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Debt recovery for banks

The much-disputed issue of the unconstitutionality of Article 510d of the Civil Procedural Code was recently submitted to the Constitutional Court. In the past several First Instance Court judges have been reluctant and indeed some have refused to apply that article, citing different grounds. Until this case was brought to the Constitutional Court no unified decision with a binding effect which had been passed, to provide guidance as to how the article should be interpreted.

The article in question allows banks to seek commencement of bailiffs' procedures to recover any money owed to them by borrowers in default through the so-called Executive Order. In essence, such an order is issued by the court through a process that does not even consider the merits of each case but rather looks only at the calculation of the amount due, while taking for granted the factual basis of the existence of the debt. This is because the Executive Order may only be issued on the basis of the so-called Executive Title. The Executive Title is customarily a court decision with res judicata force, but the disputed proviso of Article 510d of the Civil Procedural Code has also vested a loan deed with the attributes of the Executive Title. This would ultimately mean that an enforcement order (that is, Executive Order) may be issued without a substantive hearing ever taking place to confirm the existence of the basis for such enforcement.

In this case, B had borrowed €50,000 ($78,430) from Banka Kometare Tregetare (BKT). When B defaulted in repayments of the loan, BKT sought the issuance of an executive order against B by the First Instance Court of Pogradec, relying on Article 510d giving the loan agreement itself the force of the Executive Title. The First Instance Court of Pogradec stayed the proceedings and requested that the Constitutional Court declare the proviso of Article 510d unconstitutional. It contended that issuing an order in accordance with such a proviso would infringe B's rights under Article 42 of the Constitution of Albania and Article 6 of the European Convention on Human Rights, which safeguard the right to a fair hearing, thus requiring, among other things, that both parties are given a chance to be heard in court. This Court submitted that both parties did not enjoy this right in the application of the Executive Order. Additionally, the First Instance Court contended that the said proviso amounted to positive discrimination because any other loan agreement that does not fall within the remit of the Bank loans does not amount to an Executive Title.

In an encouraging decision for the banking system the Constitutional Court dismissed all the contentions of the First Instance Court. The Constitutional Court noted firstly that the allegedly infringed rights were subject to the test of proportionality, according to which the need to enforce the measure for reasons of public interest is considered against the interference with such constitutional rights. The court decided that no such balancing exercise was called for in the matter at hand, as none of the rights were interfered with.

With reference to the claims that the positive discrimination of this case would be a breach of the constitutional principle of equality before the law, the Constitutional Court decided that equality before law envisages that everyone is treated equally before the law. However, this did not extend to affording equal solutions to individuals or categories of subjects that are in objectively different circumstances.

In reference to the claims of the infringement of the right to a fair hearing, the Constitutional Court referred to a different article of the Civil Code, which gives the borrower the right to submit a claim to dispute the validity, where the basis of the Executive Title upon which the Executive Order is issued is null and void. In those proceedings, the court may also suspend the enforcement order until the case is finally settled with a decision having res judicata force. Despite finding that there was no interference with the right to a fair hearing, the Constitutional Court also went further to say that even if there was an interference with the right to a fair hearing, such interference would be proportionate to the need to protect public interest, therefore not a breach of the Constitution.

Endrit Shijaku

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