Provisional Attachment

Overview

Provisional attachment is an interim remedy freezing the prospective defendant’s assets (such as bank accounts, real property, or vehicles) to preserve assets for the enforcement of a future money judgment. Even if a claimant wins a lawsuit, enforcement may not be possible if the defendant conceals assets or absconds with money. A provisional attachment order prevents the defendant from disposing of their assets.

The points are as follows.

• Protective measure
• Temporary in nature
• Not a final confiscation

Strategic use in debt recovery

Beyond its primary purpose, a provisional attachment is often used to encourage early settlement in debt recovery. When a debtor’s assets (typically bank accounts) are frozen, the debtor is more likely to agree to a settlement in exchange for lifting the freeze, even before litigation is commenced. If, for example, the debtor company’s bank account is frozen, it could face several penalties on its banking transactions with the bank. This may allow the creditor to resolve the case without commencing litigation (see also Bank Accounts).

Requirements

To apply for a provisional attachment order, the applicant must identify the respondent’s assets to be frozen first. The applicant must then prima facie, on a documents-only basis, prove (i) the claim for which the assets are to be frozen and (ii) the necessity of freezing those assets.

Timeframe

A provisional attachment involves a demanding process within a short timeframe. If everything goes smoothly, an order can be obtained within 1-2 weeks after the application is filed.

Procedure

1. The applicant files an application with the court.
2. The judge reviews the case on a documents-only basis.
3. The applicant attends an interview with the judge. If admitted, the judge designates the amount of the security there and then.
4. The applicant deposits the security with the Legal Affairs Bureau.
5. The court issues a provisional attachment order without prior notice to the respondent.

Secutiry

If the application is admitted, the court instructs the applicant to deposit security to protect the respondent from unjustified freezing. The security generally ranges from 20-30% of the amount sought to be frozen. The security is refundable after the applicant obtains a settlement or judgment (or arbitral award) in their favour. If, however, the applicant loses in a subsequent lawsuit, the security is expected to cover the respondent’s damages resulting from the unjust provisional attachment.

Allocation

The applicant may apply for the provisional attachment of one or more assets up to a total value equivalent to the claim amount. If, for example, the claim amount is US$1 million, the applicant may apply for freezing two assets, valued at US$300,000 and US$700,000, respectively.

Bank accounts

In practice, provisional attachment is used most frequently to freeze bank accounts. Bank accounts have the following characteristics:

• Multiple bank accounts are often subject to provisional attachment.
• The balance is unknown.
• The debtor values its relationship of trust with its banks.

The applicant is often aware of multiple bank accounts, but the balances are generally unknown. For example, an applicant with a claim of ¥100 million may allocate ¥40 million to account A and ¥30 million each to account B and C. In this case, the applicant will be required to deposit security ranging from ¥20 million to ¥30 million (i.e., 20 to 30% of the amount sought to be frozen). If it then turns out that the balance in account B is ¥100 million, with no balance in either account A or account C, only ¥30 million in account B will be successfully frozen. Therefore, when making an application, the applicant must estimate the likely balance in each account and allocate the appropriate amount.

In Japan, businesses generally have one or more ‘main’ banks from which they raise funds from time to time based on long-term relationships. Accordingly, debtors value their relationship with such banks. If a bank account is frozen, the debtor could face various adverse consequences in its dealings with that bank. Regardless of the amount, this encourages the debtor to resolve the dispute with the creditor to restore their relationship with the bank. Therefore, if an applicant hesitates to apply for freezing a large sum due to an uncertain likelihood of success or the burden of security, it is a strategic option to apply for freezing only a small sum, expecting the debtor to be forced to maintain the relationship with the bank.

Frequently Asked Questions

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