By Benjamin Dors, Partner
"The swift and efficient recovery of outstanding debts over which no legal controversy exists is of paramount importance for economic operators in the European Union, as late payments constitute a major reason for insolvency threatening the survival of businesses, particularly small and medium-sized enterprises, and resulting in numerous job losses[1]."
This observation, made nearly twenty years ago, prompted the European legislator to provide creditors of the Member States with instruments to facilitate the recovery within the European Union of uncontested pecuniary claims that are due and payable.
From this concern emerged Regulation (EC) No 1896/2006 of 12 December 2006 creating a European order for payment procedure (the "EPO Regulation"), which entered into force on 12 December 2008, establishing a simplified, uniform, and swift procedure enabling creditors to recover their claims throughout the EU[2], while ensuring reduced processing times and lower costs associated with cross-border procedures.
Like the European Account Preservation Order (EAPO)[3], the European Order for Payment (EPO) aims to establish a harmonized procedural framework for cross-border debt recovery.
The purpose of the EPO Regulation[4] is twofold, as it aims to:
On the one hand, simplify, speed up, and reduce the costs of litigation in cross-border cases concerning uncontested pecuniary claims by establishing a European order for payment procedure; and
On the other hand, permit the free circulation of European orders for payment throughout all Member States by laying down minimum standards, compliance with which renders unnecessary any intermediate proceedings in the Member State of enforcement prior to recognition and enforcement.
The purpose of this article is to present the legal framework and regime of the EPO, which, after almost 20 years, remains a relatively unknown and underused cross-border debt recovery instrument, available to European creditors.
Scope and Application
The EPO applies in civil and commercial matters in cross-border cases, whatever the nature of the court or tribunal.
However, the Regulation excludes certain areas such as revenue, customs, or administrative matters, liability of the State for acts and omissions in the exercise of State authority, matrimonial property regimes, bankruptcy, social security, or claims arising from non-contractual obligations, unless they have been the subject of an agreement between the parties or an admission of debt or they relate to liquidated debts arising from the joint ownership of property[5].
The Regulation applies only in the context of a "cross-border case", defined as one in which at least one of the parties is domiciled or habitually resident in a Member State other than the Member State of the court seised of the EPO application[6].
The EPO is designed as an additional and optional means for the creditor, who remains free to use any other procedure to obtain an equivalent measure under national law[7].
Jurisdiction
Jurisdiction to issue an EPO is determined by Article 6 of the Regulation, which establishes the principle that jurisdiction is determined in accordance with the relevant rules of Community law, in particular Regulation (EU) No 1215/2012 (Brussels I bis Regulation).
By way of exception, if the defendant is a consumer, jurisdiction lies solely with the courts of the Member State where the defendant is domiciled[8].
In parallel, it is up to each State to determine which court has jurisdiction within its territory.
Claims Eligible for an EPO
To be eligible for an EPO, a claim must be both:
Pecuniary, liquidated, and due at the date on which the application for the order is lodged: in other words, the Regulation does not apply to obligations to act or refrain from acting; and
Uncontested by the debtor.
It should be noted, however, that the Regulation does not set a ceiling on the amount of the claim that may be the subject of an EPO, which may therefore be substantial.
Procedure
The application for an EPO is lodged by the creditor with the competent court by means of a unilateral and non-adversarial application (ex parte), using a standard form (set out in the Annex to the Regulation)[9].
Content of the Application
The application must contain a number of elements to precisely identify the claim and enable the defendant, if necessary, to oppose it. The following must therefore be specified[10]:
a) The names and addresses of the parties, and where applicable their representatives, as well as the court to which the application is made;
b) The amount of the claim, including the principal and, where applicable, interest, contractual penalties, and costs;
c) If interest on the claim is claimed, the interest rate and the period of time for which that interest is claimed, unless statutory interest is automatically added to the principal under the law of the Member State of origin;
d) The cause of the action, including a description of the circumstances invoked as the basis of the claim and, where applicable, the interest demanded;
e) A description of the evidence supporting the claim. However, the Regulation does not require the provision of the evidence of the claim itself, but only a description of that evidence.
f) The grounds for jurisdiction; and
g) The cross-border nature of the dispute.
