New EU procedure for conservatory seizure on bank accounts and disclosure of bank account information
19 January 2017
by Natalie Lemense
On 18 January 2017 the new EU Regulation 655/2014 establishing a European Account Preservation Order procedure to facilitate cross-border debt recovery in civil and commercial matters enters into force.
Currently, national procedures for obtaining protective measures such as account preservation orders exist in all EU Member States, but the conditions for the grant of such measures and the efficiency of their implementation vary considerably. Moreover, recourse to national protective measures may prove cumbersome in cases having cross- border implications, in particular when the creditor seeks to preserve several accounts located in different Member States. Many creditors do not engage in cross-border debt recovery, as it is a cumbersome and expensive. According to the European Commission, debts amounting to a total of EUR 600 Mio are written off annually for that reason only.
In order to assure the proper functioning of the internal market and facilitate EU cross-border debt recovery, a new optional procedure was adopted. It allows, in cross-border commercial and civil cases, for the preservation, in an efficient and speedy way, of funds held in bank accounts by the debtor.
A creditor can now apply for a European Account Preservation Order at the courts of its own Member State, in order to seize bank accounts of a creditor in various other Member States.
In order to obtain a Preservation Order, the creditor must file a standard application form. The court shall issue the Preservation Order when (i) there is an urgent need for a protective measure, because there is a real risk that, without such a measure, the subsequent enforcement of the creditor’s claim against the debtor will be impeded or made substantially more difficult, and (ii) the creditor’s claim is well-founded.
In order to avoid abuse and protect the debtor’s interest in this unilateral procedure, a creditor that has not yet obtained a judgment on the merits, is compelled to initiate such proceedings at short notice. The creditor shall also issue a security to ensure compensation for any damage that could be caused to the debtor by the Preservation Order due to fault on the creditor’s part.
Should the creditor already have a judgment ordering the debtor to pay, but not have the debtor’s bank account data, it can request the court to order disclosure of the information necessary to identify the debtor’s account(s).
Once the Account Preservation Order has been served upon the bank, the latter shall block the funds mentioned in the Order, until the debt is paid, or the Order is revoked. The debtor can request withdrawal of the Order, on certain grounds, and/or oppose to the enforcement.
The new procedure appears to be very promising for companies doing business in several EU Member States. Every day practise will have to confirm its effectiveness, and the increased recovery of cross-border debts that is being pursued.
In case of questions or comments, please reach out to Natalie Lemense.