European Account Preservation Order by a creditor on the bank accounts of a debtor based on a debt instrument

This page was last modified on 14-02-2018

A creditor holding a cross-border debt, as well as a valid debt instrument binding their debtor, may find it difficult to recover the debt.

They can use a European Account Preservation Order, which is a non-adversarial procedure that is an alternative to national attachment orders.

The debtor is not informed of the application for a preservation order, or offered the opportunity to respond before the order is issued.

The aim of the procedure is to make sure the debtor is temporarily unable to disburse any of the money in their bank accounts before a judge rules on the validity of the debt requiring payment.

The Account Preservation Order represents a guarantee for the creditor. The creditor can be certain that the assets will be frozen by the preservation order.

The European Account Preservation Order procedure can be combined with a European order for payment procedure.

Who is concerned

Any natural person or legal person holding a personal or business-related cross-border debt against a debtor (natural or legal person) living in an EU Member State (with the exception of Denmark and the United Kingdom) may apply for a European Account Preservation Order.

This procedure may be initiated against a debtor living in the same EU Member State as the creditor, provided the account in question is located in a Member State other than:
  • the State holding jurisdiction over the application; or
  • the State in which the creditor lives or is headquartered.
Example: A creditor and a debtor both live in Luxembourg, but the debtor's account is in France.
The creditor may address the petition directly to a judge if they are in possession of an debt instrument, such as:
  • a decision;
  • a court settlement;
  • an authentic act.

The creditor can also refer the matter to the judge directly if they have other documents which prove the debt.

The procedure does not apply to creditors whose grounds for claiming the debt stem from:

  • matrimonial or patrimonial regimes governing relationships comparable in effect to marriage (e.g. a civil partnership or a PACS);
  • wills/testaments and inheritances;
  • procedures already initiated against the debtor in regard to:

The European Account Preservation Order does not apply in Denmark or the United Kingdom. This means that:

  • a creditor residing in Denmark or the United Kingdom cannot apply for an attachment on an account held in Luxembourg;
  • a creditor residing in Luxembourg cannot apply for an attachment on an account held in Denmark or the United Kingdom.

Prerequisites

Permissibility

The account preservation order may be granted in the following 3 cases:

  • before the creditor has initiated legal proceedings in a Member State against the debtor; or
  • at any time during the legal proceedings until:
    • the decision in the legal proceedings is handed down;
    • a court settlement is approved by or concluded with the debtor; or
    • after the creditor has, in a Member State, obtained recognition of the debtor's obligation to pay, by means of:
      • a decision;
      • a court settlement;
      • an authentic act.
The European Account Preservation Order procedure cannot be launched in jurisdictions of different Member States if the debtor holds bank account in those different States. However, it can be launched in the jurisdictions of a single Member State on multiple bank accounts held by the debtor in the same bank or in different banks situated in several Member States.

Non-seizable monies

In principle, the creditor cannot seize funds:

  • held in accounts which, according to the bank's records:
    • are not held solely by the debtor; or
    • are held by a third party on behalf of the debtor, or by the debtor on behalf of a third party;
    unless they can be seized on the basis of the national law in the State in question;
  • exempted from seizure under the law of the Member State where the account is held.

Admissibility and validity of the application for an account preservation order

A creditor's demand is admissible if it concerns a cross-border dispute. The cross-border nature of the dispute is assessed at the time of application for the account preservation order.

The creditor has grounds to take action, if:

  • they can prove the existence of a debt and the amount of that debt – for example: debtor Z has a debt to creditor Y, which is estimated at a given value – by the presentation of debt instrument that renders the debt likely to be paid by any appropriate means;
  • there is proof of sufficiently serious circumstances jeopardising the recovery of the debt;
  • it is urgent that a legal protection measure covers the debt, because the lack of an order would make it more difficult to recover the debt, owing to genuine risks relating to the debtor's capacity to:
    • deplete their assets;
    • destroy or conceal their assets;
    • sell/cede their assets for less than their value, for an unusual amount or in an unusual way.

The creditor may choose to initiate an account preservation procedure on condition that their aim is to ensure:

  • the subsequent enforcement of a legal decision;
  • the enforcement of a legal decision, a court settlement or an authentic act requiring the debtor to pay the debt;
  • that debts which are not yet enforceable are paid, if they result from a past settlement or event, and the value thereof can be determined. In particular, the latter guarantee pertains to debts linked to proceedings:
    • in civil matters of delict or quasi-delict;
    • in civil matters seeking to remedy damage or obtain restitution further to an offence.

Otherwise, the creditor must first apply to a judge.

