An extract from The Asset Tracing and Recovery Review, 8th Edition
Seizure and evidence
A party in a civil action may, prior to the commencement of an action, seek to freeze assets in Monaco. The Code of Civil Procedure prescribes that when a freezing order is not based on an enforceable definitive judicial decision, its notification (known as an exploit) must also serve as notice of the underlying lawsuit brought in Monaco to validate the seizure.
A request to be authorised to seize assets is an ex parte request filed with the president of the first instance tribunal. It can be preceded by a request that assets be temporarily declared indisposable. The request must be justified by the existence of a certainty of the existence of a claim and a showing that a demand for payment has been made and not satisfied. Although a showing that there is urgency and a risk of the removal or dispersion of assets will serve to buttress a request, this is not one of the elements of the Code requirements to obtain a freezing order for assets held by third parties such as banks. Proof of a risk of dissipation is instead necessary if the assets are held by a debtor (for example valuable collectibles or the registration of a lien on a business or a mortgage on property).
The existence of the certainty of a claim can be shown by producing a foreign court decision awarding monetary damages to the requesting party, or the existence of a foreign arbitral award, even if neither has yet been recognised as enforceable in Monaco through the procedure for the recognition of foreign judgments or on the basis of the New York Convention on the Enforcement of Arbitral Awards, to which Monaco has adhered. The underlying contracts, invoices and letters before action equivalents will also be used to show the existence of a claim. Defences are often raised that, in order to respect the sovereignty of the principality, Monaco courts should not take into account decisions of foreign courts in deciding whether to issue freezing orders, unless the foreign decisions are recognised in Monaco. The Court of Appeals recently overturned a lower court order that, in releasing funds blocked as a result of a Monaco ex parte freezing order, had ignored a UK worldwide freezing order in a corruption case. The Court of Appeals took notice that in the interval, judgment in favour of the plaintiff was rendered by the High Court in London, even where the English judgment was not yet recognised in Monaco.
An action on the merits will then either be an action to recognise the foreign judgment or arbitral award, or it will be an action de novo on the merits. Under the new Code of Private International Law, Monaco now recognises international lis pendens, although suspension of a Monaco action in the face of the existence of a prior pending action between the same parties in a foreign jurisdiction is discretionary upon the judges, and will not preclude the filing of a civil action on the merits on the same issues in Monaco.
An ex parte request can be acted on very quickly (within days) and may result in an order to authorise seizure of specific assets. The request must specify the assets to be frozen and the amount: it cannot be a general request freezing all assets. If an asset is real property, the plaintiff must request authorisation to register a judicial mortgage for a specific sum on a described asset. If the assets are personal property (paintings, for example) their location must be specifically described, but the items need not be specifically listed, although it is helpful to do so. If the assets are bank accounts, then the name of one or more banks must be listed. No justification need be given as to why it is thought that assets are held by a bank. The authorisation will then specify that all sums due by the listed banks to the debtor are frozen up to a specified sum.
Assets remain frozen and cannot be attributed to the creditor (in the case of cash on bank acocunts) or sold at a public auction (in the case of real property or personal property other than cash) until there is a title to execute (a final decision enforceable in Monaco).
Once a freezing order is granted, a bailiff will serve it on the banks named, and on the debtor, together with the notification of the first hearing to validate the seizure.
The debtor has time until the date of the first hearing to file an action to release the freezing order. This is an emergency action known as a référé, in which the debtor must show that on its face, there is no serious opposition to his or her claim for release, either on the entire claim or on the specified sum authorised to be seized.
Référé actions can be quickly decided, but may run in parallel with underlying civil actions on the merits. The estimated time for an action on the merits is between 12 and 18 months.
Recently, where it could be shown that a debtor was the beneficial owner of a corporate bank account, the Monaco Court of Appeals has pierced the corporate veil and ordered seizure. However, the evidence of beneficial ownership was explicit rather than inferred. Similarly, the Court of Appeals authorised the seizure of the proceeds of a forced sale, even where the creditor was not a creditor of the entity owning the asset sold, on the basis that the debtor was alleged to be the ultimate beneficial owner.
French bank secrecy regulations apply in Monaco under a treaty dating back to 1945 make Monaco subject to French banking rules in many areas. Professional secrecy and the obligation of confidentiality are also covered under Article 308 of the Penal Code A request seeking to identify which banks hold funds for a client or company will not be granted. However, seizure of specific assets for specific amounts at one or several banks will be ordered if the request specifies the names of the banks. If no funds are held, the bank will reply to the bailiff that it does not have funds. If funds are held, they will be frozen and the bank will reply with the amount frozen (up to the amount authorised to be seized).
