The provisions of the EU Regulation establishing the new European Account Preservation Orders (Regulation No. 655/2014) will come into force on 18 January 2017. Under the new rules, creditors domiciled in participating EU Member States (which includes all Member States except for the UK and Denmark) will be able to apply to freeze funds in a debtor's bank account in any other participating Member State using a single application form. Although the UK has not opted into this new Regulation, it may still be of relevance to UK based businesses with commercial interests in the EU. We provide an outline of the new EAPOs and discuss the possible implications for you.
Summary of the new EAPO measures:
- An EAPO is an order made by the Court of a participating Member State to prevent the transfer or withdrawal of funds up to a specified amount held by a debtor in a bank account in another Member State. Creditors will be able to apply for an EAPO before proceedings have been initiated, during proceedings or after judgment has been given.
- Creditors apply by submitting a single standard form application (made without notice), even where they are applying in relation to multiple bank accounts or accounts in multiple jurisdictions. Applications must be submitted to the court of the Member State in which the judgment to be enforced was issued or, where an application is made prior to the initiation of proceedings or prior to judgment, to the courts of the Member State with jurisdiction to rule on the substance of the claim.
- EAPOs will be granted only where a creditor submits sufficient evidence to satisfy the court that there is an urgent need for an EAPO because there is a real risk that, without one, the enforcement of the creditor's claim against the debtor will be impeded or made substantially more difficult. Where an application is made pre-judgment, a creditor will also need to convince a court that he is likely to succeed in the substance of his claim against the debtor. Debtors will have the right to apply to have an EAPO revoked or modified.
- Once granted, an EAPO will impose obligations on the relevant bank(s) at which the debtor's account(s) are held. Banks must implement the terms of the EAPO without delay and must provide a declaration that the funds covered by the EAPO have been preserved.
What does this mean for UK based businesses?
The UK has opted out of the new EAPO regime, so it will not be possible to obtain an EAPO in the UK, or against an account in the UK. In addition, claimants domiciled in the UK will not be entitled to apply for an EAPO, due to the requirement that applicants must be domiciled in one of the participating Member States. Therefore, UK claimants should continue to rely on national law procedures to obtain protective measures.
However, a UK based business could find itself subject to an EAPO where it has a bank account located in a participating Member State and becomes involved in a cross-border matter falling within the jurisdiction of the court of a participating Member State. In such cases, a UK business could indeed have its bank accounts frozen under an EAPO and may wish to consider the scope for challenging such an order under the Regulation.
In addition, any UK based banks with branches in participating Member States should be aware of their obligations with respect to the new EAPOs. These include the obligation to take steps to preserve funds, providing declarations as to compliance with the EAPO and, in some cases, providing information on accounts held by a debtor. Banks will be liable for any failure to comply with their obligations under the Regulation in accordance with national law.