The proposed EU Directive on credit purchasers, credit servicers and the recovery of collateral contains, among other things, provisions on a new EU mechanism for out-of-court collateral enforcement. The Directive is part of a broader package of EU measures designed to reduce the levels of non-performing loans (NPLs) in the EU, as NPLs decrease profitability of banks, often leaving them in a weak position from which to provide finance to the wider economy in support of growth and jobs.
The government has decided that it is in the UK’s interest not to opt in to the Justice and Home Affairs obligations within this Directive as the provisions introduce an unnecessary level of administration to the UK’s existing collateral enforcement mechanisms, which are sufficiently robust and fit for purpose.
The Directive states that where Member States establish collateral enforcement mechanisms “by means of appropriation”, the rights of creditors “shall be governed by the applicable laws in each Member State”. The government’s view is that this provision addresses situations in which conflicts of laws points arise, in which case it is an applicable law provision and therefore includes JHA content.
The Directive similarly governs applicable law if a borrower and lender from two different EU Member States cannot agree on the appointment of a valuer— with the appointment of the valuer falling on the court within one of those Member States.
The government remains supportive of the European Commission’s broader efforts to reduce levels of NPLs in the EU, supporting solutions that are proportionate and targeted.
This statement has also been made in the House of Lords: