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Commission welcomes breakthrough on its proposal to help businesses recover cross-border debts

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Justice Ministers reached an agreement on a general approach on the European Commission's proposal for a Europe-wide preservation order, to ease the recovery of cross-border debts for both citizens and businesses.

“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."

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.

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:

  • Scope: Contrary to the Commission proposal, in the Council text, the rules will not apply to financial instruments (such as shares or bonds), wills or successions and matrimonial property. This means creditors will not be able to use a European account preservation order to preserve financial instruments in bank accounts, nor in case of disputes related to wills and successions or matrimonial property.
  • Availability and conditions: Under the Council text, the rules will only apply to creditors domiciled in a Member State which is bound by the rules. Furthermore, as a rule, the creditor will be held liable for unjustified uses of the account preservation order.
  • Access to account information: the creditor will only be able to use the mechanism established by the new rules when there is an enforceable judgment against the debtor.

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.

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