In brief
- In the UAE, bank accounts and real property are the most common form of assets which are attached through the courts. Certain assets such as those owned by the state or the governments of any of the Emirates or those which are reasonably needed by a debtor may not be attached.
- It is possible for a party to secure a claim by way of a precautionary attachment order, for litigation which is primarily intended to commence overseas.
- Due to the expatriate dominated business environment in the UAE, precautionary attachment orders are extremely common place against foreign owned assets.
What is a Precautionary Attachment Order?
A Precautionary Attachment, as governed by the UAE Law on Civil Procedure Article 252, is the legal process of seizing assets to ensure the satisfaction of a judgment in those circumstances where there is a justifiable risk and fear that they will be disposed of prior to final judgment. If there is a real risk that the assets will be disposed of before final judgment, an attachment order will be issued to protect the interests of the claimant.
An attachment is to be distinguished from an injunction, which is a facet of common law jurisdictions, and is a court order requiring a party to do or refrain from doing a certain act. Although far more limited than an injunction, an attachment is a form of equitable relief emanating from the civil law.
Attachments are usually applied for through an ex parte application (i.e. on the application of one party alone) and they are usually granted or refused within the same day due to their urgent nature. Once granted, the claimant is advised to accompany the court bailiff to ensure that the attachment order is enforced immediately.
This form of attachment is to be distinguished from the attachment order which is sought at the execution stage of proceedings, which is usually applied for by the judgment creditor after 15 days of the judgment becoming final and the judgment debtor has failed to comply with the judgment after being summoned. This 15 day time period starts to run from the date on which the judgment debtor receives the summons.
What assets can be attached by a Precautionary Attachment Order?
Although the reach of an attachment order is far and wide, in practice, bank accounts and real property are the most common form of assets which are attached through the courts. The onus is on the claimant to specify and identify the assets to which he seeks such an attachment order.
Certain assets may not be attached and they include, but are not limited to: any property owned by the state or the governments of any of the Emirates, the house and anything in the house that the judgment debtor and his legal dependents reasonably need, land or agricultural equipment necessary for a farmer to earn a sustainable living and books or other equipment necessary for the debtor to perform his profession.
There is also a separate attachment procedure under the Maritime Code Article 115 for the arrest of vessels in respect of maritime debts, which is beyond the scope of this article.
In what circumstances are Precautionary Attachment Orders granted?
Usually, precautionary attachment orders are granted to secure a genuine claim. The claimant must be able to satisfy the court that there is a real risk and fear of loss which may include, but is not a necessity, that the debtor has no stable residence in the UAE, or that the debtor may abscond and/or dissipate of the assets.
Once such an attachment order is enforced (which is usually soon after it is granted), the claimant is required to file his substantive claim within eight days or the attachment order may be considered null and void.
It is possible for a party to secure a claim by way of a precautionary attachment order, for litigation which is primarily intended to commence overseas. In this case, provided that either: substantive proceedings are also brought in the UAE and are stayed whilst the foreign litigation comes to an end or (ii) "attachment validity and continuity" proceedings are brought in the UAE, which are based on a substantive claim being litigated abroad, the attachment order will usually be deemed to remain valid during the course of such proceedings abroad.
Can a Precautionary Attachment Order be objected to or appealed?
Both the claimant and the defendant may object to an attachment order or take it one step further through an appeal. A claimant may object to the quantum of the attachment order and the defendant may object to the fact that an attachment order was even granted or the extent to which it was granted.
It is important to note that any objection by the claimant will ordinarily ruin the element of surprise and it will also not achieve any delay in the process of enforcement. In Dubai, either party may appeal the attachment order immediately without first resorting to filing an objection first.
What is the enforcement process?
Once the attachment order is executed, a judge may prescribe certain conditions for enforcement. These typically include proof of ownership of the asset or a copy of the licence to prove that the business to be attached belongs to the defendant. It is also at the discretion of the judge to order that the claimant provide a bank guarantee or provide an undertaking to cover any damages that the defendant may suffer should the action prove unjustified.
When can attached assets be sold?
In practice, if the defendant fails to pay the amount awarded by the court after final judgment and after being given proper notice to do so, assets under attachment are sold through a public auction, the proceeds of which are distributed to the creditors in accordance with the law. This can be a slow and cumbersome process, with most assets held until the substantive action is determined before being sold.
How are Precautionary Attachment Orders regarded in the UAE?
Due to the expatriate dominated business environment in the UAE, precautionary attachment orders are extremely common place against foreign owned assets. However, notwithstanding the desire of the courts to take the business environment and key players into consideration, there still must be a prima facie case against the defendant and a real risk and fear that the claimant may not be able to enforce the judgment before such an order will be granted by the UAE courts.
In practice, it is difficult to obtain such an attachment against the assets of a UAE national or a UAE company as it is difficult to establish the risk of dissipation of such assets. Therefore, the courts are reluctant to grant attachment orders in such circumstances.
Author: Reema Ashraf
r.ashraf@hadefpartners.com
The views expressed in this article do not necessarily constitute the views of Zawya.
© Hadef & Partners 2012
