By Act No. 286/2009 Coll., an amendment to Act No. 120/2001 Coll., on Judicial Executors and Enforcement Activities, as amended (hereinafter referred to as the “Enforcement Code”), comes into force on 1 November 2009. The amendment to the Enforcement Code, inter alia, introduces instruments leading to the acceleration and streamlining of enforcement proceedings, regulates the manner of execution by the executor in collecting monetary performance from the perspective of protecting participants in enforcement proceedings, clearly defines the proportionality of the extent of assets seized, and establishes new limits and scope of state supervision over the performance of enforcement activities.

Transfer of competences from enforcement courts to executors, acceleration and streamlining of enforcement proceedings

In connection with efforts to accelerate and streamline the entire enforcement proceedings, enforcement proceedings shall be initiated by submitting a proposal directly to the executor instead of the current state, where the submission is addressed to the enforcement court. The executor shall subsequently ensure that the proposal for ordering enforcement contains all requisites, or shall call upon the applicant to remedy defects in the submission. Within 15 days of receiving the proposal (or remedying defects), the executor shall request the court to authorise the execution of enforcement. The court is obliged to order enforcement by resolution within 15 days and to authorise the relevant executor to execute it, whereby the manner of execution shall subsequently be determined by the executor himself in the enforcement order. The executor shall be able to execute enforcement only after authorisation by the court. The purpose of the change is therefore to simplify the procedure for initiating enforcement, so that after submitting a proposal for enforcement, the review of formal requisites shall not be carried out by enforcement courts, which are currently unbearably overburdened with this administration, but by the executor, who would newly bear full responsibility for this agenda. According to the new legal regulation, communication between the executor and the court and cooperation between the executor and public administration bodies and other institutions shall, for the purpose of accelerating enforcement proceedings, take place preferentially through electronic means. In view of advancing electronisation, it is permitted that the enforcement file may be kept not only in paper form but also in electronic form.

In practice, there are quite often a large number of cases where, during proceedings, for example, the claim ceases to exist, no seizable assets are found with the debtor, or the debtor entity ceases to exist during proceedings. In such cases, the creditor usually agrees to the termination of enforcement and there is no dispute between the participants regarding termination. Termination of enforcement by the executor is then not to the detriment of the rights of the participants in the proceedings, but rather the contrary, because the executor can terminate enforcement more operatively and quickly than the court and subsequently ensure rapid unblocking of the debtor’s assets.

A proposal for the postponement and termination of enforcement shall now be submitted to the executor (not always to the enforcement court as hitherto) and is therefore another significant change to the Enforcement Code. If the executor does not comply with the proposal for postponement of enforcement within 7 days, he shall forward it with the enforcement file for decision to the enforcement court, which shall decide on it no later than within 15 days. As regards the proposal for termination of enforcement, within 15 days of delivery of the proposal, the executor shall send notice to all participants in the enforcement proceedings, i.e. primarily the creditor. The executor does not send notice to participants only in the event that the proposal for termination of enforcement was proposed by the creditor. If all participants agree, the executor shall issue the proposal for termination of enforcement within 30 days. In the opposite case, he shall forward the entire file for decision to the enforcement court within this period. It shall be expressly stipulated that the executor is not authorised to take any actions aimed at executing enforcement before a decision is issued on the proposal for postponement of enforcement, unless it concerns a proposal that constitutes arbitrary, purposeful, or manifestly unsuccessful exercise of a right. This significantly strengthens procedural protection not only of the debtor but also of the creditor compared to the current legal regulation, as it reduces scope for frustrating enforcement proceedings on the part of the debtor.

Proportionality of enforcement, strengthening protection of rights of participants in enforcement proceedings

The amendment to the Enforcement Code responds to the needs of practice to clearly define the proportionality of the extent of assets seized in relation to the claim being collected, its accessories, and costs being collected. In particular, practice has shown that the previous course of enforcements is sometimes unsatisfactory and damages citizens’ rights. Enforcement must not serve to restrict the debtor to a greater extent than necessary, and the amendment to the Enforcement Code thus strengthens the principle of proportionality and humanisation of enforcement proceedings. According to the current regulation, the executor was indeed obliged to choose in the enforcement order such a method of enforcement that is not manifestly unsuitable, especially with regard to the disproportion between the amount of the debtor’s obligations and the price of the object from which the fulfilment of the debtor’s obligations is to be achieved.

