The European Union has taken significant steps to streamline and strengthen its mechanisms to facilitate debt recovery between EU countries in civil and commercial matters. One of the key developments in this area is the introduction of the European Account Preservation Order (EAPO), established by Regulation (EU) # 655/ 2014. It allows creditors to obtain a court order in one EU member state to freeze funds in a debtor’s bank account located in another EU member state excluding Denmark. The EAPO aims to facilitate cross-border debt recovery by providing a streamlined procedure for creditors to safeguard their claims. The regulation has applied since 18 January 2017 with the exception of Art. 50, which has applied since 18 July 2016 regarding the information to be supplied by EU countries, such as the courts that they designate to issue and the authorities to enforce EAPOs.
Application of EAPO
The EAPO is an alternative to Regulation (EU) # 1215/2012 (Brussels Ia), Regulation (EU) # 4/2009 and the national procedures, but does not replace them. It is available to creditors (citizens and businesses) domiciled in an EU member state in cases when the account of the debtor, at the date of application for an EAPO, is held in an EU member state different than the creditor’s.
It applies to monetary claims in civil and commercial matters, excluding the following matters: revenue, customs or administrative matters and social security; rights in property arising out of marriage or equivalent relationship, and wills and succession; and claims against a debtor who is the object of bankruptcy or insolvency proceedings, judicial arrangements, compositions or other similar proceedings. Some categories of specially protected bank accounts are also excluded.
Art. 618a – art. 618e of the Bulgarian Civil Procedures Code stipulate the EAPO procedure to be initiated before the first instance court competent on the subject matter of the dispute.
Procedure for Obtaining an EAPO
The procedure is open before initiating proceedings on the substance of the matter against the debtor, during the proceedings or after obtaining a judgment, court settlement or authentic instrument requiring the debtor to pay. A specific form is to be used in order to apply for an EAPO, together with all supporting documents.
The court competent to issue an EAPO is normally one that is competent to rule on the substance of the matter. Where the debtor is a consumer, the court competent to issue an EAPO to secure a claim relating to the consumer’s contract is the court of the EU member state where the debtor is domiciled.
In all cases, the creditor must provide evidence to convince the court that there is a real risk that justifies the need to freeze the debtor’s account. If the creditor requests an EAPO before obtaining a judgment on the substance of the matter, sufficient evidence should also be given to the likely success of the substance of the claim. Short time limits are set by which the different steps in the procedure must be completed; these vary depending on whether the creditor has already obtained a judgment or not. The creditor has the right to appeal against a refusal to issue an EAPO.
Recognition, Enforceability and Enforcement of the EAPO
An EAPO issued in an EU member state in accordance with the regulation should be recognised and enforceable in another EU member state without any special procedure or declaration of enforceability. The competent enforcement bodies in Bulgaria are the bailiffs (state and private). There is an obligation on the bank to declare, by means of a specific form, whether the EAPO has led to the preservation of any of the debtor’s funds. The creditor has a duty to request the release of any funds preserved that exceed the amount specified in the EAPO. Some amounts may be exempt from seizure under the law of the country of enforcement, i.e. amounts necessary to ensure the livelihood of the debtor and of their family.
Debtor’s Rights Protection
In order to ensure the surprise effect and the usefulness of the EAPO, the debtor is not informed prior to its implementation. To counterbalance the absence of a prior hearing, there are the following safeguards for the debtor against the abusive use of the EAPO: remedies — including a right of appeal — to be able to challenge the EAPO as soon as the debtor is informed of the blocking of their accounts; and rules on the provision of a security by the creditor — to ensure that the debtor can be compensated for any damage caused by the EAPO: rules on the creditor’s liability for any damage caused to the debtor by the EAPO due to an error on the creditor’s behalf.
EAPO as a Tool to Overpass Banking Secrecy
The creditor who does not know the debtor’s account information can, under certain conditions, request the court to obtain bank account information from designated authorities in the EU member state of enforcement. That is probably the most important innovation with the EAPO Regulation. Indeed, often a claimant can suspect that a debtor has a bank account in a certain country but could not otherwise get such data due to banking secrecy.
The EAPO innovates here by allowing the creditor to apply for a freezing measure against the debtor, but also, at the same time, he may submit a separate explicit request for an order that will identify the bank accounts held by the debtor in the target country. The court to which the EAPO application has been made will be transmitting the request to an “information authority” in the country in which the creditor believes that the debtor’s bank accounts are held. The information authority must have available to it under its national law at least one of four methods to identify the bank accounts held by the debtor.
In Bulgaria, the Ministry of Justice has been appointed as “information authority” by amendments to the Law on Credit Institutions in December 2016 and to the Civil Procedures Code. When the EAPO Regulation in this particular part shall be applied, the Minister of Justice has been granted access to the data base maintained by the Bulgarian National Bank containing the IBANs and beneficiaries of all accounts in all banks and payment services providers in the territory of Bulgaira.
Bulgarian EAPO Case at the European Court of Justice (ECJ)
The ECJ ruled in a case involving the EAPO Regulation application in a Bulgarian court case (ECJ 7 November 2019 K.H.K. v B.A.C. and E.E.K., C-555/18). The ECJ took the occasion to clarify certain interpretation issues of the EAPO Regulation.
In this case, the creditor K.H.K. had obtained by the Sofia Regional Court a European Order for Payment (EOP) against the debtors B.A.C. and E.E.K. The debtors were not found at the addresses where the EOP had been notified to. They therefore did not respond in a timely manner. The creditor then asked the court to issue an EAPO on the bank accounts held by the debtors in Sweden under the EAPO Regulation. The question raised with the ECJ was whether the EOP obtained by the creditor could be considered as “authentic instrument” under the EAPO Regulation, since it was not yet enforceable.
Under the EAPO Regulation, an “authentic instrument” is defined as a document which has been formally drawn up or registered as an authentic instrument in a Member State and the authenticity of which relates to the signature and the content of the instrument; and has been established by a public authority or other authority empowered for that purpose.
The ECJ decided that since the EOP was not yet enforceable, it could not be considered as an “authentic instrument” under the EAPO Regulation. As a consequence, the EAPO requested by the creditor could only be obtained by the courts that would have jurisdiction to rule on the substance of the matter between the parties.
Conclusion
Despite the obvious advantages it looks like the EAPO is still not widely used as a legal instrument within the EU. At the same time cross- border transactions and respectively disputes develop intestively, so it may be expected that creditors from EU member states will more frequently use the EAPO, including as a tool for disclosure of information on debtors’ bank accounts details.
