The purpose of this part of the meeting is to consider a proposal for a regulation of the European Parliament and of the Council creating a European Account Preservation Order to facilitate cross border debt recovery in civil and commercial matters. The proposal has been referred to the committee by the Dáil and Seanad. A briefing has been circulated to members. I welcome the Minister of State, Deputy Kathleen Lynch, and her officials. The format of today's meeting is that we will have a briefing from the Minister of State followed by a question and answer session on the motion. I invite the Minister to begin and I also ask everyone to completely turn off all phones.
European Account Preservation Order: Motions
I thank the Chairman for allowing me to make an opening statement.
I thank the committee for making time available to discuss the motion. It relates to the exercise by the State of the option we have to take part in the adoption and application of the proposal for a regulation of the European Parliament and of the Council creating a European Account Preservation Order to facilitate cross border debt recovery in civil and commercial matters. The legal basis for the proposal is to be found in Title V of Part Three of the treaty on the functioning of the European Union. In consequence, the terms of the protocol which we share with the United Kingdom, whereby we have three months to exercise our option to take part in the adoption and application of relevant measures, apply. We have been informed that the three month period will expire on 31 October. Accordingly, if we are to exercise our option within the required timeframe, it is necessary to obtain the prior approval of both Houses of the Oireachtas before that date.
Members will be very familiar with the procedure in regard to protocol measures since a large volume of proposals which attract the provisions of the protocol have come before the Houses of the Oireachtas in recent years. In the civil area alone more than 20 such proposals have been considered, and this is a testimony to the volume of activity which exists in this field. The European Commission continues to have ambitious plans in this area and further measures can be anticipated over the next few years. It is the case that under the protocol, we may accept a proposal any time after it has been adopted. However, it is the Government's considered view that an early opt-in to the discussions will maximise this country's ability to influence the shape of the final outcome. It will give us voting rights. It will also enable us to participate, in a more meaningful fashion, in alliances with like-minded member states, in the event that this becomes necessary in order to propose or defend a particular policy stance.
The essence of the proposal is captured by its title. It is concerned with the creation of an instrument to facilitate effective recovery of debts in the European Union. It does this by means of a procedure directed towards freezing bank accounts. It is important to note that the proposal is only concerned with cross-border cases. In the Commission's proposal this test would be satisfied where any one of the plaintiff, the defendant, the court or the bank account were located in a different member state.
By way of background, the most significant regulation in the civil law area, Council Regulation 44/2001, the Brussels I Regulation, concerns jurisdiction, and the recognition and enforcement of a judgment. It, like a number of other EU instruments, facilitates the obtaining and processing of a judgment up to the pre-enforcement stage. However, once an order is recognised, national enforcement mechanisms apply. For instance, a court judgment given in Ireland which needs to be enforced in France is enforced under French law. In this regard this proposal for a regulation is a very significant step forward in assisting creditors.
I will now deal with the key elements in the new proposal. First, I would like to draw the attention of the committee to the fact that, in keeping with existing European procedures, European account preservation orders issued in one member state will be automatically recognised and enforced in another member state without any special procedure being required. A European account preservation order, EAPO, will generally be issued by the court which is dealing with the substance of the matter. As I said previously, an order issued in this context has free circulation and effect across all the member states. Application for an EAPO can also be made to the court in the member state in which the bank is located. In this case, in a departure from the norm in order to avoid forum-shopping, the effect of the order is limited to the member state where it is issued, and it will not be recognised and enforced in other member states under the proposed regulation. It should be noted that the existence of this proposal does not preclude a claimant from seeking protective measures under the relevant national law on the basis of the Brussels I Regulation.
