Can withdrawals be made from a bank account seized as security?
In disputes under civil law, a party which raises claims can seek injunctive relief from a court prior to commencement of or during proceedings. Injunctive relief is granted for the duration of the proceedings, which means until a final and binding judgment is issued in the case, and can take various forms (for example seizure of receivables on a bank account). If a court grants injunctive relief, then even if the lawsuit is dismissed after several years of proceedings and the injunctive relief ceases to exist, the business might already have gone bankrupt. A motion for permission from the court for specific withdrawals from a seized account could be an important legal remedy for a business whose bank account has been seized.
Injunctive relief for claims
For injunctive relief to be granted, a claim has to be substantiated and a credible legal interest in obtaining the injunctive relief has to be demonstrated. The applicant (rightholder) seeking injunctive relief will state the amount and the form. When granting the motion, a court, choosing the form of injunctive relief, is required to consider the parties’ interests to the extent necessary to assure the rightholder appropriate legal protection and not burden the obligated party unnecessarily.
One of the forms of security for pecuniary claims is seizure of receivables on a bank account or other receivable or material right. When granting injunctive relief in this form, a court appends an enforceability clause ex officio under Art. 743 § 1 of the Civil Procedure Code. This is because seizure of funds on a bank account or other types of receivables are executed in the form of enforcement. A copy of the decision containing the enforceability clause is only served to the rightholder, while the obligated party is served a copy of the court decision concerning injunctive relief by a court enforcement officer, who also notifies the obligated party at the same time that injunction proceedings have been initiated on the basis of that decision.
Establishing security on funds on a bank account can completely block a business’s operations. As of the moment the funds on bank accounts are seized, the obligated party cannot perform any transactions with those funds (up to the value of the amount secured) and this includes for instance performing money transfers of salaries for employees or payment of pecuniary liabilities which have become due to business counterparties or public institutions. Therefore, if the injunction applies to all of the funds on the obligated party’s bank account, the obligated party de facto is unable to pay its liabilities, and conducting of regular business activity is extremely difficult, if not impossible. Long-term seizure of funds and other receivables, even if “only” for the duration of the court proceedings, can result in the obligated party losing financial liquidity and insolvency, ultimately resulting in bankruptcy.
Motion for permission to make a withdrawal from a seized bank account
To prevent a business being paralysed as a result of seizure of receivables on its bank accounts, the Civil Procedure Code provides for the option of release of certain amounts seized as security and payment of due liabilities by a business from bank accounts which have been seized as security.
If receivables are seized as security on a bank account or other receivables and material rights of a business are seized, the business may file a motion with a court according to the procedure provided for in Art. 7522 § 1 of the Civil Procedure Code for permission to make specific withdrawals from the seized account. The motion can concern funds for ongoing payments of salaries for work and tax on salaries, and other statutory levies, as well as funds to pay for business overheads.
A motion of this kind can be filed with a court for up to week from the day on which the obligated party is served a decision granting the injunctive relief.
Specify (and give reasons for) amounts and time limits
The motion should list specific amounts for the purposes described above, being requested by the obligated party, and give reasons for each of them in terms of the applicable principle and amount, and attach the relevant supporting documentation (for example a payroll list, agreements, notices demanding payment). As a rule, the motion is filed once (it cannot be submitted again in the future with regard to the same injunction). This means that periodical withdrawals (for example salary payments to employees in subsequent months) need to be identified as such, and the period over which they will be made has to be stated. A copy of the decision granting injunctive relief, or at least a declaration made by a court enforcement officer confirming seizure, and the business’s corporate documents, also have to be attached to the motion. The court is not bound by the amounts stated in the motion and may determine these amounts itself. The obligated party therefore needs to specify the amounts, reasons for the withdrawals, and periods over which they are to be made, in detail. It also needs to submit evidence demonstrating the reasons for release of the amounts specified.
As a court decision permitting withdrawals from seized bank accounts can be contested, a motion for a decision ruling the motion for injunctive relief enforceable with immediate effect under Art. 333 § 3 of the Civil Procedure Code should also be submitted with the motion. The reason supporting this motion should be that the passing of time will expose the business to loss (for example irreparable loss in the form of inability to conduct business activity leading to loss of liquidity) or prevent or substantially hinder execution of the decision.
Taking the decision ruling to a bank
The business should take the court decision permitting specific withdrawals from the business’s seized bank accounts directly to the entity operating the bank accounts in question. The withdrawal should be made on the basis of the court decision itself, because Art. 890 § 21 of the Civil Procedure Code does not apply to withdrawals made on the basis of court permission granted according to the procedure provided for in 7522 § 1 of the Civil Procedure Code, and therefore the court enforcement officer’s permission to make the withdrawals is not necessary.
Conclusions
To summarise, a business to which a court enforcement officer has served a court decision granting injunctive relief in the form of seizure of receivables on bank accounts or receivables of other kinds and material rights can apply for permission to make withdrawals from the seized bank accounts for salaries and tax on salaries and other statutory levies and for business overheads for up to 7 days from the day on which the decision is served. Once the court decision permitting specific withdrawals from the seized bank accounts has been confirmed as enforceable, it should be submitted directly to the bank with which the seized account is held. To withdraw the funds specified by the court in the decision, the bank does not need permission from the court enforcement officer who seized the business’s bank account.
Regardless of the motion for permission for withdrawals from a seized bank account, the business being the obligated party can contest the decision granting injunctive relief and request a stay of execution.
Paulina Piekut, Monika Hartung, legal adviser, Dispute Resolution & Arbitration practice, Wardyński & Partners