In practice, however, inadequate situations not infrequently occurred where the executor sold the debtor’s immovable property at auction for an amount in the order of hundreds of thousands of Czech crowns, although the creditor was collecting an amount of ten thousand Czech crowns from the debtor. According to the new legal regulation, the chosen method of enforcement must be directed against assets whose value corresponds to the amount of claims being collected. Priority shall be given to execution of enforcement by attachment of a claim, deductions from wages, or establishment of an executor’s lien. Only in the event that the yield from these methods of enforcement is not sufficient shall enforcement collecting monetary performance be executed by sale of movable or immovable property, or sale of an enterprise. If the debtor therefore has sufficient funds in an account, the executor cannot choose another method of enforcement. The condition of proportionality shall be binding, and its non-observance shall, according to the amendment to the Enforcement Code, be considered a breach of law, which shall be regarded as a disciplinary offence by the executor. If, therefore, under the amended wording of the Enforcement Code, it were to happen that the executor actually sells, for example, a house at auction for the purpose of collecting a claim in the amount of ten thousand Czech crowns and at the same time ignores the fact that the debtor has funds in an account exceeding this amount or a sufficient wage for deductions to be made therefrom, then such conduct by the executor would undoubtedly be grounds for disciplinary proceedings.

Furthermore, the problem of current practice is eliminated, consisting in a situation where the debtor performs, or the executor collects performance, in several instalments of lower nominal value. The amendment to the Enforcement Code establishes a period of 30 days within which the executor is obliged to pay out the collected performance to the creditor, even if it concerns only partial performance, if it exceeds the amount of CZK 1,000. This step should therefore strengthen the legal position of creditors and improve their situation with regard to handling collected financial resources. Unless the executor and the creditor agree otherwise, the executor shall be obliged to ensure payment of even partial performance to the creditor within the stipulated period.

The institute of security deposited in enforcement is introduced entirely newly, the payment of which is associated with postponement of enforcement. This significantly increases the protection of the debtor in the event that he contests one of the circumstances decisive for execution of enforcement, and at the same time increases the protection of the creditor, who has payment of his claim from the deposited security secured in the event of rejection of the proposal for termination of enforcement. If, therefore, security in the amount of the claim being collected and the executor’s remuneration is deposited with the executor or the enforcement court, the executor or the enforcement court shall, on the debtor’s proposal, postpone execution of enforcement. However, if enforcement is not terminated, i.e. the proposal was not well-founded, the security shall be used to pay the claim being collected and the executor’s remuneration. In the event that enforcement is terminated, the deposited security shall be returned to the depositor.

Establishment of an executor’s lien on immovable property as a new method of enforcement

As a new method of executing enforcement when collecting monetary performance, the amendment to the Enforcement Code introduces the establishment of an executor’s lien on immovable property. The legal regulation is similar to the case of execution of a decision by establishment of a judge’s lien on immovable property pursuant to the Code of Civil Procedure. The aim of the new regulation is to create, during enforcement, a security instrument on the debtor’s immovable property in favour of the creditor, without the need to directly sell the immovable property, and thereby create scope for satisfaction of the creditor in cooperation with the debtor. Unlike other methods of execution of a decision, the creditor’s claim shall not be satisfied but only secured in the event that it is not fulfilled even subsequently. This new provision is also an expression of humanisation of enforcement proceedings, as it gives the debtor the possibility to remedy the debt claim other than by forced sale of immovable property.