The proposal envisages two situations in which it could apply. First, it applies where the claimant seeks an EAPO prior to the initiation of judicial proceedings on the substance of the matter. Second, it applies to situations where the claimant applies for an EAPO having already obtained a judgment against the defendant. Where an application for an EAPO is made prior to the initiation of proceedings on the substance of the case, the claimant must initiate such proceedings within 30 days of the date of issue of the EAPO or within any shorter time period set by the issuing court. Failing such action by the claimant, the defendant may seek to have the EAPO reviewed or set aside
It is important to note that an EAPO cannot have the effect of freezing bank accounts which, under the law of the member state where the account is located, are exempt from seizure. To obtain an EAPO the claimant must present evidence that the claim against the defendant appears to be well founded in respect of the amount for which an order is sought. The claimant must also prove that without the granting of an EAPO, the enforcement of a judgment against the defendant is likely to be frustrated or made considerably more difficult. This would arise, in particular, because of a risk that the defendant might remove, dispose of or conceal assets held in the bank account or accounts to be frozen. Of course, if judgment on the substance of the matter has already been given, the claimant does not need to provide any further evidence that a claim exists.
At this stage of the process the procedure is ex parte, that is, there is no need to notify the defendant. Once the relevant bank has been notified, the debtor is then served with the EAPO and copies of all related paperwork which have already been sent to the bank. A bank served with an EAPO has to implement it immediately upon receipt. This is done by preventing any transfer or withdrawal of funds held by the defendant in the account or accounts designated in the EAPO to the extent that such withdrawal or transfer would reduce the amount held in the account to less than the amount specified in the order. Where the law of the member state of enforcement so provides, certain amounts are exempt from the execution of the order. This covers situations where, for example, the law of a member state provides that a certain amount of money is allowed for living expenses.
National law differs widely in the EU when it comes to the effects of a provisional measure on the ranking of creditors. In view of these differences, the proposed regulation provides that the European account preservation order has the rank given to an equivalent measure under national law.
With a view to protecting the defendant, the proposed regulation ensures that certain remedies are available to him or her against the EAPO. In the member state in which the EAPO is issued, the defendant has the right to apply for a review of the order on the grounds that the conditions for issuing the EAPO were not fulfilled or that the order was granted on the basis of false or incomplete information. A review can also be sought on the basis that the claimant should have been required to provide a security or that the security to be provided by him or her should have been higher.
In the member state in which the EAPO is to be enforced, the defendant has the right to request that enforcement of the order be limited or terminated. Such a request can be based on the grounds that certain amounts in the account are exempt from execution under the law of that member state, or that the bank account frozen is exempt from seizure. If a court in the member state of enforcement has already given a judgment in the same matter, and between the same parties, the defendant can apply to have enforcement terminated. Termination of execution can also be sought by the defendant if he or she has already satisfied the judgment.
The decision on the application for the remedies just referred to may be appealed against by either party. It is worth noting that a third party has the right to raise objections against the EAPO before the courts of the member state of enforcement in so far as the order, or its enforcement, prejudices their rights.
I made mention earlier of the provision of security by the claimant. The regulation provides that the court may make the granting of an EAPO subject to the provision by the claimant of a security deposit or an equivalent assurance, in particular a bank guarantee. The amount of the security shall be reasonably proportionate to the damage that may be caused to the defendant in the event that the order turns out to be unjustified. Such a security is intended to ensure compensation for any loss suffered by the debtor.
Given the difficulties the creditor may have in obtaining information about the debtor's account or accounts, the proposed regulation obliges member states to provide for a mechanism to assist in that task. Essentially, member states can choose between two methods. A member state can provide for an order of disclosure which obliges all banks in their territory to disclose whether the debtor has an account with them. Alternatively, it can grant its enforcement authorities access to information held by public authorities in registers or otherwise. Data protection considerations require that the personal information exchanged under this provision is limited to the information necessary for enforcing and implementing the order.
The technical negotiations on this proposal commenced on 9 September when the first and, so far, only meeting of the working group took place. It is too early at this stage to say when the negotiations will reach finality. However, it is likely that negotiations on this proposal would still be live when Ireland holds the Presidency of the European Union in the first half of 2013. By and large, member states seem to be in favour of the proposal. Inevitably, however, the negotiation process is likely to reveal a divergence of views in regard to some aspects of it, and this underlines the need for us to be in a position to make common cause with those member states whose perspective most accords with our own.
