The European Account Preservation Order (“EAPO”) Regulation will apply in EU Member States other than the UK and Denmark on 18 January 2017. The Regulation provides creditors with the opportunity to freeze assets in participating Member States on the basis of a single application, and provides creditors with an opportunity to obtain information regarding a debtor’s bank account.
Whilst the UK and Denmark have opted out of the Regulation, with the effect that bank accounts there will not be subject to EAPOs, it will be possible for a creditor in a participating Member State to apply for an EAPO against the bank account of a British or Danish entity which is located in another Member State.
Important restrictions to note are that EAPOs only apply in cross-border cases where the bank account to be frozen is in a Member State other than the Member State where the application is made, and creditors seeking an EAPO must be domiciled in a participating Member State.
The EAPO Regulation prohibits parallel applications in numerous jurisdictions securing the same claim. Any other claims against the same debtor must be stated in the application.
An application for an EAPO will usually be made without notice, on paper and without a hearing. The creditor will need to submit sufficient evidence to satisfy the court that there is an urgent need for protective measures due to a real risk that, without an EAPO, the enforcement of the subsequent claim against the debtor will be impeded or more difficult. Non-payment of the claim or evidence of financial difficulty will not be sufficient; there must be a demonstrable risk that the debtor will conceal or dissipate assets to an unusual extent. Where a creditor has not yet received judgment they must submit evidence satisfying the court that they are likely to succeed on the substance of their claim against the debtor.
In order to obtain an EAPO, a creditor will need to know the details of the debtor’s account in which funds are to be preserved. Where the creditor has already obtained judgment, they can apply to the court to which they have applied for the EAPO to request the account information from the Member State where the account is based. This power is not extended to a creditor who is yet to obtain judgment, therefore pre-judgment EAPOs will only be available to a creditor who knows the debtor’s account details.
Where a judgment has not yet been obtained by the creditor, the court will require security in an amount sufficient to ensure the debtor may be compensated for any damage caused as a result of the EAPO. Where judgment has been obtained, the matter of providing security and the form of such security will be at the court’s discretion.
The bank to which an EAPO has been addressed must process it without delay. The bank must preserve the amount specified in the EAPO; alternatively if the law of the Member State requires, the funds must be transferred into a designated account. Where an EAPO relates to several accounts held at the same bank and those accounts contain funds exceeding the amount specified, the order will be implemented as follows:
- savings accounts in the sole name of the debtor;
- current accounts in the sole name of the debtor;
- savings accounts in joint names, but only to the extent where this is permissible under the law of the Member State where the account is located; and
- current accounts in joint names (again, only to the extent this is permitted under local law).
By the end of the third working day following the implementation of an EAPO, the bank must issue a declaration whether and to what extent funds in the debtor accounts have been preserved. If, in exceptional circumstances, it is not possible for the bank to do this within three days, the bank has until the eighth working day to implement the terms of the order.
The liability of a bank which fails to comply with its obligations under the EAPO will be governed by the law of the Member State in which the account is located.
If the debtor wishes to challenge the EAPO, it must apply to the court which originally made the order. There is no provision in the Regulation for living expenses or legal costs; these are subject to the laws of the Member State in which the bank account is located.
For more details on the EAPO, see our blog post here.