A simplified preservation of bank accounts in Europe

On January 18, 2017, the EU Regulation No 655/2014 entered into force. This regulation creates the possibility to obtain a European Account Preservation Order to freeze funds in bank accounts. Under EU-law, regulations are directly applicable in EU countries. They do not need to be transposed into national laws. The direct effect ensures the application and effectiveness of the EU regulation.

A creditor seeking to recover a monetary claim in Europe will try to take enforcement actions against his debtor’s bank account. Before the above mentioned EU Regulation, there was no bank attachment or preservation order that could be enforced throughout the EU. Regulation 655/2014 establishes a new uniform European procedure for the preservation of bank accounts. This procedure allows creditors to preserve the amount owed in a debtor’s bank account located in a Member State of the EU. The regulation covers all civil and commercial matters in cross-border cases, except certain defined matters such as claims against a debtor during an insolvency-procedure.

The preservation order is available for the purpose of securing claims that are due and payable (opeisbaar). The procedure for a preservation order is available to a creditor wishing to secure the enforcement of a later judgement on the substance of the matter prior to initiating proceedings on the substance of the matter and at any stage during such procedures. It is also available to a creditor who has already obtained a judgement, court settlement or authentic instrument requiring the debtor to pay the creditor’s claim.

Ex parte procedure
The European Account Preservation Order is issued in an ex parte procedure: in absence of the debtor and without the debtor’s knowledge. This ‘surprise effect’ is essential for the effectiveness of the order. If the debtor is warned the creditor wants to freeze his accounts, chances are that the debtor will move the money elsewhere by the time the order is issued and executed. Furthermore this regulation is effective because the application (and later the request) cam be submitted easily by standard forms.

Security
Because of the absence of a prior hearing of the debtor, the regulation provides specific safeguards in order to prevent abuse of the preservation order. One of these safeguards is the possibility to require the creditor to provide security to ensure that the debtor can be compensated at a later stage for any damage caused to him by the preservation order. This security can be provided – for instance – by a security deposit, a bank guarantee or a mortgage. Article 701 of the Dutch Code of Civil Procedure also contains a possibility to require the creditor to provide security, but this is not a prerequisite to attach before judgement.

Information of bank accounts
To make it easier for the creditor to recover its claim, the regulation provides the creditor with access to information about bank accounts. If a creditor does not know with which bank the debtor holds an account, he may use a special procedure for obtaining information about this account. The creditor can only request the court for access to information if he has obtained an enforceable judgment, court settlement or authentic instrument which requires the debtor to pay the creditor’s claim. Under Dutch law it is not possible for creditors to obtain information in a similar way of the debtor’s bank account.

Preservation order doesn’t block the whole bank account
Only the funds held on the bank account to a maximum of the amount specified in the preservation order, are possible to be attached in accordance with the regulation. Under Dutch law the attachment includes the total amount of the bank account.

Conclusion
The preservation order makes it easier to collect cross-border claims. It gives a creditor the opportunity to take enforcement actions against his debtor’s bank account located in a Member State of the EU. Conversely, the regulation gives better protection to the debtor than the Dutch procedure, for instance because of the providing of security, required by the creditor.

More information
Would you like more information or personal advice? Please contact Daniëlla van Hoenselaar and Monica Leenders, or one of our other specialists in civil procedural law, they will be happy to assist you on this subject matter.

September 2017

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Daniëlla Cox
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