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New Legal Framework for Distress Procedure

On 28 September 2012, the Croatian Parliament adopted the new legislative framework for distress procedure, consisting of the following Acts:

  • Distress Act
  • Act on Amendments of the Act on the Execution of Distress on Financial Assets
  • Act on Abolition of the Public Bailiffs Act

The Acts were published in the Official Gazette no. 112/12 of 11 October 2012, and came into force on 15 October 2012, except certain provisions of the Distress Act which enter into force with Croatian EU membership.

The primary objective of this new legislative framework is to achieve efficiency, speed, and effectiveness of distress procedure, thereby relieving the courts, while simultaneously ensuring the rights and dignity of debtors.

The main legal institutes to achieve these objectives are the following:

  • The institute of public bailiffs is completely abolished. Public bailiffs were introduced by the earlier Distress Act, but the institute was never implemented in practice, since those provisions of the earlier Distress Act never came into force. The main reason for the abolition of public bailiffs is the fact that after a detailed analysis it was concluded that the introduction of another public body responsible for implementation of specific actions in distress procedure would not contribute to the effectiveness and efficiency of the procedure, since the public bailiff fees, disbursements and compensation would be a further unnecessary burden for creditors.
  • The enforcement of claims for holders of documents presenting the basis for distress has been eased. Such decisions are final verdicts, decisions and court settlements of domestic courts or administrative bodies ordering payment with certification of enforceability, and employer’s payslips for due unpaid salaries, benefits or severance. Under previous legislation, the holder of such document had to file a motion to the court and obtain an execution decision, meaning that he was forced to initiate an additional court proceeding after already having completed litigation or administrative procedure. New legal solution provides the holders of these documents to use a simplified procedure of extrajudicial enforcement, i.e. to solely request extrajudicial distress on the debtor’s bank accounts through the state’s Financial Agency (FINA).
  • The jurisdiction of the courts has been altered so that municipal courts now have jurisdiction for all distress procedures. This should achieve unification, acceleration, simplification and effectiveness of distress procedures, specialization of judges, and consistency in practice.

Another relevant novelty, especially for creditors, is the amendment to provisions on the territorial jurisdiction of public notaries to pass distress decisions on the basis of credible documents (invoices, etc.). Previously, the creditor could file such distress motion to the notary public of his choice, while now he must file it to the public notary seated at the place of the debtor’s residence.

20.10.2012. at 11:30

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