Preliminary steps

Finding the magistrate having jurisdiction in the individual case

The territorial jurisdiction of the judge issuing an account preservation order depends on:

  • the territory where the debtor resides; or
  • the place where the contractual obligation has been or is to be enforced;
    In this case, the place of execution of the contractual obligation depends on the application:
    • for sales of goods: the place in a Member State where the goods were, or should have been, delivered;
    • for the provision of services: the place in a Member State where the services were, or should have been, provided; or
    • the territory in which the consumer is domiciled, if the debtor is a consumer; or
    • in matters of delict or quasi-delict: the territory in which the harmful event occurred or is likely to occur.

In Luxembourg, the judicial territory is divided between magistrates' courts and district courts.

To obtain an account preservation order enforceable in Luxembourg, pertaining to a debt of less than EUR 10,000, the creditor must apply to the competent magistrate in the territory where the debtor is domiciled, or where their bank account is held, i.e.:

  • Luxembourg City; or
  • Esch-sur-Alzette; or
  • Diekirch.

To obtain an account preservation order enforceable in Luxembourg, pertaining to a debt exceeding EUR 10,000, the creditor must apply to the district court in the district where the debtor is domiciled or their account is held, i.e.:

  • Luxembourg City; or
  • Diekirch;

Applying for information regarding the debtor's accounts

If the creditor does not know the debtor's bank account details, they must first collect a number of pieces of evidence before filing their application for an attachment with the competent judge. The aim is to enable the judge to go to the authority in charge of locating the debtor's bank accounts which may be frozen.

In all cases, prior to the audience with the judge, the creditor must ensure that they are in possession of:

If the creditor has an enforceable act, they must meet a number of conditions before they can obtain information pertaining to the debtor's accounts:

  • they must demonstrate, by means of several indicators, that it is possible that the debtor holds multiple accounts in a Member State. Such proof is acceptable in whatever form as long as it is pertinent and conclusive. It may be in the form of correspondence, bank statements, proof of payment, testimony, etc.;
  • the creditor may not know:
    • the name and/or address of the bank;
    • the IBAN or BIC of the account in question;
    • any other bank number enabling the bank to be identified.

If the creditor has an authentic act that is not yet enforceable, they must meet a number of conditions before they can obtain information pertaining to the debtor's accounts:

The creditor must collect documents to demonstrate to the judge that:

  • the amount for which the account preservation order is being sought is significant in light of the circumstances. That is, the aim is to demonstrate the high relative value of the debt, rather than its high value in absolute terms;
  • it is crucial to obtain information on the debtor's accounts, because without that information, there is a danger that the debt may not be recovered;
  • the lack of an account preservation order may result in a significant worsening of the applicant's financial situation.

How to proceed

Filing an application and preparing the dossier

The application is filed by petition using a standardised EU form. The creditor is summoned by the court clerk of the competent court. The plaintiff does not necessarily need representation by a lawyer.

The creditor must file their application with the relevant judge using the European Account Preservation Order application form, along with any and all relevant supporting documents – for instance, a copy of:

  • the decision; or
  • the court settlement; or
  • the authentic act.

If the creditor is not in possession of one of these documents, they may submit any relevant document to prove the validity of their application, such as:

  • invoices; or
  • acknowledgements of debt.

To prevent any parallel proceedings, the creditor attaches 2 declarations to their application for an account preservation order:

  • a declaration stating:
    • whether they have filed an equivalent application for an order with another jurisdiction or another authority on a national level against the same debtor for the recovery of the same debt; or
    • if they have already obtained such an order;
  • a declaration listing any applications for a European Account Preservation Orderwhich have been rejected because they were deemed inadmissible and/or unfounded.
A parallel application for an order is another application for an account preservation order having:
  • the same cause, i.e., the same contract or the same damaging event;
  • the same subject, i.e., the same objective for which the application is filed;
  • the same debtor.

As regards the presentation of the documents proving the validity of their application, the creditor must conform to the means of communication accepted by the Member State in which the competent judge sits.

When the creditor has not provided all the requisite information and documents, the judge can require the creditor to supplement or rectify the application within a period set by the judge.

If the creditor does not provide further information or does not fully rectify the application within the time period set by the judge, the application for the order is rejected.

Testimony as a means of proof is acceptable. The creditor and/or their witnesses are summoned to a hearing if the judge deems it necessary. The judge will organise the hearing without delay.

During the European Account Preservation Order proceedings, if the creditor obtains a national attachment order against the same debtor for the same debt, they must:

  • immediately inform the judge dealing with the European Account Preservation Order;
  • immediately inform the judge dealing with that order of any future implementation of the order at national level;
  • inform the judge of any equivalent national application for an attachment order which has been rejected because it was deemed inadmissible or unfounded.

The judge overseeing the European Account Preservation Order will assess whether it is still worthwhile issuing that order either wholly or partly, depending on the specific facts of the case.

