Underwriting Property Preservation Security Insurance for Cross Border Claims
Property preservation security insurance requires onshore Chinese guarantees backed by enforceable offshore bank collateral to mitigate cross-border subrogation risks.
Intra-Litigation Property Preservation
Meaning
Urgent measure to secure assets after a lawsuit has commenced but before a final judgment is rendered is a standard procedure in Chinese courts. This intra-litigation property preservation is used to ensure that the defendant does not hide or transfer property while the trial is ongoing. It provides a level of security for the plaintiff that the eventual ruling can be enforced.
The court must approve the application and specify the assets to be frozen.
Timely Application
The request for the seizure can be made at any point after the court accepts the case and before the final decision. This intra-litigation property preservation is often filed immediately after the service of the complaint to prevent the defendant from reacting to the lawsuit. The plaintiff must show that the failure to preserve the assets would make the judgment difficult to execute.
Speed is the primary factor in the effectiveness of the measure.
Judicial Order
The court reviews the application and the provided evidence to determine if the seizure is justified. Under intra-litigation property preservation, the judge issues a formal ruling that is sent to banks or land registries. These institutions are required by law to implement the freeze within a very short period.
The court has the power to search for assets that the plaintiff may not have fully identified.
Bond Requirement
Security must be provided by the applicant to cover the potential losses of the defendant if the freeze is later found to be unnecessary. This intra-litigation property preservation usually requires a bond in the form of cash or an insurance policy. The amount of the security is often a percentage of the total value of the frozen assets.
If the plaintiff wins the case, the security is released once the judgment is satisfied.