The future of freezing orders
The European Commission, as the initiator of legislation in the European Union, has admittedly made huge strides in virtually lifting territorial borders between member states in the field of recognition of judgements validly obtained from other...
The European Commission, as the initiator of legislation in the European Union, has admittedly made huge strides in virtually lifting territorial borders between member states in the field of recognition of judgements validly obtained from other member states. Such is the so-called Brussels Regime, a number of regulations which set out a system for the reciprocal enforcement of judgements in civil and commercial matters.
The European Commission recently proposed a fresh regulation to establish a new European Account Preservation Order- Josette Grech
Nonetheless, the regime’s lack of teeth renders its efficacy somewhat deficient in that it fails to provide concrete solutions to the problem of cross-border debt recovery in the form of actual measures of enforcement. Indeed, by the time a judgement is obtained from one member state and eventually recognised in another member state where a debtor resides or has assets, the debtor would be able to move his monies almost instantaneously out of accounts known to his creditor into other accounts in another member state.
The main reason for this is that, under existing Community instruments, it is not possible to obtain a bank attachment of a debtor’s bank accounts which can be enforced throughout the European Union, and execution on a court judgement after it has been declared enforceable in another member state remains entirely a matter of national law. Aware of the difficulties of cross-border debt recovery, and in a bid to enhance the proper functioning of the Internal Market, the European Commission recently proposed a fresh regulation to establish a new European Account Preservation Order (EAPO) that would allow creditors to preserve the amount owed in a debtor’s bank account. This proposal follows a Green Paper on the attachment of bank accounts and another on how to improve the transparency of the debtor’s assets.
The new European order, which is an interim protection procedure, will allow creditors to preserve funds in bank accounts under the same conditions in all member states of the EU. When implemented, it will freeze some or all of the funds within any bank accounts held by a debtor which are located within the EU, thereby prohibiting the debtor from withdrawing or transferring the funds from the bank account. Although it will allow a creditor to block a debtor’s bank account, it will not allow money to be paid out to the creditor. This order will, in any case, be in addition to the enforcement measures currently available under domestic legislation. As such it provides another tool that creditors may choose if it suits their purpose.
A claimant can apply for an order at a number of points: prior to the initiation of judicial proceedings on the substance of the matter or at any stage during proceedings or after having obtained a judgment, whether or not such judgement has been declared enforceable in the member state of enforcement. The amount that can be blocked is up to the value of the debt plus interest on the debt, as well as costs if judgement has been delivered. Not only bank accounts containing cash are attachable; included also are financial instruments, transferable securities and units in collective investment undertakings.
The procedure is fast and easy. A claimant makes an application to the court with jurisdiction on a standard form without requisite notice to the defendant. It is not necessary that a claimant provides information on the defendant or his bank accounts, as it will be possible for a claimant to request that such information be provided by a competent authority of the member state where enforcement is going to be sought.
This order is of crucial importance in debt recovery proceedings having a cross-border element, because it will prevent debtors from removing or dissipating their assets during the time it takes to obtain and enforce a judgment on the merits. It will be issued without the debtor knowing about it, thus allowing the creditor to take him by surprise.
The proposed European Account Preservation Order Regulation has been submitted to the European Parliament and the Council of the EU for eventual adoption.
jgrech@demarcoassociates.com
Dr Grech is an associate with Guido de Marco & Associates and heads its European law division.