Less than two weeks ago the Act of 13 April 2018 Amending the Civil Code and Certain Other Acts reached the desk of the President of Poland. The act has become the subject of debate, as it calls for shortening of the general limitations periods for claims and modifies the ability of enterprises to pursue claims against consumers after the limitations period expires. There is also a change in execution procedure affecting the ability to conduct electronic attachment of the debtor’s bank account.
Pursuant to an amendment dated 10 July 2015, the bailiff seeking to attach a debtor’s bank account was no longer required to identify and notify the relevant branch or organisational unit of the bank. It was sufficient to notify the bank’s headquarters by electronic communications of the attachment of the debtor’s claim against the bank. The aim of the drafters of that amendment was to expedite the exchange of information between bailiffs and banks. But the method of notification of the parties to the execution proceedings, i.e. the debtor and the creditor, did not change, and they were still notified of the attachment through service (by post) of a copy of the notice previously submitted to the bank. This arrangement raised questions about whether debtors could effectively pursue the legal recourse available to them.
How is it now?
Currently, under Art. 889 of the Civil Procedure Code, after receiving notice from the enforcement authority, the bank is required to promptly transfer the attached amount to cover what is due, or notify the bailiff within seven days of any barrier to such transfer. The bailiff, in turn, must forward the executed amount to the creditor within four days, pursuant to Art. 22 of the Act on Court Bailiffs and Execution. In practice, pleadings by the debtor to defend against execution are often not filed until after the funds have already been transferred to the creditor, thus weakening the debtor’s defence, particularly when the creditor is enforcing claims that have already been discharged or are time-barred.
How will it be?
The new amendment seeks to balance the positions of the debtor and the creditor. As stated in the justification for the bill, “It is necessary to introduce solutions on one hand enabling the debtor to defend against execution, and on the other hand preventing the debtor from defeating execution by disposing of the funds in the attached account.”
The newly adopted solutions will primarily prolong the period between attachment of the debtor’s claims under the bank account and transfer of the funds to the creditor. To this end, Art. 889 of the Civil Procedure Code is revised to remove the wording requiring the bank to promptly transfer the attached amount to the bailiff.
Instead, the bank’s obligation is moved to the new Art. 8892, but the period for performance by the bank is extended so that it will transfer the funds in the bank account to the bailiff promptly after seven days from service of notice of attachment. The duty to transfer the funds immediately is retained only with respect to execution of current support or disability payments, so that the entitled persons are not deprived of essential funds.
The debtor’s protection will also be reinforced by a provision in the new Court Bailiffs Act entering into force on 1 January 2019. The current four-day period for the bailiff to turn over to the creditor the funds executed from a bank account will be extended to 14 days, subject to the same exception for support and disability payments.
These provisions will significantly strengthen the position of debtors and their ability to defend their rights. But the new regulations could also cause more difficulties for banks. In its comment on the proposal, the Polish Bank Association cited the need to overhaul banks’ existing IT systems, because now the process of attaching claims to bank accounts is carried out exclusively on an automated basis. Nonetheless, as the proponents pointed out in response to the banks’ comment, “The need for changes in IT systems handling execution of claims to bank accounts cannot serve as a counterargument for ensuring legal protection for debtors.”
Incidentally, the bill introduces an identical provision to the Administrative Execution Act (Art. 80 §1), as the rules for how attachment of bank accounts is conducted should be the same whether execution is done through the courts or in public administration. In this case, the existing section of the act is amended rather than adding a new provision.
Joanna Duda, Dispute Resolution & Arbitration practice, Wardyński & Partners