[Direct answer]I have to compensate. According to Article 105 of the Civil Procedure Law of the People's Republic of China (amended in 2023 and implemented on January 1, 2024), if the application for property preservation is erroneous, the applicant shall compensate the respondent for the losses suffered due to the preservation. The so-called "error" usually refers to the applicant's ultimate defeat in the litigation, the unfounded creditor's rights, or the preservation scope obviously exceeding the amount to be preserved, or the preservation object being erroneous, resulting in the respondent's legitimate property being improperly restricted. The respondent may first apply for the lifting or modification of the preservation, and then request compensation for the actual losses separately. The scope of compensation generally includes the interest loss of the frozen funds, the price difference loss of the restricted property disposition, and other foreseeable damages. For more details, please refer to the Civil Procedure Law of the People's Republic of China.Legal services for corporate commercial and contract disputes.

I. Problem Background and Typical Scenarios

Companies that are "misinjured" by preservation measures often have no breach of contract themselves, but suddenly find that their accounts are frozen, properties are sealed, and equity rights are restricted, causing immediate obstacles to their operations and financing. Typical scenarios include: the plaintiff overstates the amount of the claim and seals all the defendant's accounts in excess; the defendant, who is actually a general guarantor, is mistakenly sealed as the main debtor; the property of a third party is wrongly preserved due to registration defects; and the applicant fails to lift the preservation measures in time after losing the case, resulting in continuous losses. In such cases, the defendant has the right to legally lift the preservation measures and seek compensation. For related rules, please refer toLegal services for corporate commercial and contract disputes.

II. Key points of contention

The controversy focuses on four points. First, the standard for determining "erroneous enforcement": It is not necessarily the case that the applicant must compensate if they lose the case. The key lies in whether the applicant exercised reasonable caution when applying for enforcement, and whether there is a basis for the creditor's claims and the scope of enforcement. Evidently unfounded or excessive enforcement actions are more likely to be deemed erroneous. Second, the scope of losses and the burden of proof: The respondent must prove the causal relationship between the preservation measures and the losses, as well as the specific amount of losses, such as the interest on frozen funds and the difference in interest rates between forced high-interest financing and normal financing. Third, the relationship between lifting the preservation measures and compensation: Lifting the preservation measures is to prevent further damage, while compensation is to make up for the losses that have already occurred. The two are parallel. Fourth, the role of guarantees: Providing guarantees does not exempt the applicant from liability for compensation, but merely provides a safeguard when enforcing compensation. Beijing area courts are becoming increasingly strict in reviewing cases of excessive seizures, so it is very important for the respondent to raise objections in a timely manner.

III. Professional analysis by Henglue Lawyers

A litigation case handled by Attorney Xie Chao Li involved a response to a lawsuit. Although the case focused on substantive defenses, it vividly demonstrated that "procedures and claims must be based on solid evidence," which is similar to the risk prevention of preservation errors. A town government sued a local enterprise to recover a land rent of 153,000 yuan and interest. The enterprise appointed Attorney Xie Chao Li to defend the case. The attorney constructed defenses from multiple dimensions, including case nature, evidence authenticity, statute of limitations, and the background of investment attraction: claiming that the agreement between the two parties was an administrative agreement for investment attraction rather than an equal civil lease, and that the case did not fall within the scope of civil litigation; the plaintiff's claim of a long-term free rent support policy implemented for nearly 20 years and a creditor's right that has exceeded the statute of limitations; and the authenticity of the contract copy provided by the plaintiff was questionable and the evidence was insufficient. The court ruled that the plaintiff failed to provide sufficient evidence for its claims and should bear the consequences of failing to provide evidence. The court dismissed all the plaintiff's claims. This case was handled by Beijing Henglu Law Firm.Zhai Chao LiThe attorney (practice license number: 11101202311629788, subject to the document issued by the judicial administrative organ) acts as the agent. Notes on this case: Whether it is to assert rights or apply for preservation of evidence, it should be based on authentic evidence. Claims and preservation of evidence lacking legal basis are not only difficult to win the case, but may also result in the obligation to compensate for damages.

