Repeal of provisions regarding the enforcement proceedings based on a bill of exchange

With Constitutional Court Decision No. U-I-286/12 issued on 4 June 2014, the provisions of the Enforcement and Securing of Civil Claims Act (hereinafter; ZIZ-I), which governs special enforcement proceedings based on a bill of exchange (sixth paragraph of Article 45, fourth paragraph of Article 46, third paragraph of Article 138 and second paragraph of Article 150) have been repealed.. With this decision the Constitutional Court of the Republic of Slovenia brought enforcement procedure based on a bill of exchange closer to the regulatory framework of enforcement procedure based on an invoice as an authentic document.

The essence of the regulatory framework of the bill of exchange-based enforcement proceedings enabled creditors in commercial cases to be repaid from the debtor's funds held by the payment transaction organisation on the basis of a bill of exchange, which was attached to the application for enforcement, even before the finality of the enforcement order, regardless of any objection filed by the debtor. Therefore the debtor, irrespective of any grounds for objection, could not prevent the immediate repayment of the creditor, as was the case in enforcement proceedings initiated based on an invoice, which in principle facilitated creditors' abuses of the described concept. In case of enforcement procedure based on an authentic document (under which a bill of exchange is also categorised), the court upon receiving the debtor's plea against an enforcement order, repeals the segment of the enforcement order that allows the enforcement, referring the case to be heard under contentious proceedings. However, this too did not benefit the debtor during the bill of exchange-based enforcement proceedings, since by way of a counter-enforcement motion or separate lawsuit the repayment of funds remitted from the debtor's account to the creditor by the payment transaction organisation could not be claimed, until it was determined in a commercial dispute that the creditor's enforcement motion or lawsuit was unsubstantiated. Until then, the debtor could also not file the claim for recovery due to unjustified enrichment (condictio) under contentious proceedings. Therefore under the previous legislation, repayment of the alleged creditor was possible, even before debtors were awarded the opportunity to argue their case to their own benefit before a court or make an effective statement (right to be heard) in court proceedings. Also the reinstatement (restitutio in integrum) was severely hampered in the previous system of enforcement procedure based on a bill of exchange. Due to the limitations referred to in Article 67 of the ZIZ-I, a debtor could not enforce the recovery of funds in case of unsubstantiated enforcement until the creditor's or plaintiff's claim proved unsubstantiated upon the finality of contentious proceedings. The possibility to enforce the counter-enforcement concept, with which "the debtor" recovers the paid amount relatively easily already during enforcement proceedings, was explicitly excluded by law in bill of exchange-based enforcement proceedings. The original state could only be achieved after a multiple-year delay, during which the financial state on the part of the "creditor" could have changed significantly. The possibility of the "debtor" to in fact recover the funds is thus merely theoretical.

The Constitutional Court found that the regulatory framework, where enforcement proceedings are completed in full (whenever this does not involve enforcement procedure based on a final judgement or some other equivalent enforcement title) before the affected party is awarded any effective opportunity to enforce any objections of procedural or material nature, does not comply with the right to be heard pursuant to Article 22 of the Constitution and right to legal remedies pursuant to Article 25 of the Constitution. The Constitutional Court also assessed that the findings regarding unconstitutionality remain unchanged even with respect to the circumstance that the severity of the commitment and urgency of fast-track proceedings is characteristic for bill of exchange law, as well as the fact that the assessment cannot be affected by the characteristic that the proposer of the bill of exchange-based enforcement proceedings manages to demonstrate their claim with a relatively high level of probability.

The repeal of the aforementioned provisions of the ZIZ-I will mean that according to the new regulatory framework the debtor's plea against the enforcement order based on a bill of exchange suspends the enforceability of the enforcement order, thereby preventing repayment prior to its finality, while at the same time providing debtors with the possibility to also use the counter-enforcement concept during the enforcement proceedings themselves.