Case law Developments in PIL

Starkinvest: Can an EAPO be Used to Secure a Penalty Payment?

This post was written by Carlos Santaló Goris (Lecturer at the European Institute of Public Administration in Luxembourg).

On 20 April 2023, the Court of Justice of the European Union (CJEU) rendered its second judgment on Regulation 655/2014, establishing a European Account Preservation Order (‘EAPO Regulation’). In C-291/21, Starkinvest, the Court assessed whether an EAPO could be used to secure a claim resulting from a penalty payment, and if so, under what conditions.  

Background of the Case

C-291/21, Starkinvest, has its roots in a 2016 judgment rendered by the Court of Appeals of Liège (Cour d’appel de Liège) rendered in favor of Starkinvest SRL ordering Soft Paris and Soft Paris Parties, ‘to cease all sales of their goods and services under the word mark SOFT PARIS in the Benelux countries’ (para. 18). The judgment established a periodic penalty payment in the event the order to cease sales was not respected.

In 2021, Starkinvest SRL applied for an EAPO to attach Soft Paris’ French bank accounts for € 86 694.22. Of that amount, € 85.000 corresponded to the penalty payments resulting from Soft Paris’ infringement of the order to cease the sale of goods. Starkinvest used the referred judgment rendered by the Court of Appeals of Liège (Cour d’appel de Liège) as the title to obtain the EAPO.

At this point, it should be noted that the regime to obtain an EAPO varies depending on whether the creditor has an enforceable judgment or not. All creditors have to prove that ‘there is a real risk that, without such a measure, the subsequent enforcement of the creditor’s claim against the debtor will be impeded or made substantially more difficult’ (Article 7(1) EAPO Regulation. This first prerequisite corresponds to the periculum in mora. Creditors without an enforceable judgment ‘shall also submit sufficient evidence to satisfy the court that he is likely to succeed on the substance of his claim against the debtor’ (Article 7(2) EAPO Regulation). This second condition corresponds to another common prerequisite for obtaining a national interim measure, the fumus boni iuris.

For the Court of Appeals of Liège (Cour d’appel de Liège), it was not clear whether the judgment establishing the penalty payment but not specifying the amount the claim arising from that penalty payment was valid a judgment that would exempt creditors from satisfying the fumus boni iuris. In this regard, Belgian legislation does not require the prior quantification of the claim arising from a penalty payment to request a preservation order ‘provided that the decision ordering penalty payments is enforceable and has been serving’ (para. 23). Conversely, the Belgian court also acknowledges that Article 55 of the Brussels I bis Regulation establishes that ‘a judgment that ”orders a payment by way of a penalty” can only benefit from the simplified scheme of enforcement the amount of the payment has been finally determined by the court of origin.’ Having no answer to such inquiry, the Court of Appeal of Liège (Cour d’appel de Liège) decided to submit the following questions to the CJEU:

(1) Does a judgment which has been served, ordering a party to make a penalty payment in the event of breach of a prohibitory order, constitute a [judgment] requiring the debtor to pay the creditor’s claim within the meaning of Article 7(2) of [Regulation No 655/2014]?

(2) Does a judgment ordering a party to make a penalty payment, although enforceable in the country of origin, fall within the meaning of “judgment” in Article 4 of [Regulation No 655/2014] where there has been no final determination of the amount in accordance with Article 55 of [Regulation No 1215/2012]?

The CJEU’s Answer

In essence, the CJEU was asked whether the judgment that established the penalty payment was a valid judgment that would exempt the creditor from proving the fumus boni iuris. More concretely, whether or not the claim amount had to be specified in the judgment as a condition to consider the judgment a valid title. In this regard, neither Article 4(5), which contains the definition of judgment, nor Article 7(2), the provision on the fumus boni iuris, does not state anything about the quantification of the claim in the judgment (paras 42 – 43). Nonetheless, other provisions do so. Article 6 refers to the ‘amount specified in the judgment’, while Article 8(2)(g) states that creditors can apply for an EAPO in ‘the amount of the principal claim as specified in the judgment’ (paras 46 – 47). Therefore, a systematic interpretation suggests that the judgment would have to contain the precise amount of claim.

The CJEU found that the specification of the amount of the claim is also a guarantee to maintain an adequate balance between the creditor’s and debtor’s interests in the EAPO procedure (para. 50). If a judgment establishing the penalty payment without having specified the amount of the claim is considered a valid title to circumvent the fumus boni iuris, that would undermine the debtor’s position. The court’s examination of fumus boni iuris is both a condition for creditor to access the EAPO and a guarantee for the debtor against abusive applications when there is no title acknowledging the claim. When the amount of penalty payment is not quantified, courts should have the discretion to assess whether there is a basis for the amount the creditor requested the EAPO for. Interestingly, AG Szpunar added, in his opinion, that while the judgment establishing penalty payment would not constitute a valid title, it is not ‘is meaningless for the creditor’. Creditors could use it, along ‘with documents provided by a court official in which the court official declares the breaches of the prohibitory order’, to prove the fumus boni iuris (paras. 82 – 83). Creditors willing to secure a penalty payment through an EAPO can find a practical tip here.

Lastly, the CJEU addressed the enforcement regime of judgments ordering penalty payments under the Brussels I bis Regulation. In this regard, the Court clarified that even if the EAPO does not have an equivalent provision, that does not imply that the ‘intention of the EU legislature was to exclude penalty payments from the scope of that regulation’ (para. 55). Therefore, the EAPO could be used to secure penalty payments. However, the judgment ordering the penalty payment without quantifying the claim is insufficient to overcome the fumus boni iuris.

Overall Assessment of the Judgment

The main contribution of the C-291/21 judgment is that it shows that the EAPO can be used to secure penalty payments. In this regard, it aligned the EAPO Regulation with the Brussels I bis Regulation, which expressly acknowledges the possibility of recognizing and enforcing penalty payment judgments. Creditors can combine both instruments. While using the Brussels I bis Regulation to enforce the penalty payment, they can rely on the EAPO to secure its enforcement. Whether the EAPO can be used to secure a penalty payment might seem for many pretty obvious, the Cologne Higher Regional Court (Oberlandesgericht Köln) once rejected an EAPO request on the basis of a penalty payment under German law (Zwangsgeld), because it considered that such kind of claim fell outside the scope of the EAPO Regulation. The creditor requested a preliminary reference be submitted to CJEU, but the German court rejected such a possibility. This case came to the author’s knowledge through an interview with a German lawyer in the empirical conducted in the context of his Ph.D. dissertation.

This decision also sheds light on the autonomous notion of judgment under the EAPO Regulation (in this regard, see also Tobias Lutzi’s post on this judgment), more precisely, concerning the prerequisite that the claim has to be quantified.

As in C-555/18, the first CJEU judgment on the EAPO, the Court’s reasoning of this second judgment again pivots on the need to ‘strike an appropriate balance between the interest of the creditor in obtaining an Order and the interest of the debtor in preventing abuse of the Order’ (Recital 14). This is a recurring hermeneutic tool used by the CJEU when it comes to interpreting the EAPO and the EPO. It seems that the CJEU’s approach is to counterweight the pro-creditore spirit that underpinned the creation of the EAPO and EPO, reinforcing the debtor’s position.

Legal Secretary CJEU Full Professor PIL University of Santiago de Compostela (Spain) Senior research fellow MPI Luxembourg (on leave) Usual disclaimer applies

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