It should be emphasised, lest there be any doubt on this point, that opting in to the proposal at this time does not mean that we necessarily agree with every aspect of it. The opt-in process merely ensures that we can be active participants in the negotiation process and this carries with it the right to make proposals to alter the text should that seem to be desirable. In this regard, the Minister is of the view that the elements of the proposal which impact on the protection of the debtor could be strengthened further, and this view will inform our negotiating position, in tandem with that of like-minded member states.
Ireland has in the past taken a very positive approach to participation in the various civil law instruments which have been presented. These instruments range over matters as diverse as the service of documents in judicial proceedings, the taking of evidence in such proceedings, small claims procedures, mediation, legal aid and maintenance obligations. It is a mark of our commitment to the EU project that we tend to be very positively disposed towards participation in such projects from the outset. We are positively disposed towards participation in this particular project which has the capacity to be of benefit to individual litigants and businesses in Ireland and across the EU.
The proposed regulation is undoubtedly somewhat technical in nature. However, I reiterate the Government's view that it is important that Ireland responds positively to the proposal made by exercising our right to opt-in to all the negotiations at an early stage. I hope the committee will support this approach. I need hardly add that any points raised by members of the committee on the current draft proposal will be noted and referred back to the Minister for Justice and Equality with a view to having them taken into account during the negotiation process. I look forward to the discussion that will follow.
Deputy Calleary indicated he would like to speak.
I welcome the Minister of State and her officials. I am broadly in favour of the proposal. Can the Minister of State outline the position taken by the UK authorities on this proposal? The effectiveness of the proposal for Irish business and Irish people who would seek to use it will depend on whether the UK is opting in to this, given the extent of our trading and business relationships.
The Minister of State said that the European account preservation order issued in one member state will be automatically recognised and enforced in another member state without any special procedure being required and she went on to say that in a departure from the norm in order to avoid forum-shopping, the effect of the order is limited to the member state where it is issued, and it will not be recognised and enforced in other member states under the proposed regulation. Are those points contradictory or am I missing a piece of the jigsaw?
The Deputy has raised two questions, one concerning the UK and the second one regarding the order.
It is an extraordinarily technical proposal and while it seems to be contradictory it is not. If an order is issued by the court with jurisdiction on the substance of the matter, it is enforceable everywhere, but if it is issued in another country it is only enforceable there. That may seem to be contradictory but we are at the start of a detailed negotiation process and all those issues will be clarified.
In terms of United Kingdom, I do not have any great detail on that. The UK has its own process in terms of the legality around debtors and that is why the process will take longer. We will have to take all the different factors into consideration. The UK has its security process and that may be followed before any final decision is taken in regard to the matter. It is our understanding that its consideration of the proposal is nearing conclusion but because of the different attitudes towards debtors it will be a lengthy process and it is important that we be involved in the negotiations. The key point is that we need to ensure that people who are being pursued also have protection. We all know that claims can be made that are not entirely open to scrutiny.
I welcome the Minister of State. I welcome the proposal for the adoption of the European account preservation order to facilitate cross-border debt recovery. It is a very topical and relevant proposal. There are cases where developers and speculators have moved many of their assets abroad or have substantial assets abroad. I refer to the recent case in the High Court of Priory Hall where the developer Mr. Tom McFeely-----
I would prefer the Deputy to keep his comments general.
I will then refer to the company, Coalport Limited, which is the subject of the High Court decision.
I ask the Deputy not to specify the names of individuals or individual cases before courts.
This is all in the public domain. If one reads the newspapers or turns on a radio or television, one will read or hear about this, but I take the Chairman's point.
I refer to a case where the High Court has frozen the assets of a company and that company has assets in Portugal, in particular. In this case the individual has assets in the form of hotels and apartments in Portugal. There are people who have had to vacate their homes because of the failure of this developer to bring a development up to minimal building control regulations standards. I welcome this proposal because hopefully there will be some relief for the people involved. If this proposal is adopted, will it be applicable in Portugal in particular? Will a court here be able to recover the assets of person such as a property developer or a speculator who has deliberately used the absence of this kind of law up to now to avoid meeting his obligations? I would like the Minister of State to answer that question.
