On 14 April 2015 the Polish Constitutional Tribunal considered the joint questions referred to it by the District Court in Konin, concerning the provisions of Banking Law allowing the banks to issue bank enforcement titles (BET) adjudicating that Article 96 item 1 and Article 97 item 1 of the Banking Law Act of 29 August 1997 are inconsistent with the Polish Constitution. The provisions will lose their binding force on 1 August 2016.
Under Article 96 item 1 of the Banking Law, a bank may issue BET on the basis of its books or other documents related to conducting banking activities. The form and content of the bank enforcement title is set out in Article 96 item 2 of the Banking Law. Article 97 item 1 of the Banking Law states when BET can be the basis for commencing civil enforcement proceedings following an enforcement clause being granted by a court. The court examines the bank enforcement title only from the formal perspective, and it is not obliged to review the merits of the case. If the court determines that the bank enforcement title is formally correct, it grants the enforcement clause within 3 days of filing the application.
In its initial oral justification the Constitutional Tribunal pointed out that a bank’s right to issue a bank enforcement title is a privilege that is inconsistent with the principle of equality (Article 32 item 1 of the Constitution) in three aspects:
- in relations between the bank and its client,
- in relations between the bank as a creditor and the rest of the entities as creditors,
- in relations between debtors of banks and debtors of other entities
Additionally the Constitutional Tribunal pointed out that a bank and its client have one material characteristic in common – they are parties to a private law contractual relationship, which is based on the principle of legal (formal) equality and autonomy of the parties’ will. The parties should therefore have equal opportunities to defend their rights and interests arising from the concluded contract. Meanwhile the bank may issue a bank enforcement title, the replacing court’s judgment, disregarding the merits of the case in respect of which the client could raise substantive objections. The client may only defend himself against a bank enforcement title by filing an anti-enforcement suit (Article 840 of the Polish Civil Procedure Code), which forces him to bear the whole court fee (in the amount of 5% of the value of the claim) and the burden of proof – all in a situation of ongoing enforcement proceedings being conducted against him, including the seizure of his assets.
According to the Constitutional Tribunal, the issue of a bank enforcement title is also of considerable importance from the perspective of the privileges banks have as creditors in their relations with the other entities being creditors. Such other types of creditors have limited capability of satisfying their claims while competing with banks in respect of enforcement against the same debtor.
The Constitutional Tribunal pointed out that banks have other means of securing loans, such as promissory notes which may give grounds for the issuance of payment orders in accordance with Article 491 and Article 492 of the Polish Civil Procedure Code. Additionally, a debtor can still issue submissions to enforcement in notarial deed form, in accordance with Article 777 of the Polish Civil Procedure Code.
The questioned provisions will lose their binding force on 1 August 2016.After that date banks will not be able to issue BET on the basis of Article 96 item 1 and Article 97 item 1 of the Banking Law Act. According to the initial oral justification of the Constitutional Tribunal, such delay in the date when the provisions will lose their force was meant to allow pending proceedings to be terminated and also to allow the legislator to adopt appropriate laws.
The judgment of the Constitutional Tribunal raises many questions essential from banks’ perspective, in particular:
- what will be the consequences of the judgment in respect of the statements on submission to enforcement issued already by the debtors in favour of the banks in accordance with Article 97 of the Banking Law?
- do standard loan agreements that have already been concluded (including agreements based on the LMA standard) provide effective means for the banks to request the debtors to replace the statements on submission to enforcement issued already in accordance with Article 97 of the Banking Law with the statements on submission to enforcement in notarial deed form in accordance with Article 777 of the Polish Civil Procedure Code (and whether the standard clauses such as unlawfullness, representations regarding the legality, validity and enforceability of the finance documents can be applied in current situation)?
- what are te possibilities for the legislator to restore a bank enforcement title, in a manner that would comply with the criteria set out by the Constitutional Tribunal?
These and other questions that may arise in connection with the commented judgment of the Constitutional Tribunal can only be answered following publication of the full justification of the judgment.