European Union: Cross-Border Debt Recovery: European Account Preservation Order Becomes Applicable

Last Updated: 27 February 2017
Article by Koen T’Syen

On 18 January 2017, nearly three years after its entry into force, Regulation 655/2014 of 15 May 2014 establishing a European Account Preservation Order ("EAPO") procedure to facilitate cross-border debt recovery in civil and commercial matters ("Regulation") became applicable.

The Regulation allows creditors to preserve the amount owed in a debtor's bank accounts located in any participating EU Member State through a single application for an EAPO before a national court. In such an application, the creditor may request the court to obtain the necessary information to identify the banks where the debtor has an account.

The participating EU Member States do not include the UK and Denmark. Accordingly, courts in the UK and Denmark cannot grant an EAPO and bank accounts in the UK and Denmark cannot become involved. In addition, the possibility of obtaining an EAPO under the Regulation is restricted to creditors domiciled in participating EU Member States and is therefore not open to creditors domiciled in the UK, Denmark and non-EU countries. By contrast, the accounts of debtors domiciled in the UK, in Denmark or outside the EU can be impacted, as will be banks which are operating, but not based, in participating EU Member States.

The Regulation covers all civil and commercial matters in cross-border cases, with the exception of specific matters, such as claims against debtors in insolvency proceedings or claims relating to the liability of an EU Member State for acts in the exercise of State authority. The preservation of bank accounts does not affect amounts which are exempt from seizure under the laws of the EU Member State of enforcement, e.g. amounts necessary to ensure the livelihood of the debtor and his family. The Regulation applies to cross-border cases only, i.e., cases in which the bank accounts to be preserved by the EAPO are maintained in an EU Member State other than (i) the EU Member State of the court seized of the EAPO application; or (ii) the EU Member State in which the creditor is domiciled.

If the creditor is able to identify the banks with which the debtor holds one or more accounts to be preserved, he can apply for an EAPO (i) before substantive proceedings are initiated; (ii) at any stage during such proceedings; or (iii) after a judgment has been obtained. The EAPO application must be introduced before the court of the EU Member State in which the judgment on the substance of the case was issued or, if the creditor has not yet obtained such a judgment, the court of the EU Member State that has jurisdiction to rule on the substance of the matter. However, an EAPO application against a consumer must be submitted to the court of the EU Member State in which the consumer is domiciled.

To obtain an EAPO, the creditor must provide "sufficient evidence" that there is an "urgent need" for an EAPO. This requires a showing that, in the absence of such an EAPO, there is a real risk that enforcement of the creditor's claim "will be impeded or made substantially more difficult". If the application is made before a judgment is obtained, the creditor must also demonstrate that he is "likely to succeed on the substance of his claim against the debtor". In any event, the debtor will not be notified of the EAPO application and will not be heard prior to the issuing of the order. National courts have to decide on the EAPO application within five or ten working days, depending on whether or not the creditor has already obtained a judgment requiring the debtor to pay the creditor's claim. Subsequently, banks receiving an EAPO are under an obligation to freeze the bank accounts "without delay".

In addition to the EAPO application, but in the context of such an application only, the Regulation also sets out an information request mechanism. If a creditor has reason to believe that the debtor holds one or more accounts with a bank in a specific EU Member State, but cannot identify that bank, he can request the court with which the application for an EAPO was filed to obtain the necessary information enabling the identification of the debtor's accounts. In principle, this information request mechanism is only open to creditors who have already obtained an enforceable judgment requiring the debtor to pay the creditor's claim. However, under exceptional circumstances, a request may be granted even before such a judgment becomes enforceable.

Finally, to facilitate the application of the EAPO Regulation, Commission Implementing Regulation 2016/1823 of 10 October 2016 "establishing the forms referred to in Regulation (EU) No 655/2014 of the European Parliament and of the Council establishing a European Account Preservation Order procedure to facilitate cross-border debt recovery in civil and commercial matters" lays down nine standard forms, including (i) the application for an EAPO; (ii) the EAPO itself; (iii) the declaration concerning the preservation of bank accounts; and (iv) the application for a remedy or appeal on the decision.

The Regulation may turn out to be a powerful weapon for the faster and easier recovery of claims. However, the delicate interplay between national and EU law will most probably entail some variation in the interpretation and application of the Regulation by the courts and banks in the participating EU Member States.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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