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Cross-border debt recovery (EAPO)

04 April 2012

A proposal to make cross-border debt collection much easier was adopted by the European Commission in July 2011. One of our litigation lawyers reports on the UK’s decision not to opt in to the regulation.

The Commission recognised that it is presently very difficult for creditors to enforce cross-border debt payments and judgments. The regulation will establish a new procedure (a European Account Preservation Order, or EAPO) for the preservation of bank accounts to enable a creditor to prevent the transfer or withdrawal of the debtor’s assets from any bank account located within the EU. It will be available to individuals and companies as an additional procedure to those existing under national law.

In October last year, the UK government announced that it would not be opting in to the proposed regulation, despite welcoming its aims.

A consultation by the Ministry of Justice had highlighted a number of concerns, not least that the threshold for obtaining an EAPO is too low. They felt an EAPO could cause grave problems for companies being restructured or rescued, thereby increasing their risk of becoming insolvent and also believed the courts should have more discretion as to whether to issue an order.

The government intends to participate in negotiations of the draft regulation in the hope that the UK may opt in after it has been adopted by the member states.

As always, if you need commercial and pragmatic legal advice, we’re here to help so please get in touch.

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