Meaning
Judicial orders issued by Chinese courts before or during litigation prevent a respondent from dissipating assets. An applicant can secure an asset preservation injunction under the Civil Procedure Law of the People’s Republic of China to freeze bank accounts, seize real estate, or distrain machinery. This measure ensures that a future judgment remains enforceable, preventing the respondent from dissipating funds before the final ruling.
The rule applies across both domestic civil disputes and foreign-related commercial arbitration cases where assets are located within Chinese territory.
Judicial Security
Applicants must provide a guarantee of sufficient value to cover potential losses of the respondent. If the subsequent lawsuit fails, the respondent can claim damages against this security. Court practices require either a cash deposit or a letter of guarantee from an approved Chinese financial institution or insurance company.
Procedural Requirement
Courts must rule on urgent pre-litigation applications within forty-eight hours of receipt. Once the court issues the ruling, execution begins immediately to prevent the respondent from transferring funds. The applicant must initiate the main lawsuit or arbitration within thirty days of the order.
If the applicant fails to meet this deadline, the court lifts the freeze.
Execution Risk
Local bank branches must comply with judicial orders to freeze accounts but sometimes prioritize local tax claims over civil judgments. Frozen bank accounts remain restricted for up to one year, while real estate seizures remain valid for up to three years. Extensions must be requested by the applicant before the original period expires.
The claimant bears the burden of tracking the expiration dates and filing timely renewal applications to avoid losing their priority position in the asset queue.
