Freezing Injunction / Seizure of Assets

A freezing injunction is a sovereign action which enables the investigative authorities to quickly seize the property of a taxpayer (the accused or a third party, such as a limited liability company). The authority does not have to wait for the legal finality of the tax assessment notices issued during the course of the regular taxation process. The procedure for freezing injunctions may either follow the Code of Criminal Procedure (Strafprozessordnung , StPO) or the Tax Act (Abgabenordnung, AO). Freezing injunctions are usually used by the investigative authorities under the Code of Criminal Procedure and enforcement takes place by way of the so-called “assistance to rescind”. It remains controversial, if and under which conditions one or another form of seizure takes precedence. The question of priority is decisive: A freezing injunction under the Code of Criminal Procedure will be issued by the investigative judge at the County Court, who may have a tendency to believe the allegations / deliberations of the investigative authority. A freezing injunction issued under the Tax Code (AO) is however subject to review by the Fiscal Court. Fiscal Courts are - contrary to County Courts - known for taking a less sympathetic stance towards freezing injunctions. Our attorneys / tax law specialists / tax advisers in Cologne know the practical procedures applicable to freezing injunction and the respective considerations for warding off interventions which might pose an existential threat.

While a search warrant automatically expires after six months, the suspension of a freezing injunction must be applied for at court. The Code of Criminal Procedure stipulates, that a freezing injunction must generally be suspended after six months, unless there is good cause for upholding it.

There are numerous weak points available to a defence attorney:

• The offence alleged by the investigative authority should be assessed by an expert for criminal tax law, because the alleged amount is frequently unrealistic.
• The time lapsed since the issuance of the freezing injunction is also significant, because the vulnerability of the authority diminishes at an increasing rate. This is the case, if the authority does not enforce a freezing injunction in due time.
• The Federal Constitutional Court has frequently ruled, that the principle of reasonability must be adhered to when it comes to freezing injunctions. This is particularly significant, if, as frequently is the case, the economic existence stands to be ruined by the freezing injunction. In these cases, freezing injunctions are subject to stringent conditions.
• Additionally, a freezing injunction may only be substantiated with facts, which the affected taxpayer is able to gain awareness of. If an inspection of the case files is rejected, the freezing injunction may not exclusively be based on circumstances resulting from the information contained in the case file.
• Contesting freezing injunctions is often embedded in the defence of a criminal tax matter. This lends itself to the formation of a team of tax advisers and tax law specialist, because numerous taxation and procedural questions ensue, which can only be clarified efficiently by an expert. As attorneys / tax law specialists / tax advisers in Cologne, we are able to quickly and competently assist taxpayers in criminal tax proceedings, as well as in contesting freezing injunctions.
• If the prospects of defending against a freezing injunction are somewhat doubtful, it is usually helpful to negotiate in respect of a “voluntary” security. This does not constitute acceptance of the tax debt!

The question of suitable legal remedies is not a common issue and should therefore be left to an expert. Experts know the applicable options available for contesting freezing injunctions.

• If the freezing injunction is issued by the investigating judge under the Code of Criminal Procedure, a complaint as set out in § 304 StPO is the proper legal remedy. If it was however issued by the investigating authority, an application for a judicial decision may be considered.
  • If the judge who has issued the freezing injunction remedies the complaint under § 304 StPO andsuspends the freezing injunction, the resultant garnishments must be rescinded under § 98 StPO. Such a rescission is usually applied for simultaneously when lodging a complaint.
  • If the judge who has issued the freezing injunction does not remedy the complaint under § 304 StPO, he must table the complaint before the responsible Higher State Court, being the court ruling on the complaint.
    • If the Higher State Court allows the complaint and suspends the freezing injunction, the resultant garnishments must be rescinded (as is the case with the County Court).
    • If the Higher State Court disallows and dismisses the complaint, there is, in the case of freezing injunction for values exceeding €20,000, the option of lodging a further complaintwith the Higher State Court under § 310 StPO, which is not subject to a deadline.
      • If the Higher State Court remedies the further complaint under § 310 StPO and suspends the freezing injunction, resultant garnishments must be rescinded under § 98 StPO. Such a rescission is usually applied for simultaneously with lodging a complaint.
      • If the higher court does not remedy the complaint under § 310 StPO and dismisses the further complaint, it must table the complaint before the responsible Supreme State Court, this being the court of higher instance that decides about the complaint.
• A freezing injunction under the Tax Act (AO) must however be contested within the respective taxation proceedings. The proper legal remedy is, in this case, an appeal.
• Because it is unreasonable to wait until the appeal has been decided, the taxpayer may also approach the Fiscal Court directly (so-called immediate litigation brought to reverse an administrative action).
• There is the further option of applying for a stay of the execution of the freezing injunction to the Tax Authority or the Fiscal Court.

This brief overview of the complexities of freezing injunctions goes to show, that an efficient and swift defence is only possible, if the adviser has an overall understanding and the necessary practical experience - hence facilitating effective and prompt action.