Meaning
Statutory liability arises when a party applies for property preservation before or during litigation but the application is later determined to be baseless or erroneous. This article 108 wrongful preservation provision is established within the Civil Procedure Law of the People’s Republic of China to protect respondents from financial losses caused by the freezing of assets. It dictates that the applicant must compensate the respondent for any damages resulting from such measures if the underlying claim fails.
Financial Liability
The applicant bears the burden of proof regarding the validity of the preservation measure at the time of filing. While article 108 wrongful preservation remains a constant risk, courts typically require a bond or guarantee to ensure funds are available for potential compensation. This security deposit acts as a primary source for satisfying damages if a court finds the original application lacked a factual or legal basis.
Judicial Assessment
A court determines whether a measure was wrongful by evaluating the final judgment of the case against the initial preservation request. Because article 108 wrongful preservation requires a causal link between the asset freeze and actual loss, the respondent must provide evidence of specific economic harm. Such harm might involve lost interest, penalties for breach of contract with third parties, or the depreciation of the seized goods.
Statutory Limitation
Liability for damages under this provision is generally limited to the amount of the security provided or the actual loss sustained. Although article 108 wrongful preservation covers direct economic impacts, it does not typically extend to speculative profits or indirect reputational damage. The measure of compensation is strictly tied to the period during which the assets were restricted from use.