Imposition of order fines by the executor

For breach of the obligation to cooperate with the executor on the part of third persons, according to the current legal regulation, only the court may sanction these persons, and that on the executor’s proposal. In view of established case law, which already recognises this authorisation to executors at present, the new legal regulation introduces direct imposition of order fines on obliged subjects by judicial executors. Executors are therefore not entrusted with a new power in substance; only the non-conceptual nature of the current regulation is eliminated, where conversely, in those cases where it would logically be expected that the executor would have this authorisation, the executor did not have this authorisation. Until now, the executor had to turn to the court in such cases, although it is essentially a trivial agenda. A remedy is admissible against the imposition of an order fine, which shall be decided by the court, so that the right to a fair trial shall not be affected in any way.

Change in the concept of general inhibitorium

According to the current legal regulation, a debtor to whom a resolution ordering enforcement has been delivered may not dispose of his assets. The cited provision introduced the institute of the so-called general inhibitorium, on the basis of which the debtor is prevented from reducing the value of his assets, removing things and rights from it during enforcement, and thereby frustrating its purpose. A legal act by which the debtor breached this obligation is, according to current case law, absolutely void.

The amendment to the Enforcement Code also brings about a change in the concept of general inhibitorium, in such a way that the premise of absolute nullity is replaced by the premise of ineffectiveness. General inhibitorium serves to protect the creditor and registered creditors, but not other persons or even the debtor, who can thus effectively challenge his own acts within a time-unlimited period. By this clarification, the debtor is limited in the possibility of circumventing the purpose of enforcement proceedings. Third persons are protected by the fact that they can ascertain in the Central Register of Enforcements whether enforcement is being conducted against the debtor. The same principle is therefore applied to third persons here as with other publicly accessible registers and records. As I have already stated above, according to the amendment to the Enforcement Code, the executor, creditor, or other creditor with a registered claim shall have to contest the legal acts of the debtor if they reduce satisfaction of his enforceable claim and propose to the court that it determine that they are legally ineffective against him.

Sanction amendment, reduced costs of enforcement

Practice has hitherto shown that according to the current legal regulation, there existed no legal instrument of compulsion for remedy in the event of inaction by the Executors’ Chamber or its procedure in conflict with the Enforcement Code. If the Executors’ Chamber fails to fulfil its statutory duties, on the basis of the amended wording of the Enforcement Code, the Ministry of Justice may transfer part of the chamber’s competences to itself and thereby introduce forced administration to the chamber. According to this amendment, which was tentatively named by the legislator as the “sanction amendment”, appointed executors shall at the same time be appointed and dismissed by the Minister of Justice, even without the cooperation of the Executors’ Chamber.

An entirely new instrument of the executor is the introduction of the so-called advance payment for reduced costs of enforcement. The authorised executor, together with the submitted proposal for ordering enforcement, shall quantify the claim being collected, the creditor’s costs, and his advance payment for reduced costs of enforcement. At the same time, he shall call upon the debtor to pay the claim being collected and this reduced advance payment to the executor within 15 days. After fulfilment of the obligation, the executor shall issue an order for payment of enforcement without delay; by the legal force of this order, enforcement is considered executed. In the opposite case, the debtor loses the advantage of reduced costs of enforcement consisting in the executor’s advance payment, and the executor shall continue with enforcement, whereupon the debtor shall subsequently be obliged to pay the costs of enforcement in full.

Another significant change compared to the current legal regulation is the power of the enforcement court in the event that there are no grounds for conducting enforcement or these grounds have already ceased to exist during enforcement proceedings, that the enforcement court may at any time, on the initiative of any subject including third persons, terminate enforcement even without a proposal. The enforcement court may likewise proceed in remedying or otherwise rectifying those errors that it has itself ascertained from its official duty. The court shall further decide on termination of enforcement proceedings without a proposal also when it has verified the course of enforcement proceedings with the executor and is of the opinion that the executor did not decide on termination on the participants’ proposal, although all conditions for this step were fulfilled.

The amendment to the Enforcement Code further extends the scope of subjects subject to disciplinary liability for disciplinary offences (to include liability of the executor’s articled clerk), adjusts the composition of the disciplinary committee, disciplinary prosecutors, and supplements proceedings before the disciplinary chamber. The said amendment also concerns certain terminological clarifications of the current legal regulation.

This text was translated from Czech to English using an AI translator.