The brief answer to the Deputy's question is "Yes". The benefit of this proposal, even though we are at the start of what will be complicated and lengthy negotiations, is that it will be applicable in all member states. An important feature of it is that assets can be frozen in the other country. That is crucial. It highlights the urgent and practical effects of this European contribution to how we do our business. s the Deputy rightly said, moving assets to another country can sometimes frustrate the actions by people in this country who seek redress. In reply to the Deputy's question, the proposal will apply there.
I welcome the Minister of State and her officials. Like Deputy Calleary, I was concerned about the position taken by the UK on this because the suggestion is that it may not opt in to the proposal. If the proposal for a European account preservation order, EAPO, is passed, it will be of limited use to Irish creditors, but we will have to wait and see. I would be in favour of us opting in at this stage in order that we can influence the outcome.
I am interested in the technical side of this. Clearly, where a judgment has been issued on the substance of a matter, in other words, where a creditor has an enforceable judgement, then it seems logical and commonsensical that the capacity to apply for an EAPO should exist. What is particularly new about it is that a claimant or a creditor can seek an EAPO prior to even initiating judicial proceedings. It is akin to the Mareva injunction procedure we have already here.
In my experience, the threshold is high to get a Mareva injunction here. I wonder what would be the view of the Minister in the negotiations on the equivalence when we are looking at the EAPO, particularly where someone is looking for one before he or she has even initiated legal proceedings. The proposal, as the Minister of State said, is that the claimant in that case would then have to initiate proceedings within 30 days of the issue of the EAPO. That entails freezing assets for a month. It could have a significant effect on the debtor.
The Minister of State stated that the Minister is of the view that the elements of the proposal which impact of the protection of the debtor could be strengthened further. I am not clear what the Minister means by that, and what exactly he is looking at. To put it in straightforward terms, is he seeking to make it harder or easier for creditors to enforce debts abroad? As Deputy Seán Kenny stated, this could have significant implications, particularly for cases against developers and speculators in Ireland, many of whom hold assets, not only in Portugal but in the UK and many other European jurisdictions.
I suppose the reason the Minister is anxious that we opt in at this stage is due to all of the questions being asked. The Minister is of the view that the test is not strong enough for the claimant at this stage and that we will have to re-negotiate. There will be other countries that will agree with us that there are elements of it that need to be strengthened and elements of it that need to be rebalanced. That is what we are concerned with. The Minister considers the test to be a weakness. We need to be part and parcel of the negotiations in that regard.
The 30 days' freezing of assets could, as Senator Bacik stated, have a significant detrimental effect on any business but if at the outset we get the test right, there will not be that inequality within the proposal. We are hoping to get it right. We are at the start of this process. As to what will happen if the UK does not opt in, we are convinced at this stage that it will.
I thank the Minister of State for her presentation. I have some sympathy with the Minister on this because it all seems very turgid. I am sure somebody thought this was a good idea on the basis that it could be worked through to produce something that is worthwhile.
If there is a debt I would on principle, and from a policy point of view, support giving the appropriate instruments to those who are owed money to be able to recover their debt but I do not see Joe the plumber being in a position to pursue this as an option to recover his debt, even though he may not be operating on a transnational basis. I see it as an instrument that will be used by bigger players, which, in itself, is not a criticism. All of us have watched with some interest the travails and travels from Cape Cod to Cyprus of large financial institutions attempting to recover debts and the murky world of high finance and transactions that have become the stable diet of us all in recent times. We need to improve that system.
I am sure it is appropriate to opt-in at this stage to the negotiations to try to influence the outcome. That is probably correct.
