The Czech Parliament passed an amendment to the Code of Civil Procedure (Act No. 99/1963 Coll., as amended) and the Act on Execution Procedure (Act No. 120/2001 Coll., as amended). Most of the provisions of the new legislation will be effective as of 1 January 2013. The amendment will, among other things, significantly modify the rules on enforcement of claims in the Czech Republic, as it changes some of the existing methods of enforcement under Czech law as well as introducing new ones.
Contrary to the existing regulation, the main provisions on the enforcement of claims will be shifted from the Code of Civil Procedure to the Act on Execution Procedure. Under the existing laws, creditors whose claims are not satisfied by debtors and who hold an enforcement title (such as a final and unappealable court decision or a direct enforceability deed) can choose whether they will seek the satisfaction of their claim in a court proceedings according to the Civil Procedure Code or through a judicial executor (i.e. a private person authorised to enforce claims as his entrepreneurial activity) pursuant to the Code on Execution Procedure. Although the latter process is more expensive, it is faster and more efficient and thus it has become a preferred option.
Whereas the creditors now have a right to choose which option they prefer and the means of enforcement do not differ to a great extent, the new amendment will particularly change the current practise in the following ways:
- Almost all enforcement proceedings will be carried out by judicial executors. Court commissioners (i.e. court employees responsible for performing certain operations in civil court proceedings on behalf of the court) will conduct only non-business related enforcements, such as withdrawal of a minor child, an exclusion of a spouse from a shared dwelling or other proceedings without disputes. On the other hand, the judicial executor will be competent in business related enforcements, enforcement of receivables etc.
- The amendment introduces certain new means of enforcement, such as a sale of debtor’s receivables or shareholding interest in a limited liability company through public auction. Previously, the creditor only had a right to become the owner of the debtor’s receivable and had to wait until it is paid for it.
- In cases where a debtor has claims that will become due in the future (such as claims from pension schemes), such receivables shall be newly terminated before their maturity by operation of law and the proceeds will be used to satisfy the creditor’s claims.
- As an alternative to a currently existing enforcement by a sale of a real estate or an enterprise in a public auction, the amendment introduces a new form of enforcement by way of a court administration of an enterprise or real estate. An administrator appointed by the court will administer the enterprise or property and the proceeds of the administration will be used for the satisfaction of creditor’s claims. These methods should be more flexible than the process of a sale of the property or enterprise, which is quite complicated under Czech law, and will apply where the court concludes that administration is the more appropriate course of action.
- The court will have the right to determine the list of debtor’s movable assets which should be subject to enforcement simply by using the information from public registers (such as pledge register, register of motor vehicles, etc.). This should significantly simplify enforcement proceedings, as the court will not have to physically check the scope of movables owned by the debtor.
- In addition, judicial executors will no longer have the authority to execute deeds on direct enforceability of claims. Deeds on direct enforceability of claims will only be executed by notaries. (Under the current legislation, deeds on direct enforceability can be executed both by notaries and judicial executors. Notarial deeds are usually preferred in large financing transactions.)
The amendment also introduces new non-public Register of Initiated Enforcement Proceedings which will be maintained by the Czech Ministry of Justice, where all commenced (enforcement) proceedings will be registered. Only executors will have access to the Register and the data will not be accessible on-line. This new Register of Initiated Enforcement Proceedings does not affect the operation of the Central Register of Executions, where the execution proceeding is registered after 15 days from the receipt of a registered notice stating initiation of the execution proceeding by a debtor and which is accessible to the public (an administrative fee is charged for provision of information from the database).
The amendment reflects current trends in the enforcement of claims in the Czech Republic, regulates the process of enforcement of claims more precisely and enables creditors to use new methods of enforcement which may be more appropriate from the business perspective in an individual case.