A frequent issue in litigation is the risk that the defendant may liquidate or transfer assets during the court proceeding, so that when the court award is finally granted the defendant has no assets on paper.
In order to prevent this situation, Mongolian courts allow for a process of freezing a defendant’s assets or bank account at the start of the court proceeding. Such an asset freeze will prohibit the defendant from transferring assets and cash to other parties in an attempt to avoid the negative consequences of a judgment against them. To initiate such an asset freeze, Mongolian courts require payment of a deposit, or bond by the Plaintiff into an account controlled by the court, in an amount equal to the claim.
An asset freeze of this kind requires a formal petition to the court. In most cases the court will grant a plaintiffs request for an asset freeze. There is no legal timeline for the freeze, but in most cases it will be implemented quickly to avoid any transfers by the defendant to evade the freeze. However, there are certain situations in which actual implementation of the freeze is delayed due to administrative issues, or delay by the Court Enforcement Bureau.
There is also the issue of appeal of the court’s decision regarding the freeze of assets.
The defendant has the right to appeal the decision of the court within 10 days, and the court must decides on the appeal within 14 days. The law does not regulate whether or not the Judge’s order on freeze of assets will be suspended until the complaint is resolved, or will be effective during the appeal process. This situation sometimes creates confusion and differences in actual implementation. Of course, if the actual impact of the asset freeze is not enforced until 24 days after the order, the defendant will have a lot f time to potentially transfer or hide the targeted assets.
Although, there is no specific regulation on the liability for failure to comply with the Judge’s order on measures to secure implementation of court decision, the law does allow for penalty in the form of a fine, and in some cases potential imprisonment.