In a mischievous mood early this morning,I was searching for some kind of trick question for the Minister. There was a line which took my fancy, where the Minister of State stated that this covers situations where, for example, the law of a member state provides that a certain amount of money is allowed for living expenses. We read constantly about sovereign debt and sovereign debt default. In the context of where this is going, is it envisaged that sovereign debt could be pursued through this instrument and, if so, will central banks as financial institutions fall within the remit of the powers of this instrument? It is a relevant question. I am sure the Minister of State will not have an answer but it is something of which we should be aware.
The issue of sovereign debt default has been raised. It is merely an issue if we are owed money by a country that reneges on its sovereign debt, although I do not know whether anybody owes us money and we appear to be the ones who owe most money abroad. It is something that probably needs to feed in to the system. It would be unusual if, for example, somebody was in a position to come over and put Ireland Inc. on hold because of a debt that we owe or, by reciprocation, if the Greeks, for example, were subject to the vagaries of this provision on Greek debt.
Deputy Creed is a morning person.
I had an early start.
Not always.
He has not gone home yet.
To start with Deputy Creed's last point, the instrument relates to individuals, not states. The Deputy made an interesting point. Who would one pursue in the event of sovereign debt default? Would pursuing every individual taxpayer be the only way one could do it?
I suppose it would be the Central Bank. Are central banks subject to its provisions?
This proposal is of relevance to Joe the plumber. It has not yet been determined where one will apply for the EAPO. In the event that it is determined that it will be the High Court, for instance, many small contractors go to the High Court on a regular basis.
Protect the small contractors at home, never mind giving protection abroad.
This will be about ensuring that they will have access. This instrument is important. I could not see the average tradesman or sub-contractor pursuing persons around Europe because he or she would not have the resources or the wherewithal to do it, but if he or she can do it in this manner by making an application to the courts system with which he or she will be familiar, and that instrument is then applied across Europe, the instrument then probably become relevant to the small operator.
I hope so. It is appropriate that we opt in now and try to shape it.
Are there any other questions? I have one or two.
The Minister of State stated that it is important to note that an EAPO cannot have the effect of freezing bank accounts which, under the law of the member state where the account is located, are exempt from seizure. Would it be possible to give an example of how that might occur? What kind of extra burdens or costs would be placed on the Courts Service, the banks and the Government? What kind of infrastructure will have to be put in place to enable this to happen? Would it be expensive to do so?
In terms of expense, because it will enable us to co-operate with other member states the expense in the member state in which the action is taken will probably be what it is in the normal course of events when one goes to the courts. In terms of its imposition in other states, it will be a matter of how they assess their costs. The cost of it will be built in to the mechanism as we negotiate.
An example of assets that cannot be frozen is joint bank accounts. All we need do is look to ourselves. Equally, it would apply to us if an action is taken in another country in terms of where persons would look for assets in this country to be frozen. Another would be, as Deputy Creed stated earlier, reasonable living expenses. We merely need look to what we give protection to, which in turn will be given protection across other member states. Other member states have a different standard, but it is the law that applies in those states that will determine how this will be applied in those states.
Just to tease that out, if somebody wanted to avoid this, all he or she would have to do would be to set up a joint bank account or have an account in the name of a partner or spouse. Is that avoidance mechanism available?
The Minister of State spoke about security to ensure compensation for any loss suffered by a debtor. Does that mean that somebody -----
That is in the event a frivolous claim is made.
How is that determined prior to the claim? Is the Minister of State saying that in every case a debtor must put forward some form of security before proceeding with a claim?
Not in every case. In the event that where an application is made and the courts consider the case may not be as strong as other cases, the claimant will have to lodge a security to cover the position where the application may fail or be considered frivolous. This is to cover the damage, as Senator Bacik pointed out, that may be done in terms of freezing a person's assets for a month with the result that the person is pursued by others for the non-payment of bills.
We have now completed our consideration of the motion and in accordance with Standing Orders, the joint committee will report back to both Houses to the effect that it has completed its consideration of it. Is it agreed that there will be no further debate on this matter in Dáil Éireann or Seanad Éireann? Agreed. I thank the Minister of State and her officials for their attendance today.