Bank Enforcement Order violates Constitution

August 14, 2015
Karol Błąd

Bank Enforcement Order violates Constitution 

According to the ruling of Polish Constitutional Tribunal (Trybunał Konstytucyjny – TK) from 14 April 2015 article 96(1) and article 97(1) of the Banking Act of 29 August 1997 (Dz.U.2015.128) violate the constitutional principle of equality. Therefore Bank Enforcement Order (Bankowy Tytuł Egzekucyjny – BTE) is unconstitutional.

What is Bank Enforcement Order in polish law system?

Questioned and abolished article 96(1) and 97(1) of the Banking Act give the banks right to issue Bank Enforcement Order (BTE), after that BTE may constitute the basis for enforcement conducted in accordance with the provisions of the Code of Civil Proceedings after being affixed with an execution clause by the court. However proceedings in court which has affixed BTE with an execution clause is provided without any fact-finding phase, court’s role is limited only to formal verification if technical conditions of BTE are met. That is why BTE is very easy, simple and convenient banks’ tool to execute clients’ debts from unpaid loans etc.

Constitutional Tribunal Ruling

According to the TK issuing BTE by banks irrationally protects and privileges their position. As judges said, bank and its client are parties of the same contractual relationship, which is based on the principle of legal equality of the both sides’ will. That is why parties should have similar tools to execute their rights. At present, client does not have any similar options to enforce his claims against bank, he has to file a lawsuit in accordance to typical proceedings (with fact-finding phase, gathering of evidence etc.), in contrast – BTE is much more simplified. That forms situation when bank appears as a iudex in causa sua. TK pointed that also defending from BTE is hard to the clients, because banks are not obligated by the law to notify clients about their will of submitting BTE in court (there is only obligation from the Banking Code of Ethics).

Consequences

TK ruled that questioned articles of the Banking Act will stay in force until 1 August 2016, which, in judges opinion will give suitable time to handle with the problem by issuing new legislation. Of course, new regulation could also give some kind of advantage to banks in debt collection and securing loans, but with respect to the constitutional rights of banks’ clients. However, in the meantime, till new rules will enter into force banks have to consider how effectively secure interests of depositors. Gradual elimination of BTE by other solutions (like e.g. statements on submission to enforcement in notarial deed form – Article 777 of the Polish Civil Procedure Code), seems to be suitable idea.