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Businesses and individuals who are trying to recover debts from another EU country should find the process easier if new draft European legislation comes into effect.

MEPs and the European Council recently agreed a draft law that will allow people chasing debts to issue an order via a bank to block a debtor’s bank account in another EU country. The European Account Preservation Order (EAPO) will apparently be quicker and less costly than having to go through national courts and, according to the Commission, would help EU companies alone recover some €600 million a year.

“The regulation will allow creditors to use an efficient and uniform procedure for obtaining an EAPO under the same conditions in all member states,” explained Raffaele Baldassarre, who is steering the legislation through the European Parliament. “It will also ensure that an EAPO issued in one member state is recognised automatically in all other member states.”

The new rules would allow a creditor to issue an EAPO before the debtor is informed, enabling him to achieve a “surprise effect” that prevents the debtor from moving the funds to another country. An EAPO could be issued even before a court has ruled on whether the debt can be recovered.

To discourage abuse of EAPO orders, legal affairs MEPs inserted a liability clause that means a creditor would have to compensate the recipient of an EAPO if it is found to be unjustified. The text also provides for an alleged debtor to be able to contest the EAPO immediately and oblige the creditor to set aside enough funds to cover compensation, should this prove necessary.

The EAPO would be available as an alternative to national proceedings solely for cross-border cases. Once issued it would freeze the alleged debtor’s account. However, any recovery payment would continue to be determined under national law.

The text of the draft legislation is the result of an informal agreement between the European Parliament and the Council of Ministers, and therefore still needs to be confirmed by both Institutions before it can come into force. The plenary vote on this issue is currently scheduled for April 2014.

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