Creditor protection in cross-border cases and the introduction of a procedure for a European order for Account Preservation

In issue 13 of the State Gazette dated 07.02.2017 was promulgated an Act supplementing the Civil Procedure Code (CPC). It establishes chapter fifty-sixth “a” in connection with the implementation of Regulation (EU) № 655/2014.

Regulation (EU) No 655/2014 of the European Parliament and of the Council of 15 May 2014 establishing a European Account Preservation Order procedure to facilitate cross-border debt recovery in civil and commercial matters applies from 18.01.2017. It should be borne in mind that the UK and Denmark are not participating in the adoption of the Regulation and are not bound by it nor are they subject to its application.

The Regulation has as its subject matter the establishment of a procedure that enables the creditor to obtain a European Account Preservation Order, which could be used to thwart any intentions of the debtor to jeopardize the creditor’s interests through the transfer or withdrawal of funds, to the amount written in the Order. The bank account must be opened in a Member State of the EU. It is stated that the order for preservation is available to the creditor as an alternative to the measures provided for in the national law.

Thus, the newly created legal regime will be able to benefit creditors whose debtors are located in other Member States.

The scope of the Regulation is limited. It does not apply to any dispute, but only in terms of pecuniary claims in civil and commercial matters in cross-border cases. According to the motives to the bill supplementing the CPC cross-border case occurs when the creditor is domiciled in a Member State and the court and the bank account subject to the distraint is located in another Member State or when the court hearing the application for a Preservation Order is located in one Member State and the bank account – subject to the Preservation Order is in another Member State. The Regulation specifies that the relevant moment for determining whether a case is a cross-border case is the date on which the application for the Preservation Order is lodged with the court having jurisdiction to issue the Preservation Order.

The regulation does not apply to revenue, customs or administrative matters, as well as property rights arising out of a matrimonial relationship, maintenance obligations, bankruptcy, arbitration and others.

With the changes introduced in Part VII and the creation of chapter fifty-sixth “a” the Civil Procedure Code provides internal regulations facilitating the application of the Regulation. Considering the direct application of the Regulation and that the fact that it contains detailed rules for starting and developing the procedure for issuing a European order for preservation of bank accounts, the additions made to the CPC are minimal and only specify the general rules on the preservation of bank accounts.

According to the Regulation and the CPC, the creditor can request by the court to issue a European Preservation Order prior to initiating proceedings on the substance of the matter and at any stage during such proceedings. The debtor shall not be notified of the application for a Preservation Order or be heard prior to the issuing of the Order. In case the request for issuing a European Preservation Order is made within the Cassation proceedings, the Order is issued by the Court of Appeal. The Preservation Order is available to the creditor after it has obtained in a Member State a judgment, court settlement or authentic instrument which requires the debtor to pay the creditor’s claim. The Regulation provides for a special jurisdiction if the debtor is a consumer.

When the creditor wants to obtain a preservation order it must provide sufficient evidence that there is a real danger for the execution of the claim to be thwarted or significantly hampered by the debtor. When such a request is made before there is a judgment, court settlement or authentic instrument in favor of the creditor, it must also provide sufficient evidence that it is likely his claim to succeed. In this situation, as a rule, the court shall require the creditor to provide a security for an amount sufficient to prevent abuse of the procedure provided for by the Regulation. The Regulation provides for a liability of the creditor for damage caused to the debtor, who has the burden of proof.

The Regulation provides for that the creditor can request the court with which the application for the Preservation Order is lodged to request that the information authority of the Member State of enforcement obtain the information necessary to allow the debtor’s account or the bank in which the account is maintained to be identified. According to art. 618c, paragraph 2 CPC the information authority in Bulgaria is the Ministry of Justice.

The refusal of the court to issue a European Preservation Order is subject to appeal with a private claim by the creditor. Article 618e CCP describes situations in which repeal and amendment of the Preservation Order and limitation or termination of its execution may be requested by both the applicant and the defendant.

It is explicitly provided that a Preservation Order issued in a Member State in accordance with this Regulation shall be recognized in the other Member States without any special procedure being required and shall be enforceable in the other Member States without the need for a declaration of enforceability. This position is recreated by the Bulgarian legislature in the title of the article 618d of the CPC.

CPC also provides that the competent authority to enforce the Preservation Order is the enforcement agent. He has the obligation to monitor not to be impounded funds in that exceed the sum indicated in the order and to take action for their release. The enforcement agent is the competent authority for the receipt, transmission or service of Preservation Order and other documents specified in the Regulation.

The newly created procedure contributes to the security in relations between persons of different Member States of the European Union, and thus serves as a guarantee for a faster and easier development of both civil and commercial legal relations between entities. The greater degree of security that is created with the provided protections of the creditors in all likelihood will have its positive effects on trade within the EU, as the market subjects would be more likely to have legal relations, sign contracts, make deals etc., when they know that there is a simplified procedure that ensures the collection of their claims.