Property Preservation Order

Application Procedure

The execution of a property preservation order begins with the filing of an application with the court that has jurisdiction over the case or the assets. The plaintiff must submit a written request specifying the assets to be preserved, their value, and the grounds for the application. The plaintiff must also provide a security bond, which can be in the form of a cash deposit, a property title, or a guarantee letter from a licensed Chinese litigation insurer.

The court reviews the application and, if it meets the legal requirements, issues the order within forty-eight hours in urgent situations. The court’s execution division then carries out the order by freezing the defendant’s bank accounts or placing seals on their physical property and equipment. The defendant is notified of the action only after the preservation has been executed.

Statutory Boundary

The application of this judicial measure is subject to specific statutory limits and protections for the defendant’s business operations. The court cannot freeze assets that exceed the value of the plaintiff’s claim, and any over-preservation must be corrected upon the defendant’s objection. Furthermore, the court will not freeze bank accounts that are used for essential operations, such as paying employee salaries, if other assets of equal value can be secured instead.

If the plaintiff loses the lawsuit, they must compensate the defendant for any losses caused by the preservation, which are recovered from the security bond. The preservation has a fixed duration, typically twelve months for bank accounts and three years for real estate, and must be renewed by the plaintiff if the litigation continues beyond these periods.

Strategic Effect

Securing this judicial order provides the plaintiff with immediate and powerful leverage during contract disputes with Chinese suppliers. By freezing the supplier’s liquid capital or seizing their key production machinery, the plaintiff can disrupt the supplier’s operations and force them to negotiate a settlement. This measure is often the only way to prevent a supplier from emptying their bank accounts or closing the factory to avoid paying damages.

The foreign buyer must assess the cost of the insurance bond and the location of the supplier’s assets before filing the application. This analysis ensures that the preservation is both cost-effective and legally enforceable. The long-term result of a successful preservation is a secure and enforceable path to recovering losses.