The European Commission recently published adraft Regulation to facilitate cross-border debt recovery in civil andcommercial matters.
The draft Regulation proposes the introduction of a ‘European AccountPreservation Order’, otherwise known as a ‘Freezing Order’, which willhave the effect of freezing a debtor’s bank accounts (cash and othersecurities) located in the EU, pending the resolution of courtproceedings.
The draft Regulation is a departure from previous mechanisms ofcross-border enforcement. If implemented, it will permit a creditor tomake a single application to a national court to freeze the bankaccounts of a debtor located in other Member States, without any furtherapplications for enforcement before the courts in those jurisdictions.
The creditor will be able to seek the order either prior to or duringlegal proceedings or after a court judgment has been obtained. Wherethe order is sought before the conclusion of proceedings, however, thecreditor will be required to demonstrate to the Court that the claimagainst the debtor is well-founded and that the debtor is likely tofrustrate any court judgment by disposing of the cash or other securityin the account.
A somewhat controversial feature of the draft Regulation is theproposal to impose disclosure obligations on banks within the EU. Thiswould allow a creditor to request the authorities of a Member State toascertain from the banks whether the debtor holds any accounts in thejurisdiction.
If implemented in its current form, the Regulation will place asignificant burden on banks and the Irish government as they will needto put in place the infrastructure to deal with creditor requests forinformation on debtors’ accounts.
Both Ireland and the UK must decide whether to ‘opt-in’ to theRegulation as it will not automatically apply either here or in the UK.If Ireland decides to opt-in but the UK does not, the proposal willarguably be of limited use to many Irish creditors as the UK is ourbiggest trading partner.
It may be several years before the draft Regulation is in force andit is possible that certain of its provisions will be amended during theconsultation process with the European Council and Parliament.
Contributed by Richard Breen.
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