Examination of the Application
To issue an EPO, the court examines the application "as soon as possible."[11]
The court verifies, on the basis of the information provided by the creditor in the application, that all the conditions laid down in the Regulation are met : i.e., cross-border dispute; pecuniary, liquidated, and due claim, civil or commercial; jurisdiction of the court seised, correctly completed form, etc[12].
If the aforementioned conditions are not all met, but the application is not manifestly unfounded or inadmissible either, the court may give the applicant the opportunity to rectify or complete the application, within a time limit set by the court[13].
The court may also make a proposal to amend the application if the requirements are met for only part of the claim[14]. In this case:
If the claimant accepts the court's proposal, the EPO is issued and the procedure continues, but only for that part of the claim accepted by the claimant [15].
On the other hand, if the claimant fails to send his reply within the time limit specified by the court or refuses the court’s proposal, the court shall reject the application for a EPO in its entirety[16].
If the conditions are met, the court issues the EPO "as soon as possible and normally within 30 days of the lodging of the application[17]" (excluding the time necessary to complete, rectify, or amend the application).
The court will, however, be required to reject the application in four cases[18]:
If the application does not meet the required conditions.
If the application is clearly unfounded.
If the applicant has not responded to a request for additional information or rectification within the time limit set by the court.
If the applicant has not responded to the court’s proposal for modification within the time limit set by the court or has rejected it.
No right of appeal lies against the decision rejecting the application[19].
However, the creditor will have the possibility to submit a new EPO application or to opt for any other procedure provided for by the law of a Member State[20].
Service of the EPO
To safeguard the rights of the defendant, the EPO must be served or notified in accordance with the national law of the Member State where service or notification is to be done.
The EPO is transmitted directly and as soon as possible between the entities of origin and the entities required, in one of the modes provided for by the Service Regulation[21], i.e., by means of a decentralized, secure, and reliable computer system.
Once in the required territory, the Regulation defines the possible methods of notification of the EPO, depending on whether it is accompanied, or not, by proof of receipt by the defendant.
Regarding the methods of service or notification with proof of receipt by the defendant[22], their use ensures that the defendant has knowledge of the document, or has refused it.
Regarding the methods of service or notification without proof of receipt by the defendant[23], to compensate for the lack of guarantee of actual receipt of the document by its addressee, the European legislator has provided an additional condition: their use is only possible if the defendant's address is certain.
In either case, service or notification may also be made to a representative of the defendant[24].
Opposition to the EPO
If the defendant disputes the debt claimed by the applicant, the defendant may lodge a statement of opposition to the EPO with the court that issued it[25], as long as the order is not yet enforceable, i.e., within a period of 30 days from its service or notification[26].
The debtor is not required to specify the reasons for the opposition; the debtor only needs to indicate that the claim is disputed[27].
The opposition is lodged using the means of communication accepted by the Member State of origin of the EPO (e.g., paper or electronic means)[28]. In France, for example, the opposition is lodged with the registry of the French court that issued the EPO, either by declaration against receipt or by registered letter[29].
The opposition has the effect of continuing the procedure before the competent courts of the Member State of origin of the EPO, in accordance with the rules of ordinary civil procedure[30].
However, if the applicant does not wish to risk incurring costs in the context of an ordinary procedure, the applicant may request, in the context of the initial EPO application, that in the event of opposition, the procedure is not automatically continued[31].
Review of the EPO
Once the 30-day period has expired without any opposition being lodged, the EPO becomes, in principle, final.
The European legislator has nevertheless provided for three exceptional cases in which the defendant, who has not been able to oppose the EPO within the prescribed period, may request a review before the competent court of the Member State of origin[32]:
First case: if the EPO was notified without proof of its receipt by the defendant and within a period too short to enable the defendant to arrange for his defence, without any fault on his part[33].
Second case: if the defendant was prevented from objecting to the claim by reason of force majeure or due to extraordinary circumstances, again without any fault on the defendant's part[34].
Third case: if it is clear that the payment order was wrongly issued, having regard to the requirements set out in the Regulation or due to other exceptional circumstances[35].
