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Banks’ referral of debts to enforcement proceedings, bypassing the court’s examination P 45/12

“Permitting banks to issue bank enforcement orders is inconsistent with the principle of equal treatment,” stated the Constitutional Tribunal.

On 14 April 2015 at 9 a.m., the Constitutional Tribunal considered joined questions of law, submitted by the District Court in Konin, 5th Commercial Division, with regard to the provisions of the Banking Act which permitted banks to issue bank enforcement orders.

The Constitutional Tribunal adjudicated that Article 96(1) and Article 97(1) of the Act of 29 August 1997 – the Banking Law (hereinafter: the Banking Act) were inconsistent with Article 32(1) of the Constitution. The provisions will cease to have effect as of 1 August 2016.

As to the remainder, the Constitutional Tribunal discontinued the review proceedings.

A dissenting opinion to the judgment was submitted by the President of the Constitutional Tribunal, Judge Andrzej Rzepliński.

Article 96(1) of the Banking Act stipulates that banks may issue bank enforcement orders on the basis of bank books or other documents related to the performance of banking operations. The content and form of bank enforcement orders are set out in Article 96(2) of the Banking Act.

Pursuant to Article 97(1) of the said Act, a bank enforcement order may constitute a basis for enforced debt collection under civil law after a court issues an enforcement clause for the said order. However, the court examines the bank enforcement order merely in terms of its adherence to formal requirements; it has no right to carry out any substantive examination. After confirming the formal accuracy of the bank enforcement order, the court issues an enforcement clause for the order within three days from the date of filing a relevant application by the bank.

The Constitutional Tribunal concluded that the right to issue bank enforcement orders was banks’ privilege that infringed the principle of equal treatment (Article 32(1) of the Constitution) in three aspects; namely, in relations between the bank and the customer, in relations between banks as creditors and the other entities being creditors as well as in relations between the debtors of banks and the debtors of the other entities.

The Constitutional Tribunal deemed that the bank and its customer share an essential common characteristic – they are parties to a relation of obligation which is based on the principle of the legal (formal) equality and autonomy of the wills of the parties. Therefore, they should, in principle, have equal possibilities of defending their rights and interests arising from an agreement that they have entered into. By contrast, the bank itself issues an enforcement clause, which replaces a court ruling, bypassing the substantive examination of the case, in the course of which the customer could raise substantive allegations.

Customers may defend themselves against bank enforcement orders only by bringing a counter-enforcement action (Article 840 of the Code of Civil Procedure), which implies that they need to pay a percentage fee in its full amount (5 % of the value of a claim) and that the entire burden of proof lies with them, while at the same time enforcement proceedings are being carried out against them, which entails seizing their assets.

According to the Constitutional Tribunal, such a privilege – i.e. the privilege of being a judge in one’s own case – is not justified by the status of banks which are (with few exceptions) privately-owned institutions whose activity is aimed at generating profits; still, the Constitutional Tribunal does not negate the special role of banks in the economy, which does justify certain special privileges; yet such privileges should not be as far-reaching as the bank enforcement order.

Nor is the right to issue the said order justified by the character of banks mentioned in the proceedings, i.e. as institutions in which the public repose confidence. The Tribunal stressed that such status was not assigned to banks by any legal provisions and that it was simply a fact that arose not only from the significant role of banks in the economy, but also from supervision conducted by the organs of the state over the establishment and activity of banks.

In the opinion of the Constitutional Tribunal, the bank enforcement order is also vital for the privileged position of banks as creditors in their relations with other entities that are also creditors. When competing with banks for the right to the property of the same debtor, those other entities are practically deprived of any possibility to satisfy their claims.

The Constitutional Tribunal pointed out that, apart from the bank enforcement order, banks have a wide range of measures at their disposal, in particular a bill of exchange which could be a basis for the issuance of the order for payment in accordance with Article 491 and Article 492 of the Code of Civil Procedure.

Thus, the Constitutional Tribunal ruled the challenged provisions of the Banking Act, constituting the basis for the issuance of bank enforcement orders, to be inconsistent with the principle of equal treatment. At the same time, the Tribunal deferred the moment when the provisions would cease to have effect so as to make it possible that pending cases would be resolved and to allow the legislator to pass relevant transitional provisions.

The hearing was presided over by Judge Marek Kotlinowski, and the Judge Rapporteur was Judge Teresa Liszcz.