Posted Feb 16, 2017 by Martin Armstrong
On January 18, 2017, new rules governing the seizure of bank accounts in the European Union went into effect (The EU Regulation No 655/2014 of May 15, 2014). This regulation sought to circumvent the independent legal rights of people, denying them the right to be heard in a court of law in their own country. This has created a European Account Preservation Order (EAPO) which is to facilitate cross-border debt recovery in civil and commercial matters. The European Commission described the EAPO as a “simple and cost-effective way to block funds that are owed” by a creditor in another member state. What this really means is that a CREDITOR no longer needs to run to an Italian court to sue an Italian debtor. In other words, this order dismembers the sovereignty of the member states legal courts.
Until now, a creditor who is owed money by a debtor in another EU country had to apply to a court in the debtor’s state of residence in accordance with the domestic law of that member state if he wanted to freeze the debtor’s bank accounts. In the Commission’s opinion, this was often too time-consuming and too expensive. In the United States, you still must go after a debtor in their home state and apply by the local laws.
The new European procedure was designed to be quicker, cheaper, and more efficient for creditors, but it then would demand that someone in Italy would have to hire a lawyer in Germany to defend them there. The costs are being shifted to the debtor rather than the creditor under this EAPO.
Basically, it has become possible for your accounts in your bank to be seized domiciled in the European Union doing away with all local legal protection. The danger here is someone in Germany can freeze your bank account in Italy in proceedings commenced in another member state and ex parte – meaning without you even appearing.
Any court of a member state can grant an EAPO, provided that it has jurisdiction to hear the underlying case on its merits under the European Union’s rules on jurisdiction. Therefore, under the Brussels I Regulation Recast, Germany has implemented the EAPO procedure in Sections 946 to 959 German Code of Civil Procedure (ZPO).
There is not even a limitation for the application for a EAPO can be made at any stage of the main proceedings. Therefore, you can be in a court in Italy and a court in Germany can freeze your account in the middle of a litigation or even before main proceedings have been issued, denying you the right to use funds to hire a lawyer. Article 7 (1) of the Regulation reads:
“The court shall issue the Preservation Order when the creditor has submitted sufficient evidence to 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.”
If the application is made before or during proceedings, and no judgment has therefore been obtained yet, the applicant must also show, in accordance with Article 7 (2), that they have a bona fide good case and are likely to succeed on the merits:
“Where the creditor has not yet obtained in a Member State a judgment, court settlement or authentic instrument requiring the debtor to pay the creditor’s claim, the creditor shall also submit, sufficient evidence to satisfy the court that he is likely to succeed on the substance of his claim against the debtor.”
The interesting aspect of this EAPO mechanism is how it actually also creates the right to search for bank accounts of a debtor throughout Europe. Article 14 provides for a request to obtain bank account information:
“Where the creditor has obtained in a Member State an enforceable judgment, court settlement or authentic instrument which requires the debtor to pay the creditor’s claim and the creditor has reasons to believe that the debtor holds one or more accounts with a bank in a specific Member State, but knows neither the name and/or address of the bank nor the IBAN, BIC or another bank number allowing the bank to be identified, he may request the court with which the application for the Preservation Order is lodged to request that the information authority of the Member State of enforcement obtain the information necessary to allow the bank or banks and the debtor’s account or accounts to be identified.”
However, the EAPO is NOT available in the entire EU. Denmark and Britain have opted out of this Regulation. Ireland is really screwed since they could have opted out, but chose not to do so.