns anything valuable, advance freezing is essential for preventing it from dissipating assets so as to frustrate a potential court decision.
In order to obtain interim measures in Lithuania it was usually enough for a claimant to clearly support its claim with written evidence and affirm a reasonable risk that the final decision of the court will be impossible/difficult to enforce due to the poor financial situation of the respondent (especially in the case of a significant amount claimed).
Recently, the Lithuanian civil courts have been changing the standards of evidential requirements for interim measures. Now, following the principles highlighted by the highest Lithuanian courts, judges tend to require substantial evidence proving actual or potential dishonesty of a debtor as a prerequisite. Case law has already drawn preliminary guidelines on what kind of evidence may prove a sufficient level of a debtor’s dishonesty. It might be evidence of: unfair previous transfer(s) of the debtor‘s assets; provision of incorrect information/warranties by the debtor in contractual relations; the debtor’s offer(s) for others to buy or take its assets; unfair behaviour by the debtor as found in other proceedings; the debtor avoids complying with other court decision(s); continuing failure by the debtor to produce financial statements, and the like. It is worthy of note that a debtor’s refusal to accept a creditor’s claim before addressing the matter to a court is not considered as proof of dishonesty according to the prevailing case law.
These new standards ensure greater security for defendants and will certainly be appreciated by those involved in litigation as alleged debtors by unfair claimants (e.g. contractors, competitors) who cover their intentions simply to apply pressure concerning business decisions or other unfair matters of principle. On the other hand, many fair claimants can find it difficult to provide evidence of a debtor’s dishonesty and thus face dissipation of the debtor’s assets, ending in a meaningless court process and an unenforceable favourable decision. Clearly, the courts are still in search of balance: We await more notable precedents to be created.