In a judgment announced on 14 April 2015 (Case P 45/12), Poland’s Constitutional Tribunal ruled that the provisions of the Banking Law permitting banks to issue bank enforcement titles and then use them as the basis for commencing execution proceedings—Banking Law Art. 96(1) and 97(1)—violate the constitutional principle of equality. These provisions of the Banking Law will remain in force until 1 August 2016, to allow time for pending cases to be concluded and for new amending and transitional regulations to be adopted by the Parliament.
The Constitutional Tribunal held that the bank enforcement title regulations violate the constitutional principle of equal treatment on three different levels, in relations between:
- Banks and their customers
- Bank creditors and non-bank creditors
- Debtors of banks and debtors of other entities.
In the view of the tribunal, the contractual relationship between the bank and its customer should be based on principles of equality and autonomy of the parties’ intentions. But the tribunal found that under the existing regulations, the customer cannot be equal to the bank in protection of the borrower’s contractual rights and interests. The reason for this inequality is the current procedure for issuing bank enforcement titles and enforcement clauses for these writs.
Under current law, based on a previous declaration by the customer submitting to execution through the bank enforcement title procedure, the bank issues an enforceable writ without any review of the merits of the claim by the court, and the bank is not statutorily obligated to notify the debtor that it will apply to the court for an enforcement clause. The debtor does not take part in the proceeding for issuance of an enforcement clause, and the court is restricted to a formal examination of three documents:
- The application for issuance of an enforcement clause
- The bank enforcement title, and
- The debtor’s declaration submitting to execution.
The instructive period for the court to consider the bank’s application for an enforcement clause is 3 days.
This means that the borrower has an opportunity to object to the writ of enforcement on the merits only after commencement of execution, by filing a petition to halt the execution (Civil Procedure Code Art. 840), which requires the debtor to pay a filing fee equal to 5% of the amount in dispute and to present evidence in support of the objection to execution.
In the opinion of the Constitutional Tribunal, this procedure for issuance and execution of a bank enforcement title also places banks in a privileged position as creditors in relation to other creditors of the same debtor. In turn, the bank’s debtor is in a weaker position than debtors of other commercial entities which are not banks.
The tribunal also pointed out that banks have at their disposal other legal instruments enabling them to quickly and effectively enforce claims against debtors, such as promissory notes, which may serve as grounds for issuance of an order for payment under Civil Procedure Code Art. 491–492. Moreover, debtors may continue to provide declarations on submission to execution, but in the form of a notarial deed under Civil Procedure Code Art. 777.
The judgment of the Constitutional Tribunal striking the current regulations governing bank enforcement titles does not mean, however, that bank enforcement titles will not function in the future in some different form under new regulations enacted prior to 1 August 2016. According to press reports, work is already underway at the Ministry of Finance on amendments to the bank enforcement title provisions of the Banking Law. Under the approach that is being developed, before issuing a bank enforcement title the bank would be required to summon the debtor to pay the claim, while also notifying the debtor that if the amount owed is not paid by the deadline stated in the demand the bank will issue a bank enforcement title. The period allowed for payment of the debt and issuance of a bank enforcement title could not be shorter than the period specified in the law. Additionally, in the loan documentation the bank would be required to include information about the legal consequences of issuance of a bank enforcement title as well as the borrower’s statement on submission to execution under this procedure, in the form of separate documents.
Postponement of the effective date of the ruling, pursuant to Art. 190(3) of the Polish Constitution, is intended to avoid chaos in banking transactions, but as pointed out by the reporting justice in the case, Teresa Liszcz, courts now ruling in similar cases will have to pay more attention to the constitutional values at stake. However, it will not be permitted to reopen proceedings that have already been completed, so the judgment will not have retroactive effect.
But these remarks do not eliminate doubts surrounding the continued application of unconstitutional regulations by the courts during the grace period before the ruling by the Constitutional Tribunal enters into force. Given the scale of application of these unconstitutional regulations in execution proceedings, it should be expected that the Constitutional Tribunal will address this issue in more detail in the written justification for the judgment, which the tribunal is required to issue within one month after announcement of the judgment, pursuant to Art. 71(3) of the Constitutional Tribunal Act.