EU plans to make it easier to recover debts from abroad

The European Parliament is considering plans to make it easier for firms and individuals to recover debts across national borders.

The proposed European Account Preservation Order (EAPO) would make it possible to freeze a debtor’s bank account in another member state.

Supporters of the move say the procedure would be quicker and cheaper than having to take action in the country involved. According to the European Commission, it would help EU companies to recover £500m a year.

A creditor would be able to issue an EAPO before the debtor is informed. This would achieve a “surprise effect” to prevent the debtor moving funds to another country. An order could be issued even before a court has ruled on whether the debt can be recovered.

There are safeguards to prevent the orders being misused. For example, a creditor would have to compensate an alleged debtor if the use of an EAPO is found to be unjustified. The debtor will also be able to contest any order and oblige the creditor to set aside enough funds to cover compensation should that prove necessary.

Italian MEP Raffaele Baldassarre, who is steering the legislation through the European Parliament, said: “This regulation will contribute concretely to the smooth functioning of the single market and to the daily lives of citizens. It strikes a balance between the rights of the creditor and those of the debtor through specific amendments which concern the procedure, the claimant’s liability and the disclosure of information”.

The proposal has been approved by the EU Legal Affairs Committee. Member states are now discussing how the regulation should be implemented. We shall keep clients informed of developments.

Please contact Charles Goodbody in our Warminster office on 01985 214444 or Chris Jolly in Westbury on 01373 865577  if you would like more information about credit control and debt collection.  Or email cgoodbody@mulaw.co.uk or cjolly@mulaw.co.uk