European Account Preservation
by David Carter on 08 September 2011
Written by Stephen Cowan of Yuill + Kyle Solicitors
EU proposal
The European Commission has adopted a proposal for a Regulation creating a European Account Preservation Order to facilitate debt recovery in civil and commercial matters. Once adopted by national governments it will create a new pan-European procedure within the EU for the preservation of bank accounts by enabling a creditor to prevent the transfer or withdrawal of assets from the debtor’s bank account.
The effect of the proposal is to create a uniform mechanism to preserve such accounts for the creditor’s benefit as well as the creation of a systematic method of establishing where a debtor’s accounts may be located without having to instruct, for example, an external investigator. And, of course, the question of costs has also to be addressed.
UK position
It is anticipated the UK government will adopt the proposal although it is expected the UK’s financial institutions will be involved in considerable expense in the creation of a register containing bank account details. However, current discussions are taking place focussing on the requirements on financial institutions to comply with the “responsible lending” guidance in relation to agreements regulated by the consumer credit legislation. One aspect of this is on EU member states having to share financial information amongst themselves to establish a debtor’s current indebtedness. So we may not be so far away from achieving this goal as it may at first seem.
It is the register of bank accounts which will be searchable by a ‘competent authority’ to establish whether or not the debtor has an account available both prior to judgment and post judgment once an application is made an Order has to be given within seven days. Post judgment orders have to be delivered within three days of their being lodged. Applications can be made ex parte. Creditors will have to pay for search costs but these will have to be set at a reasonable level to ensure there are no financial disincentives in creditors using the process.
Various debtor safeguards are in place to ensure the debtor has sufficient resources in the account to ensure the livelihood of the debtor and his family.
If the debtor is a company then a balance of the account will be protected to ensure the debtor can still carry on a business.
As expected, the amount of cash which can be frozen by an application will be limited to the amount of the debt together with an amount in respect of interest and costs due under the monetary judgment or, if prior to the judgment, the sum sued for.
Creditors will no doubt welcome this measure as being helpful in the recovery of debts throughout the EU. However creditors have to remember that the proposal does not apply within the UK’s three law districts of England and Wales, Northern Ireland and Scotland. On the assumption the Regulation is adopted there should not be too much difficulty for legislation to be passed which will allow the Regulation to apply intra UK. If this done then creditors will be even happier!
© Sheriffs High Court Enforcement Ltd. Please contact us to request permission to reproduce this article.
Disclaimer: The statements and opinions expressed in this article are those of the author and do not necessarily reflect those of Sheriffs High Court Enforcement Ltd, trading as The Sheriffs Office. Sheriffs High Court Enforcement Ltd does not take any responsibility for the views of the author. The author will not be held responsible for any comments posted by visitors to this site. Please note that this article does not constitute legal advice. The author has used his best endeavours to make this article as accurate and complete as possible, but requests that the reader be aware that the law of England and Wales frequently changes. The author strongly advises the reader to take legal advice before embarking on any enforcement action.
