Regulation 655/2014 of the European Parliament and Council of 15th May 2014, which establishes the procedure for European Account Preservation Order to facilitate cross-border debt recovery, has started to become applicable since 18th January 2017.

This rule allows creditors to request from jurisdictional bodies the issue of preservation orders on current accounts of defaulting debtors open in countries of the European Union. The aim is to avoid that the mere fact that the accounts are in a different EU member state from the creditor does not prevent the debtor from eluding its pecuniary obligations. These requests may come about in two different scenarios:

a) when requested as a cautionary measure prior to the initiation of proceedings against the debtor regarding the substance of the matter; or also during such proceedings.

b) when the request for the order is of an enforceable nature, that is to say, it is sustained in a court decision, a court transaction or an enforceable public document which makes the payment of the debt in favour of the creditor obligatory.

Scope of application:

  • The Regulation is applicable to civil and commercial pecuniary debts in cross-border matters, understood as such to be those in which the bank accounts to be withheld are maintained in an EU member state which is not the EU member state of the judicial body to which the application for the preservation order is made (State where the courts air the matter); neither is it the EU member state where the debtor has its domicile.
  • It shall not apply to fiscal, customs or administrative areas, neither does it apply to the responsibilities of the State derived from enforcing its authority.
  • Exceptionally, and in spite of their civil and commercial nature, matrimonial, probate, arbitral, social security and insolvency credits shall be excluded from the scope of application of the Regulation.

Now we come to the requirements for obtaining a preservation order:

The competent jurisdictional body shall issue the preservation order when:

  • the creditor has filed sufficient proof regarding the urgent need for cautionary measures, in so far as there being an urgent necessity due to a real risk that without said measure, an ultimate enforcement of the credit against the debtor may not be carried out or it shall become much more difficult. The term “sufficient proof” is somewhat imprecise, but in practice, we must understand that the competent court shall attend to the material concept and interpretation in the light of case law of “periculum in mora”.
  • When the court procedures are underway, but there is still no verdict, the applicant for the preservation order must prove the existence of “fumus boni iuris”, that is to say that the claim formulated against the debtor has possibilities of prospering in substance.

Cases where applications are filed prior to the formulation of a lawsuit in substance. This possibility is set forth in articles 5 and 10.1. Regarding the requirements for  issuing the order, article 7.2 does not make express reference to this type of procedures prior to the formulation of the lawsuit in substance, however, it must be understood that the requirements set forth for proceedings already underway shall be applied, and therefore, the applicant must prove that  periculum in mora y fumus boni iuris exist for the application to be accepted. In these cases, the creditor must initiate action regarding the substance of the matter and accredit the action before the competent court within a deadline of 30 days as from the date of filing the application for account preservation. Article 10.1 does not say whether said term is to be interpreted as calendar days or working days, although they should be understood to be working days as a consequence of the uniform interpretation of the nature of the deadlines established in other articles of the Regulation wherein the term in working days is specified.

Speciality. “in audita parte” proceedings.

Article 11 of the Regulation does not allow the competent court to notify the debtor of the application for an account preservation order, meaning that the debtor may not be heard before the order is issued. This measure tends to reinforce the efficiency of the preservation orders, given that if the competent judicial bodies were to decide to listen to the other party before deciding upon the request, it would give precious time to the debtor to modify his statement, and at the risk of a cautionary measure, to cancel, transfer or empty either completely or partially his current accounts, thus compromising or even annulling the efficiency of the measure.

Guarantee.

In proceedings already underway – and by this, it is necessary to interpret that in cautionary measures actions prior to the filing of a lawsuit in substance –  the court may, before granting the preservation order, demand the deposit of a guarantee from the claimant. The same shall apply to cases of the enforcement of judgments, settlement agreements or a public document with an enforceable nature. The request, or otherwise, of the guarantee is facultative and shall depend upon the perception of the court regarding the circumstances of the case.

The moment in which this measure is requested is critical, taking into account the time that the procedure may take and the irreparable risk of filtrations regarding the existence of the account preservation order, which may put the debtor on guard before the order is effectively issued. It would have been more operative if the guarantee was deposited within a short deadline, straight away after issuing the order,  so pena of revocation in case of not doing so.

Request for information.

The practical problem for the creditor often lies with lack of knowledge of the identity of the debtor’s accounts. Article 14 sets forth a system for requesting information from the jurisdictional body before which the application for an account preservation order has been filed. The systems for such an information search shall be determined by each member State.

Deadline for the decision.

The competent jurisdictional body must decide upon the case within 5 working days from the filing of the application, when dealing with the enforcement of a decision, a settlement agreement or an executive public document; or 10 working days, in other cases.

 

 

Eduardo Vilá

Vilá Abogados

 

For more information, please contact:

va@vila.es

 

13th April 2017