Under the domestic laws of most member states, a creditor is permitted to request the court to issue warrants against its debtor to safeguard a money claim. A creditor seeking to recover a debt will most commonly try to do so by taking out precautionary or execution warrants against its debtor’s bank accounts.

The extent of such a procedure is limited in scope owing to the fact that the debtor’s assets have to be present in the member state where the warrant is issued. When the debtor’s assets are not present in that member state, the creditor faces various obstacles in securing its credit and eventually recovering a monetary claim. A creditor trying to enforce a judgment obtained in one member state against the debtor’s bank accounts held in another member state is normally met with procedural difficulties, language barriers and additional costs and delays.

A new tool for the protection of EU creditors has been granted by virtue of an EU Regulation that came in force earlier this year. This regulation is intended to improve the efficiency of enforcing judgments obtained in an EU member state and facilitating debt recovery by permitting creditors to obtain a European Account Preservation Order (EAPO).

This innovative remedy allows a creditor to seize a debtor’s bank account located in any one of the EU member states, with a view to preventing its debtor from removing or dissipating its assets during the time the creditor obtains a judgment and enforces it.

The regulation streamlines the procedure of attachment orders of bank accounts in cross-border disputes in the EU. A single order obtained from one member state will be capable of freezing a bank account of a debtor, even if such bank account is held outside the jurisdiction of the issuing member state. Such a procedure is permitted in relation to civil and commercial debts, whether arising out of contract or tort, or civil claims for damages. However, it is not allowed in relation to credits deriving from matrimonial relationships, succession, wills and in relation to insolvent companies. Credits disputed in arbitration also fall outside the parameters of this EU regulation.

In seeking this remedy, the creditor acts without the debtor’s knowledge.  There is no obligation to give notice to the debtor that such a procedure is intended to be taken as this would nullify the effectiveness of this order, removing the surprise effect such orders are intended to have.

Identifying where the debtor holds a bank account may be insurmountable, particularly due to prevailing data protection laws and banking secrecy rules. However, the EU regulation makes provision for this too by allowing the creditor to first ask the court to collect the information needed to find the debtor’s account from the national authorities of the member state in which the creditor believes that the debtor may hold an account.

Having established this, a creditor may obtain an EAPO at two different stages. An EAPO may be applied for at any stage prior to a creditor obtaining judgment on the merits of its money claim, whether before the beginning of the proceedings on the merits or during their course.

The EAPO in such case would be a precautionary measure safeguarding the creditor’s claim and has the effect of freezing the account up to the amount claimed. Where an EAPO is granted prior to commencement of proceedings, the creditor is in duty bound to initiate proceedings on the merits within a set time frame.

A creditor may also apply for an order after obtaining a judgment, by way of executive action against a condemned debtor. In the latter case, the funds will be seized in favour of the creditor in satisfaction of the judgment. In a bid to safeguard the debtor’s rights, the regulation stipulates a set of requirements that a creditor must fulfil for an EAPO to be granted at pre-judgment stage. The creditor must show that there is an urgent need for a protective measure because of a real risk that an eventual judgment would not be able to be executed and that the claim will likely succeed on the merits. The regulation also makes it obligatory for the creditor in certain circumstances to provide security.

In addition, the affected debtor has the right to apply to the issuing court to revoke or modify the EAPO under set grounds. Where an EAPO is revoked, the debtor may also seek compensation from the creditor for any damage caused by the EAPO due to fault on the creditor’s part. The procedure is very fast and simple and has the potential to considerably strengthen claimants’ ability to enforce civil judgments and recover debts in the EU.

Josette Grech is adviser on EU law at Guido de Marco & Associates.

jgrech@demarcoassociates.com