An extract from The Asset Tracing and Recovery Review, 8th Edition

Seizure and evidence

i Securing assets and proceedsCivil procedural means

German law provides for two general categories of provisional relief – attachment and preliminary injunction – which can also serve to preserve assets to safeguard the interests of a victim of any fraudulent action.

Attachment

An attachment secures a monetary claim. Therefore, it is the proper remedy for a victim intending to preserve the alleged wrongdoer's assets to secure a possible claim for damages and compensation against the latter.

In addition to an attachment claim, a victim must demonstrate a ground for attachment. A ground for attachment exists if there is reason to fear that the enforcement of a subsequently rendered judgment in Germany (see Section V.iii on the enforceability of foreign judgments in Germany and the consequences for attachments) would otherwise be frustrated or made considerably more difficult due to the actions or the financial situation of the defendant. The attachment of the defendant's assets must, therefore, be necessary to protect provisionally the claimant's prospects of executing a judgment rendered in the future. A ground for attachment might also be assumed if there are reasons to believe that the defendant's conduct qualifies as fraud or the embezzlement of assets.

Depending on the circumstances, the court may notify the defendant of an application, set a deadline for a written response and schedule an oral hearing. The court will then issue an order of attachment. However, in most cases the court will not schedule a hearing, but will issue an attachment order ex parte. This allows the claimant to obtain a court order securing its claims without giving the defendant time to thwart the security. Furthermore, this procedure is very fast. Normally, it does not take more than two or three days, sometimes even only hours, from filing an application to obtaining a court order.

Preliminary injunction

A preliminary injunction secures all non-monetary claims. A victim applying for a preliminary injunction must have a claim with respect to the assets it wants to preserve by way of injunctive relief. Therefore, a preliminary injunction would be the proper remedy if the victim seeks to preserve its specific assets to secure a claim for recovery of those assets.

As a victim must demonstrate a ground for an attachment, similarly the victim further has to state the reason why an injunction is necessary to safeguard its rights. Both the injunction claim and the injunction ground have to be supported by prima facie evidence.

The procedure for rendering an injunction order or judgment is largely identical to the one in attachment proceedings. However, the court can only render a decision without an oral hearing in extremely urgent cases.

Use of criminal compulsory measures

German civil procedural law does not allow compulsory measures such as a search of premises or seizure of assets on behalf of private persons for the purpose of tracing assets for civil proceedings. However, such compulsory measures are admissible in criminal investigations. They may also be used for the private interests of an aggrieved person, who could thus also benefit from the special investigative powers for its private litigation.

In the course of a criminal investigation, the public prosecutor is also entitled to trace and secure assets to support an aggrieved company's possible civil claims arising out of the alleged criminal offence. For these purposes, the available means are search and seizure as well as the attachment of assets. The only prerequisite is that a company has a civil claim (e.g., for the recovery of assets, damages or unjustified enrichment) against the accused person arising from the criminal offence. It does not matter when a company intends to enforce the claim, or if it intends to do so at all.

Against this background, it can be advantageous for an aggrieved person to notify the public prosecutor of facts that relate to the dispute and that allegedly constitute a criminal offence, even though an obligation to report on alleged crimes generally does not exist under German law (with the exception of money laundering offences under certain circumstances and crimes that are not relevant in the case at hand). The goal is to bring about a criminal investigation. The public prosecutor is under a legal obligation to initiate investigations when notified of a reasonable suspicion of a crime having been committed. Via the special powers used in the course of that investigation, it might be possible to trace and secure (otherwise hidden) assets and evidence (see Section III.ii), and to make it easier to enforce civil claims.

ii Obtaining evidenceCivil means

One of the fundamental principles of German civil procedural law is that each party itself has to obtain the evidence it needs. Therefore, an extensive pre-action disclosure by a defendant or third parties, as is the case in common law jurisdictions, is not provided for by German law. German civil procedural law features other concepts to cope with a claimant's possible deficiencies regarding information and evidence. In addition, however, German law also provides some specific, albeit limited, instruments to obtain information from a defendant or third parties prior to commencing an action.

Overview of general procedural concepts

With regard to a claimant's lack of information and evidence, German law features the following concepts.

  1. First, it is admissible to plead certain facts as true even if a party has little evidence that they are true. It may, for example, be sufficient to state only general observations indicating certain facts, or to provide reasonable assumptions. The party may try to substantiate the allegations in more detail and to prove them in the course of the proceedings.
  2. Second, in fields where the opponent typically has better knowledge of particular facts, its response to the claimant's allegations must be more precise and must rebut the allegations in a more detailed way. Where specific information and evidence is typically not available to the claimant, but is available to the defendant, the burden of providing and proving the respective facts may even shift.
  3. Third, the defendant (as well as the claimant) is required to state truthfully and completely all the alleged facts on which its defence is based. Violations of this obligation may constitute a criminal offence under German law.

Against the above background, the victim's need to obtain information and evidence prior to commencing an action is therefore not as strong as it is in common law jurisdictions.

Enforcing substantive law claims for disclosure

In addition to the above concepts compensating for a claimant's information deficiencies, German law provides for specific instruments to obtain information prior to commencing an action. In this regard, disclosure may either be based on a contractual or a statutory claim against a third party or a defendant:

  1. the claimant may have contractual claims for disclosure of information (e.g., a harmed company against its employees);
  2. irrespective of a contractual relationship, the claimant may be entitled to ask the possessor of an object for an inspection of the object. For this to be the case, the company must have a claim in respect of that object against its possessor or wish to obtain certainty as to whether such a claim exists. Such a claim could be, for instance, a claim for recovery of assets; and
  3. the claimant may also be entitled to claim inspection of a document against its possessor. Unlike the above right for inspection of other objects, this right does not require that a company has a claim in respect of the document, but the content of the document must be related to the claimant.

If the wrongdoers or third parties do not comply with the above claims, they need to be enforced in a separate civil lawsuit prior to commencing an action against the wrongdoers. In a pending lawsuit, the court may order the production of information under certain restrictions.

The above claims for inspection, however, may also be enforced by way of a preliminary injunction.

Criminal means and inspection of criminal files

In the course of a criminal investigation, the public prosecutor will use his or her special powers to collect a host of information.

The premises or other assets of the suspect and of third parties as well as these persons themselves may be searched to trace evidence for the criminal offence under investigation. An item that might serve as evidence may be secured. If the possessor of the item resists handing over the possible evidence voluntarily, the public prosecutor may seize it compulsorily.

The victim of a fraudulent action planning a civil lawsuit may make a request for inspection of the files that contain the information gathered by the above means via an attorney. To be successful, an attorney needs to state a justified interest to inspect the files. It will often be sufficient for the attorney to truthfully state that his or her client intends to prepare a civil action against the person accused in the criminal proceedings, and that the information contained in the files may be relevant for this purpose.