Firms or citizens recovering debts across EU borders could be able to get the debtor's bank account frozen under a draft law agreed with the European Council and endorsed by European Parliament’s legal affairs MEPs on Tuesday, 11 February, 2014.

The European Account Preservation Order (EAPO) should be quicker and cheaper to use than national proceedings. The European Parliament amended the proposal to prevent abuse and safeguard alleged debtors.

 

Raffaele Baldassarre MEP, the Rapporteur on the proposal who is steering the legislation through the Parliament, said, "The regulation will allow creditors to use an efficient and uniform procedure for obtaining an EAPO under the same conditions in all Member States. It will also ensure that an EAPO issued in one Member State is recognised automatically in all other member states. The new procedure will help reduce lawyers' fees and translation costs, notably through the use of standard forms. It will enable a creditor to do away with the need for an additional lawyer for each foreign jurisdiction where a preservation order is sought.”

 

The proposed regulation would enable any firm or citizen in the EU to issue an order via a bank to block a debtor's bank account in another EU country. These proceedings would be quicker and less costly than having to go through national courts. According to the Commission, this would help EU companies alone to recover some €600 million a year.

 

The new rules would allow a creditor to issue an EAPO before the debtor is informed, so as to achieve a ‘surprise effect’ that prevents him or her from moving the funds to another country.

 

An EAPO could be issued even before a court has ruled on whether the debt can be recovered. To discourage abuse of EAPO orders, legal affairs MEPs inserted a liability clause whereby a creditor would have to compensate the recipient of an EAPO if it is found to be unjustified. The text also provides for an alleged debtor to contest the EAPO immediately and oblige the creditor to set aside enough funds to cover compensation, should this prove necessary.

 

The EAPO would be available as an alternative to national proceedings solely for cross-border cases. Once issued it would freeze the alleged debtor's account. However, any recovery payment would continue to be determined under national law. The committee backed the new legislation by 22 votes, with 1 abstention. The text is the result of an informal agreement between the European Parliament and Council that needs to be confirmed by both institutions before coming into force. The plenary vote is scheduled for April 2014.

Photo: An EU draft law will enable firms or citizens to freeze a debtor's bank account.