On 17 July 2014, the regulation creating the European Account Preservation Order ("EAPO") came into force. This regulation will serve as an alternative to domestic remedies and relates to the freezing of bank accounts across participating EU Member States. The EAPO Regulation will be applicable from 18 January 2017. It will automatically apply to all Member States except the UK and Denmark which have opted out of the EAPO; therefore, it will not apply to assets located in those countries.
The central feature of the EAPO is that it will allow creditors to apply for an order in one participating Member State to freeze the assets of debtors held in bank accounts located in another participating Member State without the need to obtain another court order within that State. It is available in the context of recurring claims in both commercial and civil cross-border matters. This means that, for example, assets located in France could be frozen by order of the Spanish courts. It is important to note that applications for such orders will generally be made 'without notice' so the debtor will not have prior knowledge of the application.
These Orders can be awarded before or during the course of proceedings, and can also be obtained once a judgment has been awarded. In order to obtain an order before judgment, the claimant must demonstrate to the court "sufficient evidence" that the claim is likely to succeed. To obtain an order after judgment, the claimant must demonstrate the need for an "urgent protective measure" to enable the judgment to be enforced. The courts of a Member State with jurisdiction on the substance of the matter will have jurisdiction to issue an EAPO.
What will be the impact?
The aim of the EAPO is to make it easier for multi-jurisdictional disputes to be resolved and for judgments to be enforced across borders. The EAPO will result in it being easier for creditors to obtain freezing orders against debtors whose assets are located in participating Member States. The obvious concern for debtors is that they find themselves in a situation where their business could become effectively paralysed by an EAPO without them having had the opportunity to make representations of their own to the court granting the order.
However, there will also be further consequences of the introduction of EAPOs. Banks in all participating Member States will be subject to stringent requirements attached to an EAPO. For instance, they must not only freeze the account but also file a report to the relevant authorities within three days confirming that such action has taken place. Banks will also be concerned regarding their ability to reclaim any costs incurred in conforming with the legislation (this will vary between Member States) and the extent of the sanctions they may face if they fail to do so (this will again vary).
As a result of the UK and Denmark opting out of the regulation creating EAPOs, the assets of UK and Danish debtors located in the participating Member States can be frozen using an EAPO. However, UK and Danish creditors will not be able to use an EAPO to freeze the assets of their debtors nor will others be able to obtain an EAPO over bank accounts held in the UK or Denmark. EAPOs may also be obtained against the assets of individuals from outside of the EU, as long as those assets are located within a participating Member State.
Might we see EAPOs in the UK in future?
Although the UK Government initially supported the EAPO proposals, it opted-out primarily because the public consultation and views of relevant stakeholders viewed the measure to be too 'pro-creditor' with insufficient safeguards for defendants. A statement released by the Ministry of Justice in December 2012 highlighted concerns that there was "no requirement to compensate a defendant for losses suffered from the wrongful grant of an order". The UK Government participated fully in negotiations prior to the EAPO coming into force in the hope of negotiating terms that might make it possible to opt back in; however, agreeable terms were not reached. On this basis, it is difficult to see EAPOs being adopted in the UK in the near future and litigants in the UK will have to continue relying upon national laws or worldwide freezing orders.