In the event that the court rejects the defendant's request for review, the European order for payment remains valid and can therefore be enforced.
On the other hand, if the court considers that the review is justified, the European order for payment is null and void[36].
Enforcement
Unless the defendant opposes, the court that issued the EPO declares it enforceable "without delay[37]" after verifying the date on which the EPO was served or notified.
The court then sends the enforceable EPO to the applicant.
An EPO that has become enforceable in the Member State of origin is recognized and enforced in all other Member States without the need for a declaration of enforceability and without any possibility of opposing its recognition. In other words, the enforcement of the EPO in another Member State does not require an exequatur[38].
Under no circumstances may the EPO be reviewed as to its substance in the Member State of enforcement[39].
As a last resort, the defendant may request a refusal of enforcement of the EPO from the competent court in the Member State of enforcement in two situations:
First situation: If the EPO is irreconcilable with an earlier decision or order previously issued in any Member State or third country, provided that the following three conditions are met:
The earlier decision or order was issued in a dispute concerning the same cause of action between the same parties, and
The earlier decision or order fulfills the conditions necessary for its recognition in the Member State of enforcement, and
The irreconcilability could not have been raised as an objection in the court proceedings in the Member State of origin.
Second situation: if the defendant has already paid the claimant the amount awarded in the EPO.
Finally, the Regulation provides for the possibility of suspending or limiting the EPO in the event that the defendant has applied for a review in accordance with Article 20[40]. In this case, the defendant may request the competent court in the Member State to either:
limit the enforcement procedure to protective measures, or
make enforcement subject to the provision of security as determined by the court, or
in exceptional circumstances, stay the enforcement proceedings.
An EPO which has become enforceable shall be enforced under the same conditions as an enforceable decision issued in the Member State of enforcement[41].
***
[1] EPO Regulation – Recital 6.
[2] Except for Denmark and – prior to Brexit – the United Kingdom.
[3] See B.Dors, Revisiting Cross-Border Debt Recovery Tools (Part 1): The European Account Preservation Order (EAPO): https://www.advant-altana.com/en/news/revisiting-cross-border-debt-recovery-tools-part-1-the-european-account-preservation-order
[4] EPO Regulation – Article 1.
[5] EPO Regulation – Article 2.
[6] EPO Regulation – Article 3.
[7] EPO Regulation – Recital 10.
[8] EPO Regulation – Article 6 (2).
[9] EPO Regulation – Article 7.
[10] EPO Regulation – Article 7 (2).
[11] EPO Regulation – Article 8.
[12] EPO Regulation – Article 8.
[13] EPO Regulation – Article 9.
[14] EPO Regulation – Article 10(1).
[15] EPO Regulation – Article 10(2).
[16] EPO Regulation – Article 10(3).
[17] EPO Regulation – Article 12(1).
[18] EPO Regulation – Article 11.
[19] EPO Regulation – Article 11 (2).
[20] EPO Regulation – Article 11 (3).
[21] Regulation (EU) 2020/1784 of the European Parliament and of the Council of 25 November 2020 on the service in the Member States of judicial and extrajudicial documents in civil or commercial matters (recast)
[22] EPO Regulation – Article 13.
[23] EPO Regulation – Article 14.
[24] EPO Regulation – Article 15.
[25] EPO Regulation – Article 16 (1).
[26] EPO Regulation – Article 16 (2).
[27] EPO Regulation – Article 16 (3).
[28] EPO Regulation – Article 16 (4).
[29] French Code of Civil Procedure – Article 1424-8.
[30] EPO Regulation – Article 17.
[31] EPO Regulation – Article 17.
[32] EPO Regulation – Article 20.
[33] EPO Regulation – Article 20 (1.a).
[34] EPO Regulation – Article 20 (1.b).
[35] EPO Regulation – Article 20(2).
[36]EPO Regulation – Article 20(3).
[37]EPO Regulation – Article 18.
[38]EPO Regulation – Article 19.
[39]EPO Regulation – Article 22.
[40] EPO Regulation – Article 23.
[41]EPO Regulation – Article 21.
