Maltese Court Landmark Judgement – Precautionary Acts must be followed by proceedings in the EEA

The facts, in brief, were as follows: At the request of a Bermudian company undergoing bankruptcy proceedings in the United States, a precautionary garnishee order was issued against FXDD Malta, a company registered in Malta, for an amount of around seven million Euros.

Twenty days after the precautionary garnishee was issued, FXDD Malta filed an application in the First Hall of the Civil Court, asking the Court to strike down the precautionary garnishee on the grounds that it was prima facie unjustified and excessive, and without basis, and furthermore on the grounds that in order for a garnishee to remain in force, it must be followed by an action filed in Malta within 20 days. BT Prime had filed no action in Malta to sustain its application for the issue of a precautionary garnishee.

BT Prime argued that an action in Malta was not necessary, as proceedings were underway in the United States. FXDD argued, in essence, that the requirement under the Code of Organisation and Civil Procedure was that a court case had to be filed in Malta or in the European Economic Area for the precautionary warrant to remain in force. The First Hall of the Civil Court confirmed, unambiguously, that Article 836(1)(a) of the Code of Organisation and Civil Procedure should be applied, and declared that the warrant was no longer in force given that it had not been followed by the institution of a case in this jurisdiction within the timeframe stipulated by law.

With the increasing internationalization of business in Malta, this judgement is an important milestone and limits the scope for the issue of abusive garnishee orders in Malta on the basis of spurious proceedings undertaken outside the EEA.

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