Monetary deposit offered by the creditor

To prevent abuse of the system, the judge ruling on an account preservation order may require the creditor to put up a monetary deposit before granting that order.

The means of payment accepted for the monetary deposit depend on the Member State where the competent judge sits.

Applications for information regarding the debtor's accounts

A creditor who does not know the details of the debtor's account applies to the relevant judge dealing with the order, after having assembled the necessary supporting documents.

If the judge is convinced of the validity of the creditor's application, they will forward it to the authority in charge of obtaining the information in the Member State where the order is to be enforced.

In Luxembourg, that authority is the Financial Sector Supervisory Commission (Commission de Surveillance du Secteur Financier - CSSF).

The authority in charge of gathering the information may be faced with 2 scenarios:

  • it is unable to obtain the information pertaining to the debtor's bank account. In such cases:
    • it informs the judge of such failure;
    • the judge must immediately refund the monetary deposit to the creditor;
    • it obtains the information on the debtor's account. It forwards that information to the judge.
It should be noted that the conditions governing the transfer of such information between the bank and the authority in charge of collecting this information vary from one Member State to another.

The debtor will only be informed of the procedure by their bank 30 days after the bank has provided the information to the authority seeking it, to ensure that the European Account Preservation Order can be effectively enforced.

Decision and content of the account preservation order

The judge hands down their decision, at the latest, on the 10th working day after the day when the creditor supplemented their application with the authentic act issued by the magistrate.

The order is issued to the creditor in the form of a pre-printed European Commission form.

Appealing a decision to refuse an order

The decision of the court of first instance is notified to the creditor, as part of the procedure set out by the law of the Member State in question.

The creditor then has 30 days from the date of the decision to appeal.

If the judge wholly rejected the application for an order, the appeal procedure will operate in the same manner as that in the first instance: without the debtor being informed of the procedure.

Implementation of the account preservation order by the bank

Once a final decision has been handed down and all avenues of appeal exhausted, the judge sends a copy of the order to the bank, which immediately freezes the debtor's account(s) up to the value of the claimed sum.

The bank then issues a declaration, informing the judge:

  • whether the accounts in question have been subject to an account preservation order;
  • of the amount frozen;
  • of the date on which the order was implemented.

In principle, the bank has 3 to 8 working days following the implementation of the order to issue that declaration to the judge.

If the debtor's account is held in a different Member State to the State in which the creditor lives or is headquartered, the bank sends:

  • the declaration to the judge who issued the order, by any appropriate means;
  • the declaration to the creditor, by registered post with confirmation of receipt, or by equivalent electronic means.

When the debtor's account is held in a Member State other than that of the jurisdiction applied to for the account preservation order, the bank sends its declaration to the competent authority in the State where the bank is headquartered.

In Luxembourg, that authority is the CSSF.

If the creditor benefits from the freezing of an amount in excess of the debt stated in the order, they must take all necessary measures to release that excess amount, using the Request to Release Overpreserved Amounts form.
The creditor must act within 3 days of receiving the declaration.

Notification to the debtor

When the debtor resides in the Member State where the account preservation order was issued, the issuing judge or the creditor serves notice thereof to the debtor. This division of roles depends on the law in the Member State holding jurisdiction.

In Luxembourg, the creditor goes to a bailiff in the district where the debtor lives.

When the debtor resides in a Member State other than that where the order was issued, the judge or creditor sends the documents to the relevant authority in the State where the debtor is resident.

Example: the creditor applies to the judge in the place where the contractual obligation is to be enforced.

In this case, the judge or creditor sends the competent authority in the Member State where the debtor is resident the following documents:

  • the application for an account preservation order filed by the creditor;
  • copies of all documents given by the creditor to the judiciary to obtain the debt;
  • the bank's declaration;
  • the account preservation order, including both parts A and B of the form.
When the European Account Preservation Order applies to multiple banks, only the first part stating that the amounts have been frozen under the order shall be served on the debtor by the judge or creditor.

These documents are submitted to the competent authority in the Member State by no later than the end of the 3rd working day after receipt of the bank's declaration.

That authority immediately takes the necessary measures to serve the documents on the debtor in accordance with the law in force in that Member State.

Any other declarations stating that other monies have been frozen under a European Account Preservation Order are served on the debtor by the judge or creditor.

Appeals against the definitive order

The creditor may appeal the decision handed down by the judge using the Appeal against a decision on a remedy form.

In Luxembourg, for any initial order, the debtor may file their appeal with:

  • the competent district court for that territory, if the initial judgement was handed down by a magistrate;
  • the Court of Appeal, if the initial judgement was handed down by a district court.

The creditor has 15 days to file their appeal, from the date of notification of the initial order.

Who to contact

 

Luxembourg
 

Luxembourg