European Union: New Mechanism Of Claim Security Against Unreliable Debtors – European Account Preservation Order

As of January 18th 2017 creditors have at their disposal a new institution securing their pecuniary claims. The European Account Preservation Order aims to facilitate debt recovery in EU Member States and should contribute to an increased business security.

Major characteristics of the new mechanism and the principles of its application are presented below:

I. Scope of application

  • The procedure of obtaining the European Account Preservation Order ("PO") applies to pecuniary claims in civil and commercial matters in cross-border cases in EU Member States, excluding Great Britain and Denmark.
  • A "cross-border" case is one in which:

    1. the bank account (in RP also an account maintained by Credit and Savings Unions, "SKOK") on which the debtor's funds are to be preserved is maintained in a Member State other than the Member State of the court of the application for a PO;
    2. the bank account on which the debtor's funds are to be preserved is maintained in a Member State other than the Member State in which the creditor is domiciled.
  • The regulation does not apply i. a. to:

    1. matters other than civil and commercial (economic), i.e. among others, fiscal, customs or administrative matters;
    2. claims against a debtor in relation to whom bankruptcy proceedings have been opened;
    3. preservation of bank accounts containing financial instruments.
  • a PO may be obtained before, during and after the primary proceedings for payment are initiated.

II. Which courts does the jurisdiction lie with?

  • In principle, jurisdiction to issue a PO lies with the courts of the Member State which have jurisdiction to rule on the main case against the debtor.
  • Exception 1: where the debtor is a consumer (regardless of who the creditor is acting as) jurisdiction to issue a PO lies only with the courts of the Member State in which the debtor is domiciled.
  • Exception 2: jurisdiction to issue a PO after a judgement (court settlement or authenticated document) has been issued against the debtor lies with the courts of the Member State in which the judgment was issued.

III. How to fill in the application for a PO?

  • The creditor lodges the application using a form. The form must be filled in in the language of the court of the Member State to which the application is sent. A court fee is charged for the application (the fee for the application for a PO lodged with a Polish court is PLN 100.00, unless the application has been lodged in the letter instigating the proceedings).
  • The creditor is obliged to:

    1. satisfy the court that there is an urgent need for a protective measure in the form of a Preservation Order because 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;
    2. satisfy the court that there is a claim for payment/present a judgement which imposes the obligation of payment.
  • The creditor should indicate in the application for a PO:

    1. name and address of the bank in which the debtor has it account or accounts or
    2. SWIFT code.
  • If the above data (name and address of the bank/SWIFT code) is missing, the creditor who has an enforcement order against the debtor will be able to use the mechanism allowing the access to foreign accounts of the debtor. The mechanism of obtaining the information on accounts from banks by courts is applied through the "information authority" (in RP: the Ministry of Justice).
  • A court may allow a creditor who has obtained an unenforceable judgement to obtain information on the debtor's bank account in special circumstances, i.e.:

    1. the amount subject to security must be high, considering the circumstances and
    2. there is an urgent need for a protective measure in the form of a Preservation Order because there is a real risk that, without such a measure, the subsequent enforcement of the creditor's claim against the debtor could be impeded or that it could result a significant deterioration of the creditor's financial situation.
  • Therefore, the creditor's lack of knowledge on the debtor's bank account (at least the name and address of the bank or SWIFT code) – combined with the lack of a judgement imposing the obligation of payment on the debtor – will make an effective application for a PO impossible.

IV. Security to be provided by the creditor

  • Before issuing a PO, in a case where the creditor has not yet obtained a judgment, the court requires the creditor to provide security for an amount sufficient to prevent abuse of the PO procedure and to ensure compensation for any damage suffered by the debtor as a result of the PO. By way of exception, the court may dispense with the requirement of providing the security if it considers that it is "inappropriate" in the circumstances of the case.
  • Where the creditor has already obtained a judgment, the court may, before issuing the PO, require the creditor to provide security if it considers this necessary and appropriate in the circumstances of the case.

V. Decision of the court

  • The PO procedure is conducted without the debtor - the debtor is not notified of the application, but may appeal against it.
  • A characteristic feature is that the court issues the PO without delay. Where the creditor has not yet obtained a judgment against the debtor, the court issues its decision by the end of the tenth working day after the creditor (correctly) lodged his application. Where the creditor has already obtained a judgment, the court issues its decision by the end of the fifth working day after the creditor lodged his application.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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