Chabra orders are in essence freezing orders (mareva injunctions) issued against a third party against whom although there is no substantive cause of action, there is information that he/she holds assets on behalf of the main claimant.

Cyprus Courts, as part of their constant efforts to face and overcome the difficulties occasioned by the globalization of trade, have introduced the jurisdiction of Chabra orders to the Cypriot legal framework and have exercised such jurisdiction on numerous instances.

Alongside Prohibitory orders, Receivership orders, Disclosure orders, Search (Anton Piller) orders, Anti-suit injunctions and European account preservation orders (all discussed elsewhere on the website), Chabra orders form the complete arsenal of interim relief available in Cyprus Courts.

Requirements

Chabra orders will only be issued under specific circumstances. We set out below a brief summary thereof:

1. A third party against whom there is no cause of action is in possession of assets beneficially owned by the main defendant
2. The latter can be shown to control or have the power to dispose the assets
3. There is good reason to suppose that the assets would be amenable to some process, ultimately enforceable by the courts, by which the assets would be available to satisfy a judgment against the main defendant
4. The affairs of the third party against whom the injunction is sought are intermingled with the affairs of the main defendant
5. There is risk of dissipation
6. The claim for the order is ancillary and incidental to the plaintiff’s cause of action

Lastly, although there is still no binding Cyprus case law on this matter, it is important to join the third party as a co-defendant. This requirement is often neglected.

Innocent third parties

Since the jurisdiction is exceptional and will only be exercised when it is just and equitable to do so, the Courts may be reluctant to issue a Chabra order against entirely innocent third parties who have not taken any actions to frustrate the administration of justice.

Further Discretion pursuant to Regulation (EU) 1215/2012 (Recast Brussels Regulation)

According to section 35 of the Recast Brussels Regulation, an application may be made to the courts of a Member State for such provisional, including protective, measures as may be available under the law of that Member State, even if the courts of another Member State have jurisdiction as to the substance of the matter.

The notion of provisional measures referred to in the Regulation includes protective orders aimed at obtaining information or preserving evidence or preventing the alienation of assets.

Importantly, it must be stressed that where provisional, including protective, measures are ordered by a court of a Member State not having jurisdiction as to the substance of the matter, the effect of such measures should be confined to the territory of that Member State.

Further discretion pursuant to International Commercial Arbitration Law, Law 101/87 (“the ICA Law”)

Cyprus Courts have denoted that Chabra orders are fully compatible with section 9 of the ICA Law, which gives discretion to Cyprus Courts to issue an interim (protective measure) at any time before or during the arbitral proceedings. Specifically:

“The application, as submitted, is fully consistent with the content, objectives and philosophy of The International Commercial Arbitration Act 101/87, on which the application is based, by Article 9 thereof, providing that (the competent District Court in Cyprus) has the power, at the request of one of the parties to an arbitration procedure, to order precautionary measures at any time before the commencement or during the arbitration procedure, in order to ensure … the smooth and effective course of the arbitration.”

ICA Law applies to arbitrations with an international element. An arbitration is international if:

1. The parties to the arbitration agreement have at the time of the conclusion of the agreement their places of business in different States; or
2. One of the following places is situated outside the State in which the parties have their places of business:

1. The place of arbitration determined in the arbitration agreement
2. The place where a substantial part of the contracting obligations is to be performed
3. The place with which the subject-matter of the dispute is most closely connected

Note: In case of a Chabra order issued in aid of arbitration proceedings, there is no need for the person against whom the injunction is granted to be a party in the arbitration proceedings.

Contempt of Court

Any violation of any interim order, whether prohibitory or mandatory, constitutes contempt of court. Contempt of court is a serious offence which is punishable by imprisonment or sequestration of assets or a fine.

Any third party who while aware of the order knowingly and intentionally incites or assists in its violation may also be held liable in contempt of Court.

Cyprus Courts will treat any wilful violation with the utmost severity. In a well-known passage, often adopted by Cyprus Courts, the Supreme Court denoted the following:

«Invariably disobedience of the order of the Court undermines the effectiveness of the judicial process, a defiance of far reaching social repercussions. Obedience to orders of the Court constitutes one of the foundations of civilized life»

Our Services

Economou & Co LLC is a trusted Cyprus leader in all matters involving corporate litigation and interim relief. Please contact us if you are interested in:

• Strategic advice with regards to the legal steps to be undertaken in Cyprus in order to achieve the desired result
• General advice in respect to all matters concerning corporate litigation, such as commercial fraud, civil conspiracy, jurisdictional issues, recognition and enforcement proceedings
• Filing and obtaining interim relief, including but not limited to prohibitory orders, Chabra orders, disclosure orders (Norwich Pharmacal), tracing orders (Bankers Trust), receivership orders, Search Orders (Anton Piller), gagging orders and anti-suit injunctions