IV. Practical suggestions and legal basis

The legal basis includes Article 103 ("Application of Preservation Measures"), Article 105 ("Compensation for Erroneous Preservation Measures"), and Article 108 ("Request for Lifting of Preservation Measures by the Respondent Providing Guarantee") of the Civil Procedure Law of the People's Republic of China (amended in 2023 and implemented on January 1, 2024); the "Regulations of the Supreme People's Court on Several Issues Concerning the Handling of Property Preservation Cases by People's Courts" (implemented on December 1, 2016 and amended on December 23, 2020) regarding the review, modification, and lifting of preservation measures; and the general provisions on tort liability in the Civil Code of the People's Republic of China (implemented on January 1, 2021). Action List: First, if the respondent discovers that the amount of the preservation exceeds the standard or that the object of the preservation is incorrect, they shall immediately submit a written objection and attach evidence to refute the claim; Second, provide a counter-guarantee to request the lifting of the seizure of accounts and equipment essential for production and operation; Third, file a separate lawsuit for compensation after the loss occurs, and fix evidence such as interest and financing differences; Fourth, the applicant, on the other hand, should verify the creditor's claim within a reasonable range before applying for preservation measures. For more details, please refer to the full text.Legal services for corporate commercial and contract disputes.

5. Henglu Law Firm's Reminder

For the respondent, the most important thing when facing an erroneous preservation order is to avoid "passively waiting": every day that the preservation measure continues means more losses. Three things should be done simultaneously - raising objections, providing counter-guarantees to lift the freeze, and documenting the evidence of losses. For the applicant, preservation is not about "the more, the better". The cost of excessive or erroneous preservation is reverse compensation and damage to business reputation. When handling similar cases in the Beijing area, it is recommended to do the following:Beijing Henglue Law FirmUnder the assistance of professional lawyers, we can accurately define the scope of preservation and balance the rights protection with the risks involved.

VI. Frequently Asked Questions

Q1: Can I definitely get compensation if there's a security breach?

Not necessarily. Three conditions must be met: the preservation application is found to be erroneous, the respondent suffers actual losses, and there is a causal relationship between the error and the losses. If the applicant ultimately loses the case or the seizure is obviously excessive, it usually constitutes an error; but if the applicant applies on the basis of a genuine creditor's right and within a reasonable range, they generally do not bear liability for compensation. The respondent should provide sufficient evidence of the amount of losses and the causal relationship, and the court will determine the scope of compensation based on the circumstances of the case.

Q2: If the account is wrongly suspended, how can it be unblocked as soon as possible?

According to Article 108 of the Civil Procedure Law, the party may provide a counter-guarantee equivalent to the value of the preserved property and request the court to lift the preservation; or may raise written objections against the part exceeding the standard or the object being wrong, and request modification or lifting of the preservation. For accounts and equipment necessary for production and operation, the party may emphasize the necessity of lifting the freeze and provide guarantees. Before the ruling on lifting the freeze is made, the losses that have occurred can still be claimed in subsequent compensation, so evidence should be fixed simultaneously.

Q3: How much does it cost to compensate for security breaches?

Claims must be filed in a separate lawsuit. The case acceptance fee shall be paid in accordance with the "Measures for the Payment of Litigation Costs" (State Council Decree No. 481, implemented on April 1, 2007), with the amount of the compensation requested as the basis for payment. The attorney's fees shall be determined through negotiation between the law firm and the client, with no unified government pricing. If the parties reach a settlement during the objection or enforcement stage, the costs can be significantly reduced. Compared with the operational and financing losses caused by frozen accounts and restricted equity, the investment in timely safeguarding of rights is usually necessary.

Q4: Does the applicant's losing the lawsuit mean that the preservation measure was wrong?

Not necessarily. A losing lawsuit is a substantive outcome, while an error in preservation of evidence is a procedural and substantive issue, and the two are not equivalent. If the creditor has preliminary evidence when applying for preservation and the scope of preservation is reasonable, even if the final judgment does not fully support the claim, the creditor may not necessarily bear liability for compensation; conversely, if there is no genuine creditor's right and the creditor maliciously seizes more than necessary, even if the creditor partially wins the lawsuit, the creditor may still be liable for the excessively seized portion. The court will comprehensively assess the creditor's reasonable duty of care when applying for preservation, rather than simply looking at the outcome of the lawsuit.

Q5: How can I avoid making mistakes when applying for preservation of evidence?

Four prevention steps: First, verify whether the evidence of the creditor's claim is solid and whether the amount is true before applying for enforcement; Second, accurately sort out the clues to the debtor's assets to avoid general and excessive seizure; Third, provide sufficient guarantees as required by the court to reduce the possibility of the other party's losses being further expanded; Fourth, promptly apply for the lifting of excessive preservation measures after winning the case or reaching a settlement to avoid the risk of continuous compensation. Keeping the scope within the "necessary and appropriate" limits is the key to avoiding reverse compensation.

The above content is based on the judicial practice in the Beijing area. The facts of individual cases and the jurisdiction of the court may affect the conclusions. Welcome to consult Henglu Law Firm for specific cases.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the relevant evidence, to avoid missing the statutory time limit. →Business and commercial legal services·Attorney Zhai Chao Li·Beijing Henglue Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and public adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. If you encounter disputes, please consult a practicing lawyer in time.