EU Regulation on Cross-Border Preservation of Accounts Now in Force
On January 18, 2017, the EU Regulation No 655/2014 of May 15, 2014, establishing a European Account Preservation Order procedure ("EAPO") became applicable. Perhaps coincidentally, the acronym EAPO could also stand for Equality, Alignment, Protection, and Optimization, the objectives pursued by the European regulators.
In short, this new procedure enables a creditor to obtain a "Preservation Order" ("Order") against a debtor to ensure enforcement of his or her claim in a cross-border context. This regulation solely applies to pecuniary claims in civil and commercial matters in cross-border cases, which are defined in Article 3 of the regulation as follows:
For the purpose of this Regulation, a cross-border case is one in which the bank account or accounts to be preserved by the Preservation Order are maintained in a Member State other than:
a) The Member State of the Court seized of the application for the Preservation Order (…); or
b) The Member State in which the creditor is domiciled.
Furthermore, the Order is available to the creditor either before initiating proceedings in a Member State against a debtor, or after obtaining a judgment or another decision. It stems from the regulation that one of its stated goals is to "strike an appropriate balance between the interest of the creditor in obtaining an Order and the interest of the debtor in preventing abuse of the Order." Indeed, although this regulation obviously provides creditors with a new powerful tool with respect to debt recovery, debtors are offered safeguards against abusive behaviors of creditors. Notably, on the one hand, if the creditor applies for an Order prior to obtaining a judgment, the Court where the application is made must be satisfied of the likelihood that the creditor will succeed on the merits. On the other hand, and wherever the application is made, the creditor must be able to show an emergency for judicial protection, or that without the order, recovery will be jeopardized. Finally, the creditor can be held liable for any damage caused to the debtor by the Order.
The main purpose of the regulation is to establish a uniform, harmonized procedure that makes it easier for creditors to obtain a protective measure within the European Union. This is achieved through the alignment of the procedural framework within all Member States, as well as through the compulsory recognition that waives exequatur procedures. However, a significant number of provisions refer back to national laws. Beyond the subsidiary competence that national laws maintain regarding residual procedural questions, debtors' bank accounts can be seized only to the extent that they are not subject to preservation under the law of the Member State of enforcement. Hence, the amounts that are exempt from seizure in the Member State will be exempt from preservation. For instance, in France, the account balance privileged from seizure is now set at €535.37.
Given the potential consequences likely to result from preservation, debtors are provided with some remedies enabling them to obtain modification or revocation of the Preservation Order. In fact, they can either challenge the granting of the Preservation Order or the implementation of the Order. Creditors can also appeal the decision dismissing the Order. Additionally, debtors benefit from the right to provide a security in lieu of preservation: the Court that issued the Order can order the release of funds if the debtor provides security in the amount preserved.
The regulation contains several means of ensuring its efficiency. Beyond the abovementioned exequatur waiver, the regulation prevents "parallel applications," i.e., creditors may not submit several applications for a Preservation Order to several courts at the same time. Optimization of the procedure is also fostered by the "surprise" element, permitted by the nonadversarial nature of the first phase of the procedure. Indeed, the debtor will not be notified of the application for a Preservation Order. Lastly, to guarantee the success of this new measure, the regulation has limited all the potential expenses incurred by the procedure (court fees, costs incurred by the banks, fees charged by the authorities) and provided that representation by a lawyer is not mandatory to obtain an Order.
Note that neither the United Kingdom nor Denmark is subject to this regulation, as they did not take part in its adoption. In England and Wales, however, worldwide freezing orders are available in appropriate circumstances to freeze assets (including but not limited to monies contained in bank accounts).
While the breadth and scope of the EAPO will be tested in its future operation, it provides a potentially useful tool for litigators seeking to trace and secure assets across Europe.
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Gerjanne te Winkel
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