On 3 August 2019, National Assembly of the Republic of Serbia has adopted the long-awaited amendments to the Enforcement and Security Act (“Act”), which entered into force on 1 January 2020. Having in mind the extent of amendments (more than 170 Articles), we can say the we practically have a new Enforcement and Security Act.
We will try to summarize the most important changes to the Law in the following paragraphs. Due to the large number of changes to the Act, this text shall only cover the most important ones and ones that will have a big impact on future enforcement proceedings.
1. Greater Jurisdiction of Public Bailiffs
Starting from 1 January 2020, debt collection from the Republic of Serbia, autonomous provinces, local authorities, as well as from all direct and indirect Budget users, shall be conducted only through enforcement proceedings before Public Bailiffs.
This means that Public bailiffs shall be entitled to initiate enforcement by adopting the Decision on Enforcement, which until now was in exclusive jurisdiction of the courts (save for the debt for utilities).
Besides this new procedure, the Act also introduced a new obligation for creditors before filing a motion for enforcement against debtors. All creditors will now be obliged to notify the Ministry of Finance about their intention to file a motion for enforcement at least 30 days earlier and proof of such notice is a mandatory appendix to the motion for enforcement.
2. Electronic Public Auctions of Real Estate
Starting from 1 March 2020 Public Bailiffs will be able to decide if the public auction of real estate will be performed via electronic or regular auction procedure. This was introduced in order to prevent different kinds of unwanted behavior aimed at abusing the auction procedure. Although the procedure is optional, this is only temporary – starting from 1 September 2020, all public real estate auctions shall be conducted only as electronic public auctions.
The Act does not set the rules for electronic auctions, but it does stipulate that such procedure shall be more closely regulated by the Minister.
A few additional important changes were introduced in relation to the deposit that all participants must pay so they can participate in the real estate auction. Deposit amount has been increased from 10% to 15% of the real estate’s estimated value, and now it has to be paid at least 2 days before public auction.
Another interesting change has been introduced in relation to the direct bargain sale of real property by deleting the sale price limit. Previous version of the Act stipulated that real estate could not be sold for less than 70% of the estimated price by a direct bargain.
3. Summary Enforcement Procedure
Besides the regular enforcement proceedings, the Act also provides new rules for summary enforcement proceedings. Rules of the summary enforcement proceedings apply under the following conditions:
- the competent court for enforcement proceedings is the Commercial court;
- enforcement can be performed only on the basis of the following credible documents: (i) promissory note or check of domestic or foreign entity: (ii) unconditional bank guarantee; (iii) unconditional letter of credit, and (iv) certified statement from the debtor authorizing a bank to transfer funds from its account to creditors account.
The main difference between a regular enforcement proceeding and a summarized one is in shorter deadlines. A debtor can file an objection within 5 days as of when they received the decision on enforcement and the creditor can respond to the objector within 3 days.
4. Enforcement against Debtor’s Intellectual Property
New Enforcement instruments were introduced with Amendments to the Act. As of 1 January 2020, creditors can seek enforcement on other property rights of the debtor which include patent, trademark, and other intellectual rights.
5. Voluntary settlement procedure in front of public bailiffs
In order to decrease costs of the enforcement procedure, a voluntary settlement procedure has been introduced by the Law. Such procedure can be initiated by the creditor before commencing the enforcement proceedings. With a written request, the creditor has an obligation to provide an executive or credible document. On the basis of such request, public bailiffs invite the debtor to settle the debt voluntarily within a period of 60 days. If the debtor does not respond within 60 days, it shall be deemed that the debtor has refused to pay the debt voluntarily. Even though this procedure is completely voluntary, by initiating it, the statute of limitation for the debt is increased for additional 60 days.
This text is for informational purposes only and should not be considered legal advice. Should you require any additional information, feel free to contact us.
By Milan Samardzic, Partner, and Nemanja Providzalo, Senior Associate, Samardzic, Oreski & Grbovic