The government yesterday announced that the UK would not be opting in to the proposed Regulation establishing a Europe-wide bank account freezing order (click here for our summary of the proposals).
Although the government recognises the benefits of the proposal in facilitating cross-border debt-recovery, responses to its consultation on the proposal highlighted concerns over a lack of adequate safeguards for defendants, such as: too low a threshold for obtaining an order; insufficient discretion for courts in deciding whether to grant an order or in what amount; and no general requirement for a claimant to provide security for any damage that might be suffered by the defendant if the order was unjustified (though the court has a discretion to require security). Fears were also expressed that the grant of an order might undermine the process of company restructuring or rescue and make insolvency more likely.
The consultation also highlighted concerns over the burdens that would be placed on both banks and the government, in particular through the provisions enabling a claimant to request a “competent authority” in the Member State of enforcement to obtain the bank details of the debtor. This could be accomplished either by the relevant authority making enquiries of all banks in the Member State to identify whether the debtor holds an account with them, or by establishing a central register which could be interrogated by the authority as and when required. The UK has no such system at present, so setting this up would involve significant work and cost for both the government and financial institutions.
Although the UK has decided not to opt in to the proposal at this stage, it has stated that it intends to participate fully in negotiations with the hope that sufficient changes will be made to enable an opt-in after the proposal is adopted.