It is otherwise possible, prior to initiating a civil action, to request from the court of first instance (TPI) an order to obtain information helpful to determine or confirm the whereabouts of persons or assets. The court has been known to order the compulsory production of records from corporate service providers (which might administer assets held in Monaco banks) or banks where a beneficial owner of an account whose rights were contested requested to have copies of: the account-opening documents; the Monaco administrative services for records such as employment records, confirmation of Monaco rights to residence, statutes of Monaco civil companies and the names and addresses of the administrators, which are otherwise not on the public record; and records relating to wills and estates from the clerk of the court, where they are otherwise not accessible to the public.
In one instance, the court ordered that the entire data records of a financial services company be copied and remitted to a potential plaintiff, but the order was quashed in a subsequent référé action on the grounds that it violated the confidentiality protected by Article 308 of the Criminal Code.
An order can therefore be set aside, before or after execution, by an urgent référé procedure. Refusal to comply with an order will not result in contempt charges, but may be grounds for an action by the plaintiff that the order be observed, failing which a daily fine will be imposed.
The order must be requested before the action on the merits is begun, after which only the judges of the TPI who are sitting on the case can enjoin a party to produce a document. Failure to produce does not result in contempt charges, which are unknown in Monaco, but the judge may hold the unjustified refusal to produce evidence against the party refusing.
It is otherwise not in practice possible to compel evidence in a Monaco civil case. Monaco has adhered to the Hague Convention on the Taking of Evidence in Civil and Commercial Cases of 18 March 1970, with the reservation that pretrial depositions and discovery are excluded and refusal by a witness to participate may not result in criminal prosecution in the requesting country.
Monaco civil cases are judged on the written evidence and accompanying documentation, which must be in the French language or translated by a sworn translator. Oral testimony is not ordinarily taken in civil proceedings. There is no pretrial discovery, and pretrial depositions of the opposition are unknown.
An independent expert may be named at the request of one of the parties (either by summary procedure or as part of the procedure on the merits), or by the judge of his or her own initiative in an interlocutory judgment. The independent expert will be given a specific mission, and will convoke the parties to obtain information in a series of meetings. However, the expert will not have the power to compel evidence. The expertise is adversarial, in that parties are represented by counsel who are expected to produce commentaries on the subject matter during the process, and when the pre-report is distributed. The expert will then produce a final report with conclusions, which may not be, but usually is, confirmed by the court. If the expert is named in a référé action then a new action will be required on the merits to validate the report. In a civil fraud action, an expert could, for example, evaluate the movements on bank accounts over many years to determine whether the use of funds was in compliance with undertakings given or whether it was fraudulent.
In civil and criminal proceedings, parties do not produce affidavits on their own behalf. Third-party evidence in civil proceedings must be in the form of an attestation, in handwriting, setting out the identity of the affiant, the relationship between the affiant and the party for which they are testifying, and the fact that the deponent knows the attestation will be produced as evidence and that a false statement can give rise to criminal prosecution under Article 103 of the Criminal Code. The attestation may be in a foreign language. It should not be drafted by counsel, but is expected to be a spontaneous declaration by the declarant.
It is therefore practically difficult to attest to complicated and lengthy financial transactions. Foreign form affidavits have been known to be used, particularly where they have been admitted as evidence in foreign proceedings. Legal and other expert opinions are not expected to be handwritten.
Objections to the introduction of evidence may, and most often do, contest the validity of the evidence in its form. Thus, an attestation that is not handwritten or that does not clearly set out one of the identifying characteristics of the deponent, or that is not accompanied by a copy of an identifying document, may be excluded. Evidence may also be requested to be excluded because its production is disloyal, meaning that it has been obtained unfairly, or in contravention of criminal statutes preventing secret registration of telephone conversations, or preventing the public reproduction of the arguments in divorce matters. Evidence produced solely for the purpose of presenting a party in a bad light may be requested to be excluded, but rarely is. Hearsay and even clearly irrelevant evidence are both admissible, and the weight given will be at the discretion of the judge.
It is illegal to produce documents obtained from a criminal investigation in a related civil matter until the trial is concluded (because of the confidentiality covering criminal investigations). An authorisation may be requested either from the prosecutor's office or the court hearing the civil matter.