The European Account Preservation Order Explained
The EU wants to improve the functioning of the internal market. One of the ways to achieve this is to make it much easier for someone in a member state to get a preservation order for the account of a person that’s located in another member state. The European Account Preservation Order regulation will be implemented by all the EU member states except the United Kingdom and Denmark.
The creditor does not even need to know the account number or name of the bank where the account is held. The European Account Preservation Order is yet another nail in the coffin of the Rule of Law by further eroding the out-of-date right to be secure in one’s property and to keep one’s financial affairs private.
The European Account Preservation Order – How Does It Work?
A creditor living in a member state who has a claim against a debtor that has an account in another member state will ask a court in his own member state for an account preservation order. The procedure has been set up to be convenient and offers a low threshold for the creditor. He can apply through a standard form for the preservation order and he does not need a lawyer or other representation for the procedure.
If he already has a ruling on the substance in his favour, the court will grant him the preservation order. In cases where the creditor doesn’t have a ruling in the matter of substance, the court will grant him the account preservation order if he can show that there is a substantial risk that the debtor will perform actions that impede the creditor’s claim. He must also prove to the court that it’s likely that his claim will be successful in the produce on the matter of substance.
The preservation order will be send to the bank(s) in the member state(s) and the banks are obligated to comply with the request. The debtor will be confronted with his accounts being frozen and the only way to get back access to his own accounts is to travel to another EU state to participate or start a procedure before a foreign court.
The frozen funds will only be released after the claim has been settled, or after the debtor has successfully overturned the preservation order or the claim. This can only be done before the court that issued the preservation order or that rules over the matter of substance, which usually is in a EU member state other than the state where the debtor resides. During this time the business of the debtor can become irreparably damaged.
Getting Account Information
A very privacy threatening provision in the regulation is the option for the creditor to obtain the banking information of the debtor. Through his application the creditor can ask the court to issue a court order for the banking information of the debtor. The order can be issued even if the creditor does not know at which bank the debtor holds his accounts. A suspicion that the debtor has an account in one or more states is enough.
Should the court rule in favour of the creditor, it will send the request to the member states where the creditor thinks the debtor has accounts. The authorities of those states will send the request to all the banks in those member states. These banks will have to check whether or not the debtor holds accounts with them. Should the debtor have an account at the bank, the bank will hand over the name and address of the bank and the account number of the debtor.
Because the creditor does not even need to know the name of the bank or the country where its located, this type of action has all the hallmarks of a fishing expedition that is a serious threat to the privacy of the alleged debtor. Keep in mind that this information can already be obtained by the creditor without a ruling of the substance of the matter and even before the alleged debtor has had the chance to defend himself against the claim of the creditor. Even when the court rules in favour of the debtor on the matter of substance, the right to privacy of the debtor has already been breached by providing this information to the creditor.
The Position Of The Debtor
With this new regulation the debtor will be faced with a serious threat to his privacy and the continuation of his business. The alleged debtor will have no opportunity to defend himself in the first stage of the application for an account preservation order. His banking information will be subject to a fishing expedition.
After the debtor has been informed about the fact that his account has been frozen and that his banking information has been given to the creditor, the regulation forces him to go to another state to defend his rights. This means that the alleged debtor can be faced with a legal system that is literally foreign to him. The proceedings will possibly be in a foreign language. The debtor will also be confronted with the costs and inconvenience of taking part or starting a trial in another country.
Even in case of a technical error in the application, the granting or the execution of the order, the initiative lies with the debtor and he will have to go to the foreign court. The creditor can be held liable for the debtor’s damages caused by the preservation order, but the burden of proof lies with the debtor. Only in certain cases will the fault of the creditor be presumed.
This regulation will come into force in July 2017. It works heavily in favour of the creditor. While it offers a low threshold for the creditor to get the banking information of the debtor and the preservation order, it poses a high threshold for the alleged debtor to defend himself. The rights and business continuity of the debtor are threatened with this EU regulation.
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