European Account Preservation Order

Monday 31st October 2011 Written Statements

[The Parliamentary Under-Secretary of State for Justice (Mr Jonathan Djanogly)]

My right hon. Friend, the Minister of State, Lord McNally, has made the following written ministerial statement:

The Government have today decided not to opt in to the European Commission’s proposed regulation creating a European Account Preservation Order to facilitate cross-border debt recovery in civil and commercial matters.

The aim of the Commission’s proposal is to establish a self-standing European procedure for a protective measure to freeze the bank accounts of debtors in cross-border cases. The Government welcome the Commission’s objective. It supports measures which make it easier for both businesses and citizens to resolve disputes and enforce judgments across borders. Many of those who responded to the Government’s recent consultation on this proposal also welcomed its aims and agreed with the Commission that a procedure which made it easier for claimants to take protective measures in cross-border cases would be useful to both individuals and businesses in helping them to recover debts.

However, the consultation also revealed a number of significant problems, in particular a widespread concern that there was a lack of adequate safeguards for defendants. Issues highlighted included that the threshold for obtaining an order was too low, that there is no requirement for the claimant to provide any security to compensate a defendant for losses suffered from the wrongful grant of an order, and that there should be more discretion for courts when deciding whether to issue an order or the amount for which it should be granted.

Given the apparent ease with which an order might be obtained fears were expressed about the possible dangers posed to companies which were in the process of restructuring or rescue where the freezing of a bank account could undermine the rescue and make insolvency more likely.

Concerns were also raised about the burdens the proposal is likely to place on both the Government and banks, in particular through the provisions of access to information on bank accounts.

Although the Government have decided that the UK should not opt in to the proposal now, it intends to participate fully in the negotiations with the hope that sufficient changes will be made to enable a post-adoption opt in.