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Croatia

Law and regulation of Covid-19 loan moratoriums in Croatia

Table of contents
  1.  Description of the legislation
    1.  Is there a moratorium on loans legislation implemented in your jurisdiction?
    2. If no: Are there any ongoing discussions regarding a potential introduction of such measures?
    3. What is the name of the relevant legislation (the “Relevant Act”)?
    4. What is the duration of the measures (period of moratorium)?
    5. Does the legislation provide for an extension of the period of moratorium?
  2. Parties and agreements affected by the Relevant Act
    1. Is the moratorium available for both corporate and consumer loans?
    2. Who are the affected Lenders?
    3.  Does it make a difference whether loans are granted by a foreign entity and governed by foreign law?
  3. Impact on the loan agreements
    1.  Is there a cut-off date with respect to loan agreements to which the Relevant Act will apply (e.g. not applicable to loan agreements entered into after the cut-off date)?
    2.  Does the moratorium apply to principal only, or also to interest and/or fees?
    3. Will the maturity of the loan automatically be extended by the moratorium period?
    4.  Are repayments and interest which have become due and payable under the contract before the Relevant Act has come into force covered by the moratorium?
    5. Will lenders be able to terminate a loan due to an event of default other than non-payment (e.g. breach of financial covenants)?
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1. Description of the legislation

1.1 Is there a moratorium on loans legislation implemented in your jurisdiction?

A moratorium on loans has not been implemented in Croatia through legislation. However, a special non-binding regime has been envisaged by the Croatian Banking Association, which means it is up to each bank to decide whether and how it will implement a moratorium.

1.2 If no: Are there any ongoing discussions regarding a potential introduction of such measures?

For now it seem there will be no formal legislative proposals regarding the potential introduction of a moratorium.

In addition to the non-binding moratorium regime, a set of binding measures was adopted through legislation on 1 May 2020. The respective legislation suspended:

  • enforcement proceedings
  • the option to initiate bankruptcy proceedings (except when initiated by the debtor)
  • the application of default interest rates.

The respective measures will last for the next three (3) months, with the possibility of extension for an additional three (3) months.

As a result of the aforementioned binding and non-binding measures, most Croatian commercial banks have independently implemented a 3-month moratorium, applicable to both consumer and corporate loans, on a voluntary basis.

The remaining measures are mandatory and apply to everyone including the banks, which means that banks may not initiate enforcement or bankruptcy proceedings and may only calculate contractual interest rates during this period.

Since no moratorium is implemented through binding legislation, currently it is not possible to give a definite answer regarding any effects.

1.3 What is the name of the relevant legislation (the “Relevant Act”)?

N/A

See point 1.1 above.

1.4 What is the duration of the measures (period of moratorium)?

N/A

See point 1.1 above.

1.5 Does the legislation provide for an extension of the period of moratorium?

N/A

See point 1.1 above.

2. Parties and agreements affected by the Relevant Act

2.1 Is the moratorium available for both corporate and consumer loans?

N/A

See point 1.1 above.

2.2 Who are the affected Lenders?

N/A

See point 1.1 above.

2.3 Does it make a difference whether loans are granted by a foreign entity and governed by foreign law?

N/A

See point 1.1 above.

3. Impact on the loan agreements

3.1 Is there a cut-off date with respect to loan agreements to which the Relevant Act will apply (e.g. not applicable to loan agreements entered into after the cut-off date)?

N/A

See point 1.1 above.

3.2 Does the moratorium apply to principal only, or also to interest and/or fees?

N/A

See point 1.1 above.

3.3 Will the maturity of the loan automatically be extended by the moratorium period?

N/A

See point 1.1 above.

3.4 Are repayments and interest which have become due and payable under the contract before the Relevant Act has come into force covered by the moratorium?

N/A

See point 1.1 above.

3.5 Will lenders be able to terminate a loan due to an event of default other than non-payment (e.g. breach of financial covenants)?

N/A

See point 1.1 above.

Authors

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Portrait ofJelena Nushol Fijačko
Jelena Nushol Fijačko
Partner
Zagreb
Portrait ofRelja Rajkovic
Relja Rajković
Senior Associate
Zagreb