The EAPO Regulation adopted in Luxembourg has been established to facilitate cross-border debt recovery by creditors. This regulation allows the freezing of the debtor’s bank account maintained in any EU Member state by a single order issued by another EU member state. The regulation is binding in all EU member states except the UK and Denmark, who opted out.

International firms housed under various business entities, such as a firm with one or more subsidiaries in different regions, would be able to transfer assets easily between the accounts of what is essentially the same firm. Furthermore, in today’s digital economy, it is pretty usual for individual customers to buy goods or services from enterprises in one nation while having their money housed in another. Therefore, preventive measures are required to preserve the financial link between debtors and creditors and prevent assets from vanishing beyond EU Member States’ borders.

Creditors and the EAPO Regulation

Suppose a creditor has a payment claim backed up by a court order in one EU member state. The EAPO procedure, a new debt-collection tool established by the Regulation that went into effect in January 2017, allows a creditor to quickly request that an order be registered and issued in another EU member state to freeze the debtor’s bank account in that specific state.

Before the EAPO Regulation, there were substantial disparities in how such orders were carried out among EU Member states. Today, the EAPO Regulation has made debt collection easy for banks. This new instrument of the EU civil justice has made it cheap and quick to execute the enforcement order in another EU Member state.

At the EU level, the EAPO Regulation gives a better level of openness about debtors’ assets. This also improves interbank collaboration.

On the other hand, the EAPO has a limited scope. To begin with, EAPO may only be used in cross-border cases, which means that the bank account on which the preservation order will be enforced must be held in a member state other than the one where the court order was issued or where the creditor has its residence. Second, the EAPO is only applicable to debtors’ bank accounts and not to their other assets.

To balance the interests of creditors and debtors under this newly established system, anyone applying for an EAPO must first clear many barriers before its implementation. To prevent the misuse of this new regulation by creditors, it must be proven that the claim is fair and the creditor’s last option.

Secondly, the claim must be proved as urgent. The creditor must also prove that his crediting agency and the recovery of the assets in dispute would be jeopardized if the order is not received.

Debtors and the EAPO Regulation

Debtors may require protection from the misuse of the EAPO Regulation. The creditor has the responsibility to ensure that only what is needed is recovered and that the debtor’s rights are not harmed. The court receiving the order will determine whether or not it is required to protect debtors from EAPO misuse.

An essential aspect of EAPO is that the order must be filed without the debtors being addressed, as this will prevent the latter from transferring his funds. On the other hand, the procedure provides the debtor with the assurance that the frozen amount will only reflect the creditor’s legal claim. The debtor will also have the possibility to file an appeal against the order as soon as possible.

How can Valsen help

The experienced staff of Valsen Fiduciaries Group our global network allow us to provide high-quality services in several jurisdictions. We are at your disposal to provide you advices regarding EAPO procedures. Please contact us through info@valsenfiduciaries.com or +248 2 525 217