Slovenia: Bills of Exchange in Enforcement Proceeding
Ana Filipov, Franci Cmok
Recent amendments to the Enforcement Procedure and the Interim Protection Act
facilitate repayment in enforcement proceedings.
Introduction
Bills of exchange are mostly regulated by the sector specific act of 1946 (based on
provisions of three 1930’s Geneva conventions). Provisions of other acts (eg, Obligation
Code; Obligacijski zakonik) are used secondarily if the Bill of Exchange Act (Zakon o
menici) does not contain applicable provisions.
In practice, besides as a credit or payment instrument, the bill of exchange is mainly
used as a security instrument. Most likely it will take on an even larger role in
commercial practice due to the latest amendments of the Enforcement Procedure and
Interim Protection Act (Zakon o spremembah in dopolnitvah Zakona o izvršbi in
zavarovanju, Official Gazette no. 51/2010; the ZIZ-H), which entered into force on 15
July 2010.
Two types of enforcement proceedings
Until the abovementioned amendments, a bill of exchange was – like invoices, excerpts
from business records, calculations of interest, checks, etc. – listed as an "authentic
document" on a basis of which enforcement proceeding could commence. The main
characteristic of such proceeding, where a proposal can still be filed either electronically
or in hard copy, is that the debtor is given time for voluntary repayment and the creditor
cannot be repaid before the writ of execution becomes final.
In addition, the ZIZ-H provides an exception relating to the bill of exchange whereby in
commercial disputes a creditor is entitled to repayment before the writ of execution
becomes final. The act defines specifics relating to the proposal: a creditor has to file a
proposal with the district court where the debtor has its registered seat, in hard copy,
accompanied by the original bill of exchange. If the proposal is filed by the attorney-in-
fact, it is sufficient to state that the power of attorney was given and its scope. The
proposal must include information about:
the creditor and debtor;
the bill of exchange;
the debtor’s obligation;
the means of execution (whereby the court has to acquire information on eg the
debtor’s bank and bank account number or other information on the debtor’s
securities ex officio); and
all data necessary for the enforcement to be performed.
In addition, in its proposal the creditor must request the court to ask the debtor to pay
the claim (principal, interest and costs) within three days after receipt of the writ of
execution.
Fast track proceeding – better for creditors than debtors
The new option clearly brings advantages for creditors. The court, obliged to issue the
writ of execution within five days from the day it received the proposal, sends the writ by
registered mail to the parties of the proceedings and the debtor’s bank(s). After receipt,
the bank must immediately seize the assets in the debtor’s account(s). If the debtor does
not voluntarily pay the creditor within three days, the bank transfers the seized amount
to the creditor even if the debtor objects to the writ of execution. However, payments
from other means of execution are performed after the writ of execution becomes final.
The fact that the debtor’s objection does not affect the repayment from its bank
account(s) may have severe effects on the debtor. If the creditor’s claim is later found to
be unjustified, it then becomes the debtor’s job to get the funds back from the creditor.
According to publicly available information, one Slovenian company is dealing with this
problem right now. Based on information from its website, in May 1991 the debtor, as a
guarantor, issued a bill of exchange to secure repayment of a loan for USD 6 mln, which
three of its subsidiaries had taken at the New York branch of a Yugoslav bank. Although
the debtor claims that the claim is disputed and litigation pending, at the end of
September 2010 the competent court issued a writ of execution relating to this surety,
now based on a proposal of a Lichtenstein company for a principal of almost USD 9.8
mln. This example shows how the change of legislation can have a severe impact not
only on future issuers of bills of exchange but also those who acted as guarantors
expecting that their objections would prevent wrongful claims being repaid.
Conclusion
It is expected that the expedited enforceability of the bill of exchange provided by ZIZ-H
will increase the use of bills of exchange despite the risks mentioned above.
This article was originally published in the schoenherr roadmap`11 - if you
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