The current situation in the court system in Serbia often fails to provide the expected legal protection both to creditor and to debtors; court procedures are slow and awards are expected for several years, only to then be executed within the scope of an inefficient execution procedure. It is precisely why this new piece of legislation – the Law on Enforcement (the “Law”) – was adopted – in an attempt to improve this crucial segment of the judicial proceeding.
Although the Law foresees numerous amendments, we particularly emphasize the introduction of an appeal as a legal remedy in enforcement proceeding, which is the most important novelty. The previous (and still applicable) law as a legal remedy foresees only an objection as sole available form of legal remedy.
The main difference between the objection and the appeal is that the same court which issued the decision on enforcement (admittedly the council of three judges) decides upon the objection, while on the other side a superior court decides on an appeal. The expectation from introduction of an appeal in enforcement proceeding is that the number of often unnecessary and extended lawsuits will be reduced in an indirect way, i.e. that creditors will be able to completely protect their interests already during the enforcement proceeding without the necessity of pursuing long-lasting litigation proceedings.
In accordance with the provisions of the Law, the enforcement debtor will be able to challenge the decision on enforcement on the basis of an enforcement record (e.g. a judgment) with an appeal, while previously an objection was exclusively available. We note that an objection is still reserved as a possibility in case of challenging a part of decision of enforcement regarding costs of proceeding.
On the other hand, in case of decision on enforcement on the basis of a verbatim record (e.g. the invoice), it is initially challenged with an objection decided upon by a council of the same court that issued the decision on enforcement. The same solution applies at present, however the new Law foresees that both the creditor and the debtor are able to challenge the decision issued concerning an objection by an appeal.
The fact that the appeal delays enforcement of decision until becoming final and binding, that is until issuing the judicial decision on appeal (unless when decision was based on promissory note, in which case there is no delay), may look like needless prolongation of a proceeding. However, two circumstances should be taken into account before reaching such decision: (i) the decision on appeal of appellate court must be issued within 15 days which is not a long time period; (ii) such introduction of two-instance decision indubitably improves the legal security for parties, whereas the suspensive effect of appeal is justifiable considering the intent to avoid the effects of illicit enforcements.
In order to analyze justification of introduction of appeal in enforcement proceedings, it is necessary to pay attention on practical aspects too. Namely, the circumstance that competence for deciding on appeals was given to appellate courts still remains a concern, considering current HR capacities which are very limited. One should have in mind that for the whole territory of Serbia only one Commercial appellate court exists and this means that this court, which is already overloaded, will be facing a great challenge to take over its new competence and to issue decisions within the prescribed period of time. However, there is a certain adjustment period left until the application of the new Law, so a possibility remains that the competent court will manage its internal organization until that moment.
On the other hand, we also recognize a very important potential practical implication of introducing the appeal. Namely, councils of the first instance courts have so far rather easily adopted objections by enforcement debtors on decisions on enforcement based on verbatim records. Therefore, despite the fact that in a number of cases the objections were obviously without legal ground and without evidence, the court often adopted them, which resulted in initiation of long-term civil litigation procedures. Such behavior of courts cannot be justified but it could be understood to a certain extent, precisely because judges did not want to take the responsibility for rejecting objections, since the appeal against such judicial decision was not allowed by the law. Therefore, adopting the objections of enforcement debtors almost automatically is a current practice in all courts, so one could get the impression that judges do not even read these objections but rather adopt them without in-depth considering and then forwarding them to litigation departments for following actions. However, we expect that this practice will be changed with the introduction of the appeal, primarily because dissatisfied enforcement creditors will be able to challenge judicial decisions on adoption of objections with the appeal. In that way a significant number of lawsuits in many cases will be reduced, since the judges will not be prone to adopt exceptions of debtors so easily.
Although the new Law brings a lot of amendments and modifications, we consider that the introduction of an appeal in the enforcement proceeding is the most important change which triggers numerous procedural and essential consequences of interest to legal entities in Serbia. Whether the proclaimed goals of the new Law will be fulfilled depends on willingness of courts and bailiffs to apply the Law accurately. We deem that a special effort should be made in that sense, given that the solutions which the new Law offers are a significant step to better legal security in the domestic judicial system.