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EAPO just another acronym?

Bob Scharfe

Bob Scharfe,

Luxembourg

Benjamin Lievin,

Luxembourg

27 April 2017

The Luxembourg Parliament has today adopted the draft law 7083 (the "Bill") on the application of Regulation (EU) No 655/2014 of the European Parliament and of the Council of 15 May 2014, establishing a European Account Preservation Order ("EAPO") procedure (the "Regulation") to facilitate cross-border debt-recovery in civil and commercial matters.  The Bill aims at facilitating the application of the Regulation in Luxembourg, the Regulation being indeed directly and entirely applicable since 18 January 2017.

EAPO in a nutshell

EAPO is a cross-border alternative to national preservation measures.  The purpose of EAPO is to provide creditors with a judicial tool allowing them to preserve their interests prior to any main procedure against a given debtor.

One of the important features is that only the amount specified in the EAPO is blocked

The funds preserved by the EAPO shall remain frozen until the EAPO has been revoked (as the case may be upon duly motivated request of the debtor addressed to the Court having issued the EAPO), has come to an end or has been superseded by a judgment, court settlement or authentic instrument providing the same type of security to the creditor.

It is to be noted that the United Kingdom and Denmark have not opted into the Regulation and fall outside its application scope.

Are there any requirements for the issuance of an EAPO?

The preservation order shall be available to creditors whenever the latter feel that the enforcement of their claim against the debtor might be impeded.  Hence, creditors are allowed to introduce a preservation order request even if no judicial procedure has been opened yet, but also during such procedure and after a judgment has been obtained.

The Luxembourg Court will only issue an EAPO in the event that the relevant claim fulfils certain basic conditions.  The claim must relate to a cross-border civil or commercial matter and there is an urgent need for protective measures as there is a risk that creditors could be prevented from recovering the amount that they are likely entitled to receive.

To that effect, creditors shall file an application with the competent court by means of a duly completed form as further described in the Regulation and its implementing texts.

The application can also contain a request for obtaining of account information in case the applicant does not have sufficient information on the account at hand.  In Luxembourg, the Commission de Surveillance du Secteur Financier ("CSSF") is in charge of collecting the account information in accordance with the Regulation and to transmit such information to the requesting Court.

What authority is competent to deliver an EAPO in Luxembourg?

The submission, appeal against, revocation or modification of a preservation order shall be submitted before the relevant Luxembourg Courts depending on the amount of the claim i.e., generally: (i) the Juge de Paix for amounts lower or equal to EUR 10,000; or (ii) the Tribunal d'Arrondissement for amounts higher than EUR 10,000.

EAPO time frame.

Depending on the situation, the seized Luxembourg Court has to take a decision on the application within five or ten working days.  In case of a negative decision by the Court, an appeal against such decision needs to be lodged within 30 days from the date of the notification of refusal by the relevant Court.

Upon receipt of the EAPO from the issuing Court or the creditor (as the case may be under each national law regime), the recipient bank has three working days to issue a declaration indicating whether, and to what extent, funds in the defendant’s account(s) have been preserved and, if so, on what date(s).

Are there any consequences on the Luxembourg financial sector?

Although the Bill has many upsides, notably for creditors, one may wonder what impact the Bill may have on local banks and generally on Luxembourg, being an important financial centre.

The Regulation will be supposedly mostly an administrative burden on the banks as resources will need to be allocated to dealing with EAPOs, also in relation to the seeking of payment or reimbursements of costs incurred in relation therewith.

Secondly, given that the EAPO deals with sensitive aspects, the question may be asked whether all safeguards have been put in place to preserve, inter alia, banking secrecy.  By appointing the CSSF as the competent authority in charge of obtaining from the banks the relevant information necessary in order to allow the debtor’s account to be identified, one may think that the regulator has taken all precautionary measures in this regard.

Finally, it is yet to be seen what will be the impact of EAPO on the "soon-to-be-voted" draft bill 7024 implementing Regulation (EU) 2015/751 on interchange fees for card-based payment transactions and pertaining to, inter alia, banking secrecy.

Bob Scharfe

Bob Scharfe,

Luxembourg

Benjamin Lievin

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