|Daniel Futej||Rudolf Sivák|
In order to increase consumer protection in the Slovak Republic, several acts relating to bills of exchange have recently been amended. However, these changes do not only concern consumers. Amendments were passed because bills of exchange – and the strict fulfillment of their obligations – are easy to abuse. Sadly this abuse does occur, particularly in dealings with consumers.
Bills of exchange are popular with banks and other financial institutions, who use the bills to secure their future claims. This is mainly because the owner of the bill of exchange (the creditor) is in a much better position in the event the debt is not repaid in a timely manner. A bill represents the unconditional obligation of the debtor to pay the owner of the bill of exchange a certain sum of money on a certain date and in a certain place.
Regulations on proceedings regarding bills of exchange allowed for a method of obtaining a judgment that was far simpler and quicker than enforcing the rights arising from a contract. If the applicant submitted an application lawsuit along with the original bill of exchange whose authenticity was not contested, and paid the court fee, the court would issue an order to pay the bill. The advantages of these proceedings included a short, three-day period for lodging objections against the order to pay the bill – any objections lodged after the three-day period were disregarded. In addition, delivery of the court order could be made outside Slovakia, and there was also the possibility of substituted delivery of the court order. In certain circumstances, the court order to pay a bill could become effective and enforceable even if the defendant was not aware of its existence.
Initially, this legislation on bill of exchange proceedings was to have been repealed as of June 30 2016 because the specific regulation on bills was not passed through to the new procedural regulation that will come into force on July 1 2016. However, the Slovak parliament decided to repeal the bill of exchange regulation at an earlier date and it was repealed as of December 23 2015. Under the new regulation, bills of exchange will be enforced in standard court proceedings where the outcome need not necessarily be the issuance of a court order to pay. Even if an order to pay is issued, there will be a 15-day period in which to lodge objections. There is even possibility of expanding on reasons of objections after the 15-day period has expired. Delivery of the court order abroad will not be possible with this type of simplified judgment, and substituted delivery will be excluded.
The parties to the bill of exchange have considered the bill as an instrument completely apart from the contract with which it may have originally been associated. Therefore, when enforcing a bill, the creditor did not have to concern him or herself with, or even furnish evidence of, the history of the bill.
However, under the new regulation, if the defendant is an individual, the bill of exchange cannot be separated from its history. The claimant will have to describe their relationship with the defendant and demonstrate any relationships between the previous owners of the bill and the defendant. If the bill was issued as security for any contract or agreement, the contract or agreement will have to be attached to the application. Unless proven otherwise, it will be presumed that the bill was issued in association with a consumer contract and, as such, the defendant will be afforded specific lawful consumer protection. For some time now, issuing a valid bill to secure claims arising from a consumer contract has been prohibited, so the court will examine the history of the relationships associated with the issuance of the bill.
According to the new regulation, if the bill was issued in connection with a consumer contract the defendant can lodge objections based on their relationships with the previous owners of bill of exchange. These objections can be lodged even if the applicant did not demonstrate that the bill was not issued in connection with a consumer contract. Before the new regulation, objections arising from the relationship between the bill debtor and the previous owners were inadmissible. The only exception was if in the acquisition of the bill the new owner of the bill of exchange acted deliberately to the detriment of the debtor. In the past, the party acquiring a bill of exchange did not have to concern themself with the previous relationships concerning the bill, so they did not have to worry about the legal basis on which the bill was issued. Now, however, the party acquiring the bill will have to be much more prudent and should ask the person from whom they are acquiring the bill for all the documents associated with it so that they can submit all those documents to the court. When enforcing a bill of exchange against an individual, failure to submit the required documents could result in a dismissal of the application. Only the decision-making practice of the courts will show the extent of evidence the courts will require from claimants as a condition for being successful in a dispute with an individual over the payment of a sum on a bill of exchange.
Another new development is that if the defendant is an individual who became obligated under a bill of exchange in association with a consumer contract, the court will take into account, ex officio, facts warranting objections that could be lodged by the defendant. So the court will, ex officio, take into account facts warranting objections even if the defendant themself does not lodge the objections and remains passive in the proceedings.
It will be interesting to see the effect the new regulation has on the use of bills of exchange in cases where the debtor is an individual.
Daniel Futej and Rudolf Sivák
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