According to the Decision of the Commercial Appellate Court of the Republic of Serbia (the “Court”), voluntary assignment of claims in enforcement proceedings is not allowed. Interpretation of Article 48 of the Enforcement and Security Act (the “Act”) provides for assignment of the claim subject to enforceable or directly enforceable title based on the law, but not based on a contract. Therefore, it is currently not allowed to assign claims and collaterals in enforcement proceedings.

Even though the aim of the Act, which entered into force on 1 July 2016, is to liberalize the area of enforcement, the opposite happened when it comes to assignment of claims. Namely, a minor difference in terms used in the relevant provisions of the Act and the previous Enforcement and Security Act which was in force from 2012 to 2016 (the “Old Act”), in the eyes of the Court is a major one. The Old Act allowed assignment of claims in enforcement proceedings on the basis of agreements or any other transactions, as well as ex lege assignment of claims. On the other side, the Act explicitly provides only for ex lege assignment of claims in enforcement proceedings. The Court interpreted this provision as the clear intent of the legislator to prohibit voluntary assignment of claims in enforcement proceedings.

This interpretation represents a significant innovation in Serbia, since decisions of higher instance courts play an important role in the practice or lower instance courts, even though Serbian law does not recognize precedents as binding source of law. Heretofore, assignment of claims and collaterals in enforcement proceedings was a regular mechanism favoring the establishment of the NPL market.

Although relevant legal experts emphasize that such interpretation is not in accordance with general principals of Serbian law and should not be accepted, the National Assembly of the Republic of Serbia did not resolve this issue in the Authentic Interpretation of the Act published in December 2016. Therefore, currently this is a valid and most relevant interpretation, which significantly narrows the capacity of the NPL market in Serbia.

The remedies of such interpretation are time consuming (litigation for obtaining of a new enforceable title). However, we find the interpretation not affecting the situation when the new creditor initiates the enforcement proceedings on the basis of the bills of exchange assigned through endorsement by the former creditor.