Let’s assume a creditor has a monetary claim against a debtor in Korea but the debtor refuses to pay it. The creditor would proceed to file a lawsuit to get a judgment to collect his claim. Unfortunately, however, the chances are that knowing the complaint was filed, the debtor would try to conceal or transfer his assets to evade from the liability under judgment. This shows why provisional attachment is highly required to secure the judgment effectively.
Provisional attachment is a judicial measure available to anyone who has a monetary claim to lock down certain assets. It, depending on the type of court order, prevents the debtor from selling assets or enables the creditor to secure his interest in the debtor’s asset regardless of the sale by the debtor, until the court issues a judgment on the merit.
The creditor can, and usually does, seek a provisional remedy before she files a complaint on the merit. So, this is a very powerful weapon for the creditor. For example, as many Korean creditors do, if the creditor succeeds in putting a provisional attachment on the debtor’s bank account, the debtor would not be able to use the money and could face several penalties regarding its banking/financing transactions with the bank. This could heavily deteriorate the ability for a small company to conduct business, which makes the debtor more motivated to settle with the creditor.
Almost every type of property or rights may be attached, including the debtor’s monetary claim to the third party. However, some Korean statues exempt certain categories of assets from the object of provisional attachment.
In order to obtain a provisional attachment order from the court, the creditor must show (i) there is a prima facie monetary claim against the debtor and (ii) without the provisional attachment, it would be difficult to enforce a judgment.
The provisional attachment order is issued ex parte, which means that the debtor will have no notice. The notice is given only after the court issues an order of provisional attachment.
The debtor may file an objection to the provisional attachment. Then the court holds a hearing with the participation of both parties. It is common, however, the court will wait and see the outcome of the lawsuit on the merit, because the two separate legal proceedings deal with the same claim. This means, in many cases, the provisional attachment order keeps its effect until the judgment on merit is finally issued, even though the debtor immediately filed an objection to the provisional attachment order. If the debtor wants the attachment to be lifted immediately, he must furnish sufficient security to the court, which amount must be enough to fulfill the creditor’s alleged claim.
If you have any questions about provisional attachment and any other preliminary remedies in Korea, please send your inquiry to Mr. Wonil Chung by clicking here.
© 2012 Wonil Chung. All rights reserved.
Because of the generality of this update, the information provided herein may or may not reflect the most current legal development at the time of view, nor is it applicable in all situations nor should be acted upon without specific legal advice based on particular situations.