Brussels, 6 December 2013
Commission welcomes breakthrough on its proposal to help businesses recover cross-border debts
Justice Ministers today reached an agreement on a general approach on the European Commission's proposal for a Europe-wide preservation order (IP/11/923), to ease the recovery of cross-border debts for both citizens and businesses. The proposal facilitates cross-border debt claims and gives creditors more certainty about recovering their debt, thereby increasing confidence in trading within the EU’s single market. It is part of the Commission's “justice for growth” agenda, which seeks to harness the potential of the EU's common area of justice for trade and growth.
“Today’s breakthrough in negotiations on the European Account Preservation Order is a breakthrough for Europe's small businesses – the backbone of our economies. In these economically challenging times, companies need quick solutions to recover outstanding debts. They need an effective Europe-wide solution so that the money stays where it is until a court has taken a decision on the repayment of the funds,” said Vice-President Viviane Reding, the EU's Justice Commissioner. "I count on the European Parliament and Council to continue their good work so that this proposal swiftly makes it into the European statute book."
European companies lose around 2.6% of their turnover a year to bad debts. Most of these companies are SMEs. Up to €600 million a year in debt is unnecessarily written off because businesses find it too daunting to pursue expensive, confusing lawsuits in foreign countries. The European Account Preservation Order proposed by the Commission offers solutions to these problems.
The compromise reached at the Justice Council today confirms the main points of the Commission's proposal. Most importantly, key elements of the proposal such as ensuring a 'surprise effect' with orders being issued without the debtor's knowledge and a broad definition of cross-border cases have been maintained in the Council's text. The Council text differs from the original proposal in the following ways:
Next Steps: In order to become law, the Commission's proposal needs to be adopted jointly by the European Parliament and by the EU Member States in the Council (which votes by qualified majority). The European Parliament's legal affairs committee voted to back the Commission's proposal on 30 May this year (MEMO/13/481). Today's breakthrough in the Council means the two chambers can now enter into 'trilogue' discussions with the Commission to reach a final agreement.
Small and medium-sized enterprises (SMEs) make up 99% of businesses in the EU. Around 1 million of them face problems with cross-border debts and up to €600 million a year in debt is written off because businesses find it too expensive or difficult to pursue lawsuits in other EU countries. Citizens also suffer when goods bought online are never delivered or an absent parent fails to pay maintenance from abroad.
The Commission's proposal for Regulation will establish a new European Account Preservation Order that will allow creditors to preserve the amount owed in a debtor's bank account. This order can be of crucial importance in debt recovery proceedings because it would prevent debtors from removing or dissipating their assets during the time it takes to obtain and enforce a judgment on the merits. This will increase the likelihood of successfully recovering cross-border debt.
The new European order will allow creditors to preserve funds in bank accounts under the same conditions in all Member States of the EU. Importantly, there will be no change to the national systems for preserving funds. The Commission is simply adding a European procedure that creditors can chose to use to recover claims abroad in other EU countries.
The European Account Preservation Order will be available to the creditor as an alternative to instruments existing under national law. It will be of a protective nature, meaning it will only block the debtor's account but not allow money to be paid out to the creditor. The instrument will only apply to cross-border cases. The European Account Preservation Order will be issued in an ex parte procedure. This means that it would be issued without the debtor knowing about it, thus allowing for a “surprise effect”. The instrument provides common rules relating to jurisdiction, conditions and procedure for issuing an order; a disclosure order relating to bank accounts; how the preservation order should be enforced by national courts and authorities; and remedies for the debtor and other elements of defendant protection.
For more information
European Commission – Justice newsroom: http://ec.europa.eu/justice/newsroom
European Commission – civil justice: http://ec.europa.eu/justice/civil
Homepage of Vice-President Viviane Reding, EU Justice Commissioner:
Follow the Vice-President on Twitter: @VivianeRedingEU
Follow EU Justice on Twitter: @EU_Justice