A New Relieved Procedure for Preservation Orders for Bank Accounts throughout EU

Regulation No. 655/2014 establishing a European Account Preservation Order procedure to facilitate cross-border debt recovery in civil and commercial matters is already in effect as of January 18, 2017, and the respective supplements in the Civil Procedure Code – the new chapter fifty-six “a” – were promulgated in issue 13 of February 7, 2017of the State Gazette.

The new regulation is in favour of creditors located in one Member State,seeking to preserve a bank account of the debtor in another Member State. The United Kingdom and Denmark are excluded from the scope of the Regulation.

The request is made by filing an application form. The application may be filed before initiating the claim proceedings as well as afterwards, including after issuance or entry into force of a court decision. In case that claim proceedings have already been initiated, preservation shall be requested from the court referred to with the main dispute. In case a security of a future claim is requested, again the competent court shall be the one which should be referred to with the claim under the rules of international jurisdiction. An exception is the hypothesis where the debtor is qualified as a consumer– then the application is submitted to the court in the state where the debtor is domiciled. If together with the request for cross-border preservation,the creditor wants to preserve accounts in the debtor’s domicile, he should initiate a separate security proceedings, which is outside the scope of the regulation.The prerequisites for granting а security largely resemble those in Bulgarian procedural law. The creditor is required to justify the necessity for the security. If still there is no judgment rendered granting claim, the application should be submitted together with convincing evidence in favor of the merits of the claim. In case of a security of a future claim or pending proceedings and prior to issuing a judgment, the creditor has to provide a guarantee as an additional condition for granting the security. It should serve as compensation for any contingent damage that the debtor might suffer as a result of the security. As an exception, the guarantee may not be requested if the court finds that such a requirement is inappropriate in the particular case. If the object of the security are receivables whose existence is recognized by the court, the security may be requested at the discretion of the court. Of special interest is the case of having no information regarding the banks the debtor might have opened accounts with. If there is an enforceable judgment (or settlement, or an authentic instrument under the Regulation), the creditor can take advantage of a specifically regulated procedure for acquiring the necessary information. For this purpose, the creditor should include in the application for security a petition to the court to request information on the bank accounts of the debtor from the relevant information authority in the country, where the preservation is to be effected. For Bulgaria, this authority is the Ministry of Justice. The creditor should justify his assumption that the debtor has opened a bank account in this particular country, having the option to specify more than one country. For data protection reasons the information on the opened bank accounts is not provided to the creditor.

If an act has been issued, but it is not enforceable yet, the creditor still may request information regarding the bank accounts of the debtor. In this case, however, the debt needs to be of significant amount and the arguments for the need of security should be convincing.If no act has been issued yet, the above procedure is not applicable. The only possibility remaining for granting preservation is at banks known to the creditor.

Unlike the Bulgarian procedural law, the Regulation stipulates the possibility for the creditor to receive instructions for correction of any irregularities in his application for security.

The ruling on the application for security should be pronounced no later than five or ten working days from the referral to the court or removal of irregularities. The shorter term applies in case the requested security refers to receivables recognized by court, regardless of whether the court decision has entered into force. Another point of difference with Bulgarian legislation is the possibility to hold an open hearing of the creditor or witness. If this possibility is used, the term for ruling on the order starts running as of the date of the open hearing. In the event that the creditor has deposited a bank guarantee for granting the security, the latter must be recognized immediately after the deposit.

The refusal of granting a security is subject to appeal within 30 days of notifying the creditor.The security may be granted up to a maximum amount equal to the claim specified by the creditor. If subject to the security is a court recognized claim, the court may also grant security on the legal costs awarded to the creditor.

The content of the preservation order is described in detail in the Regulation and the content of the documents filed by the creditor, the debtor and the bank is subject to a separate special regulation.

The issued preservation order is directly enforceable in any Member State without the need for a declaration of enforce ability. The order is executed by the authority which has the functions of an enforcement authority in the respective country. In Bulgaria that is the bailiff.

When security of future claim is granted a term for filing the claim is set, which may be up to 30 days as of the date of filing the application or within 14 days from the date of issuance of the order, depending on which of the two dates comes later. This period may be extended at the request of the debtor, for example, if settlement negotiations are underway.

The procedure for enforcing the preservation order is also described in detail. The bank receiving a preservation order should reply within three days, providing information on whether and what amount it has preserved. If provided for by the national legal system, the amount can be transferred to the enforcement authority or to the court. If it turns out that the amount of the claims of the creditor is preserved simultaneously in several banks, the creditor should take measures as quickly as possible, after becoming aware of this fact, to release the amounts representing the over-preservation. If provided for by the national legal system, these measures may be implemented by the enforcement authority, as is the case in Bulgaria.

Within three working days as of receiving a reply from the bank, the creditor or the court should proceed to serving the debtor with the preservation order with the respective documents enclosed thereto and the responses of the banks.

Regardless of whether the debtor has received notification of the imposed security, the latter may object both against its admission and imposing. The reasons for this may vary – non-compliance with the formal requirements of the procedure, lack of jurisdiction of the court, non-existence of the secured claim, partial or complete non-seizability of the preserved amounts. Jurisdiction to rule has the court, that issued the preservation order or the court at the place of enforcement depending on whether the debtor claim sun lawfulness in the granting or the enforcement. Substantive grounds for termination of enforcement may be if it is manifestly contrary to the public policy (ordre public) of the Member State of enforcement.

At the request of the debtor the object of security may be replaced by another, such as a bank guarantee or a mortgage. Should the circumstances under which the preservation order was issued change and following the request of either of the parties or on its own motion, the court may revoke or modify it. The right to appeal to a third party affected by the granting or enforcement of the preservation is governed by the law of the State in which the preservation is granted, respectively – imposed.

In the event that there were no grounds for granting and imposing of the preservation order, the debt or may realize the liability of the creditor for damages incurred. There are specific rules concerning the allocation of the burden of proving the necessary prerequisites for this liability. In principle,this burden should lie with the debtor, but there is a presumption of guilt of the creditor in several hypotheses, such as failure to file the claim within the prescribed term after the issuance of the order or if an over-preservation is imposed and the creditor has not taken steps to repeal it.

The fees relating to the proceedings are stipulated to be the same as the fees for carrying out similar actions under the national legal order.

The new Regulation contains a number of provisions identical to those under the Bulgarian law,but there are also many differences. Although its application will be a challenge, the new regulation will definitely facilitate the efforts against defaulting debtors.