The Preservation of Foreign Bank Accounts Is Made Easier in the EU
As from 18 January 2017, it is possible to proceed with preservation of bank account(s) of a debtor holding one or more bank accounts in another member state of the European Union.
This is provided for in the Regulation (EU) No 655/2014 of 15 May 2014 establishing a European Account Preservation Order procedure to facilitate cross-border debt recovery in civil and commercial matters, which came into effect as from 18 January 2017.
1. Benefits of this measure
The preservation is a seizure that can be carried out before a court’s decision.
The purpose is to prevent the debtor to withdraw the funds out of his bank account before being forced by a court’s decision to pay a debt.
It is also important that the debtor is not informed about the creditor’s application beforehand.
It is not complicated to initiate a preservation procedure on a Belgian bank account. However, a creditor dealing with a foreign debtor or a Belgian debtor holding a foreign bank account was often reluctant to initiate a preservation procedure because he had to turn to a foreign court. As a result, many debts were not collectable from a practical point of view and many debts were therefore dropped.
As from 18 January 2017, each Belgian consumer or company will be able to request a European account preservation order from a Belgian judge. With this order, the preservation can be carried out on one or more bank accounts held by a debtor in another state of the European Union.
The preservation prevents the transfer or withdrawal of funds held by his debtor in his bank account.
2. Only applicable in cross-border cases
The regulation is only applicable to debts in civil and commercial matters, when the preserved bank account is held in a member state other than the member state in which the creditor is resident or of the court where the application for the preservation order is filed.
The regulation does not apply to Denmark and the United Kingdom.
If the cross-border condition is missing, the regulation does not apply and gives way to the national rules regarding preservation.
3. Which court has jurisdiction?
♣ If the creditor has not yet obtained a judgment, court settlement or authentic instrument, the court of the member state, which has jurisdiction to rule on the substance of the matter, has also jurisdiction to issue a preservation order.
If the debtor is a consumer who has concluded a contract with the creditor for a purpose that can be regarded as being outside the debtor’s trade or profession, only the courts of the member state in which the debtor is domiciled have jurisdiction.
♣ If the creditor has already obtained a judgment or court settlement, jurisdiction to issue a preservation order for the claim specified in the judgment or court settlement shall lie with the courts of the member state in which the judgment was issued or the court settlement was approved or concluded.
♣ If the creditor has obtained an authentic instrument, jurisdiction to issue a preservation order for the claim specified in that instrument shall lie with the courts designated for that purpose in the member state in which that instrument was drawn up.
4. How does the procedure unfold?
The application for the preservation order has to be lodged with the court having jurisdiction to rule on the substance of the matter. To that end, a standard form should be used.
The creditor has to submit sufficient evidence to satisfy the court that:
♣ There is a real risk that, without such a measure, the subsequent enforcement of the creditor’s claim against the debtor will be impeded or made substantially more difficult.
♣ The debtor’s debt will be declared manifestly founded.
In order to ensure the surprise effect, the procedure is unilateral. The debtor should not be informed about the creditor’s application nor be heard prior to the issue of the order.
5. Security for the debtor
At the same time, the Regulation provides for a number of safeguards to prevent abuse of this procedure.
In this way, it will be possible that the damage the debtor could possibly suffer as a result of the preservation could be compensated if the creditor is liable for that damage. To this end, a security can be required from the creditor. The burden of proof of the creditor’s liability shall lie with the debtor.
However, according to the regulation, the fault of the creditor shall be presumed in the following cases:
♣ If the order is revoked because the creditor has failed to initiate proceedings on the substance of the matter, unless that omission was a consequence of the debtor’s payment of the claim or another form for settlement between the parties;
♣ If the creditor has failed to request the release of over-preserved amounts;
♣ If it is subsequently found that the issue of the order was not appropriate or appropriate only in a lower amount, because the creditor has failed to inform the court that he
a. has submitted to another court a parallel application against the same debtor aimed at securing the same claim; or
b. has obtained an equivalent national order against the same debtor and aimed at securing the same claim;
♣ If the order is revoked or its enforcement terminated because the creditor has failed to comply with his obligations with regard to service (or notification) or translation of documents.
6. Request for the obtaining of account information
Sometimes a creditor knows that the debtor holds one or more accounts with a bank in another member state without knowing neither the name, the address of the bank or the IBAN. In that case, the regulation sets out a mechanism allowing the creditor to request that the information needed to identify the debtor’s account be obtained by the court, before a preservation order is issued, from the designated information authority of the member state in which the creditor believes that the debtor holds the account.
The creation of a European account preservation order is a further step to facilitate cross-border debt recovery.
ABOUT THE AUTHOR: Leo Peeters
Leo Peeters is specialised in national and cross-border corporate and business law, and in commercial and financial transactions. He offers advice to his clients on mergers, acquisitions, financial transactions and restructuring of companies. His experience covers contract law, commercial law, banking and finance law, insolvency, distribution law, construction and real estate, telecom and arbitration. Leo serves the interests of both national and international clients.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.