European Account Preservation Order: Ministers endorse Commission proposal to help business recover cross-border debts
New EU rules which will make it easier for companies to recover claims across borders have taken a big step towards adoption. Member States in the Justice Council today endorsed the compromise agreement on those rules reached with the European Parliament just a few weeks ago (see MEMO/14/101 ), paving the way for a final adoption at first reading. The proposal will help businesses recover millions in cross-border debts, by allowing creditors to preserve the amount owed in a debtor's bank account. This follows the European Parliament's Legal Affairs (JURI) committee vote to give its support to the compromise text agreed in trialogues with the European Commission and the Council of Ministers, on the proposal for a Regulation establishing a European Account Preservation Order ( IP/11/923 ).
" Small and medium-sized enterprises are the backbone of European economies - making up 99% of businesses in the EU. Around 1 million of them face problems with cross-border debts," said Vice-President Viviane Reding , the EU's Justice Commissioner. " After two and a half years of work on this proposal, the European Account Preservation Order is now close to a final adoption. This is good news for Europe's SMEs - in these economically challenging times, companies need quick solutions to recover outstanding debts."
While the EU’s internal market allows businesses to enter in cross-border trade and boost their earnings, today around 1 million small businesses face problems with cross-border debts. Up to €600 million a year in debt is unnecessarily written off because businesses find it too daunting to pursue expensive, confusing lawsuits in foreign countries. The European Account Preservation Order can be of crucial importance in debt recovery proceedings because it would prevent debtors from moving their assets to another country while procedures to obtain and enforce a judgment on the merits are ongoing. It would thus improve the prospects of successfully recovering cross-border debt.
Next steps: On 30 May, the European Parliament’s Legal Affairs Committee (JURI) already voted to back the Commission’s proposal ( MEMO/13/481 ). Ministers discussed the proposal at the Justice Council meeting on 6 June 2013 and reached a general approach on 6 December 2013 ( SPEECH/13/1029 ). In order to become law, the Commission's proposal needs to be adopted jointly by the European Parliament and by the EU Member States in the Council (which votes by qualified majority). It is expected that the European Parliament will vote in plenary in April paving the way for a first reading adoption under the Greek EU Presidency in June.
The main changes following the trialogue talks are:
-The requirement for the applicant to put security (e.g. a security deposit, or a bank guarantee) when requesting a preservation order so as to avoid unjustified claims (subject to some exceptions);
-A rule on creditor liability for the damage caused to the debtor of the European Account Preservation Order;
-A limitation of the possibility for creditors to obtain information on their debtors' accounts;
The new European Account Preservation Order will allow creditors to preserve funds in bank accounts under the same conditions in all Member States of the EU (except the UK, which has not opted in, and Denmark). Importantly, there will be no change to the national systems for preserving funds. The creditors will be able to choose this European procedure to recover claims abroad in other EU countries. The new procedure is an interim protection procedure. To actually get hold of the money, the creditor will have to obtain a final judgment on the case in accordance with national law or by using one of the simplified European procedures, such as the European Small Claims Procedure.
The European Account Preservation Order will be available to the creditor as an alternative to instruments existing under national law. It will be of a protective nature, meaning it will only block the debtor's account but not allow money to be paid out to the creditor. The instrument will only apply to cross-border cases. The instrument provides common rules relating to jurisdiction, conditions and procedure for issuing an order; a disclosure order relating to bank accounts; how it should be enforced by national courts and authorities; and remedies for the debtor and other elements of defendant protection.