Navigation path

Left navigation

Additional tools

Other available languages: none

MEMO/11/540

Brussels, 25 July 2011

European Commission to help businesses and consumers recover cross-border debts – Frequently Asked Questions

What is the proposal about?

Creditors currently face complex and lengthy procedures for recovering debt in another country, resulting in higher costs for businesses trading across EU borders. Individuals face similar problems when seeking to get their money back from a rogue trader or a maintenance defaulter in another EU country.

The proposed Regulation establishes a European procedure – the European Account Preservation Order – for recovering money within the EU. This will ease cross-border claims by giving creditors more certainty about recovering their debt, thereby increasing confidence in trading within the EU’s single market. The Regulation creates a provisional measure to preserve the debtor’s funds located abroad. Under the new rules, a court would issue an order to a bank obliging it to preserve a specific amount owed to a creditor. This could be done either before or after the creditor has received a court judgement entitling him to recover the debt. The procedure would only be available in cross-border cases. It would not provide for the actual payment of the money to the creditor at the end of the litigation, which will continue to be governed by national law.

What problems do creditors face when recovering debts from another country?

At the moment, debtors can instantly move funds from a bank account in one Member State to another, or simply withdraw funds. Debtors can thus easily escape enforcement of a court order to pay back money owed. Creditors, however, have little chance of safeguarding funds in debtors’ bank accounts abroad to secure the payment of their claims. As a result, many creditors are either unable to successfully recover their claims abroad or do not consider it worthwhile pursuing them and write them off.

Creditors face a range of problems in preserving funds in cross-border cases: the conditions for issuing orders to preserve assets vary considerable across the EU; it is often difficult, if not impossible, for creditors to get information about the location of a debtor’s bank account; the costs for obtaining an order abroad are generally higher than for domestic cases, particularly for hiring an additional lawyer and translating documents; and there is a wide difference in how long it takes for national authorities to enforce a judgement.

How much money is at stake?

Companies could recover up to 600 million a year in debt that is currently written off. They lose around 2.6% of their annual turnover to bad debts that are not pursued. .A European Account Preservation Order could also help individuals collect maintenance payments.

How will the recovery of debts abroad work in practice?

The proposed Regulation would establish a new European Account Preservation Order that would allow creditors to preserve the amount owed in a debtor's bank account. It would be available to the creditor as an alternative to national orders. The European procedure would be issued without the prior hearing of the debtor, allowing for a “surprise effect”. Banks would be obliged to implement the order immediately by preserving a specific amount.

Does the proposal have safeguards to protect debtors?

Debtors have to be notified immediately after the measure takes effect to prepare their defence. They can contest the order by applying for a review by the court that issued the order. The Regulation provides for standard forms available in all EU languages to apply for a review.

The Regulation also allows amounts to be exempt from enforcement to ensure the livelihood of debtors or to allow a company to continue its ordinary course of business. Creditors must in any case show a good prospect of winning the case on the substance, and – in particular – that the claim is well-founded. A court can also require that creditors provide a security deposit to ensure compensation for any damage suffered by the debtor if the order is later proved to be unjustified.

How would the proposal help consumers?

Individuals can find it just as difficult as businesses to recover a debt when the debtor is abroad. This can happen when consumers never receive goods bought online and already paid for them, or when an absent parent fails to pay maintenance from abroad.

According to recent Eurobarometer surveys, consumers are still reluctant to shop cross-border. Only 7% of European consumers buy online from another Member State and 14% of Web shoppers ran into problems with the transaction. About three-quarters of those complained to the seller or service provider, but only half took further action.

Are there concrete examples?

  • Example 1:

Mr Kaminski, the owner of a small Polish furniture company, makes specially designed oak kitchen cupboards. A Spanish retailer is impressed with his cupboards during a furniture fair in Cracow. Mr Kaminski agrees with the retailer to produce and deliver a first lot of 300 cupboards to test the market at a price of €150 per cupboard plus shipping. Payment should be made upon delivery. Mr Kaminski only manages to negotiate an advance payment of 20% for the material. The cupboards are delivered to Spain but the retailer fails to pay. When no money arrives after a month and various attempts to reach the retailer by phone and email fail, Mr Kaminski discovers on the internet that the retailer has a habit of defaulting and not paying his suppliers. Mr Kaminski turns to his company’s local lawyer for advice. He is told that he would need to seek a provisional account preservation measure in Spain according to Spanish law. Unfortunately, the Polish lawyer is not familiar with Spanish law so Mr Kaminski would need to hire an international law firm with considerably higher rates.

The proposed Regulation would make it easier to obtain a preservation order in another Member State and cut lawyer’s fees because the conditions and procedure for issuing a European Account Preservation Order would be the same in all Member States. In addition, there would be a standard application form in all official EU languages.

  • Example 2:

Françoise is a 24-year-old Belgian studying graphic design in Brussels. She needs to buy a laptop for her master’s thesis and has found one in a local store for €1,199. A friend tells her that she can find the same model for much less in Germany. Francoise browses the Internet and finds an offer from a German online shop for €899 plus €25 shipping costs. She pays by credit card but never receives the computer on the date indicated in the order confirmation. She gets no reply to an email and discovers that the trader’s website is under construction. A fellow student who is studying law advises her to get a provisional measure against the trader’s bank account. However, she first needs to get the trader’s account number.

The proposed Regulation would allow Françoise to apply for the order without the trader’s account number. Under the proposal, she can ask the competent authorities in Germany to get the necessary information for her. The new procedure will make it much easier for creditors in situations such as Françoise's to get a preservation order.

  • Example 3:

Marion is living with her 3-year-old daughter in Manchester, United Kingdom. She has just separated from her husband Pedro who decided to return to Portugal, his native country. This leaves Marion in a difficult position because she does not have the necessary financial means to bring up their daughter alone. After contacting Pedro many times asking for money to help her cover child-rearing costs, Marion is advised by a lawyer to obtain a maintenance order against him in the UK. While proceedings are pending, she learns that Pedro is likely to move to the United States for a new job. Her lawyer advises her to seek a provisional order so that money is preserved in her ex-husband’s account in Portugal pending the outcome of the maintenance proceedings. Marion invests her savings to hire a Portuguese lawyer to do this but by the time the order is granted and enforced, Pedro has closed the account and left the country.

Under the proposal, Marion could obtain a European Account Preservation Order more quickly than a national measure. This would increase her chances to have funds in her ex-husband’s account preserved before he leaves the country. The proposed Regulation provides for specific time limits within which the European Account Preservation Order would have to be issued and implemented.

What are the next steps?

The proposed European Account Preservation Order Regulation will now pass to the European Parliament and the Council of the EU for adoption under the ordinary legislative procedure (co-decision) and by qualified majority.


Side Bar

My account

Manage your searches and email notifications


Help us improve our website