Conditions to be met before implementing execution measures

Judicial enforcement proceedings are divided into two different but successive phases. In the first phase, the court orders the compulsory execution and in a second phase that execution is effectively implemented.

Thus, first of all, the court verifies that the conditions of the compulsory execution are met.

Then, in a second stage, the debt is recovered.

For enforcement measures arising from a court decision to effectively begin, a court decision in the form of an enforcement order is required (for more detail see I. A.).

1. WHAT CONDITIONS MUST FIRST BE MET BEFORE IMPLEMENTING ENFORCEMENT PROCEEDINGS AGAINST
MY DEBTOR?

It is crucial for certain conditions to be met before implementing enforcement measures against a debtor or a party required to fulfil the obligations resulting from a court decision.

Answers to questions are provided in Act LIII of 1994 on the enforcement of court decisions.

Article 13 provides:

"An enforcement order may be issued if the enforceable decision:

• a) contains an obligation (order made against the debtor);
• b) is final or subject to a provisional enforcement; and
• c) the time given to the debtor to execute the decision has expired."

Pursuant to Article 13, a decision ordering the debtor is required, in order for the court to issue an enforcement order. Thus, it is of paramount importance to know what can be considered to be an "order" of the debtor. In all cases, we must analyse the meaning of the actual decision of the judgement and not simply a literal analysis. With this in mind, it is not a prerequisite of the enforcement of the decision that the actual decision expressly contains the word "order". It suffices that it is clear to whom the debtor has an obligation, what the purpose of this obligation is and what its value is.

WHAT MAY BE REGARDED AS ENFORCEMENT ORDERS?

We find the answer to this question in Article 10 of Act LIII of 1994:

Article 10 "The enforcement of court decisions (hereinafter referred to as: enforcement) must be ordered upon issuance of an enforcement order. Enforcement orders are:

• a) an enforcement certificate issued by the court or a notary;
• b) a document bearing the enforcement clause, issued by the court or a notary;
• c) an execution order or restriction, or a transfer order, or else a decision of direct notification, a restraining order or an order of reference made by a notary;
• d) judicial notice of a fine or penalty, a fine for wilful contempt, a court decision ordering the seizure of assets, a fine imposed by a Member State of the European Union in criminal proceedings regarding an offence committed; an order to seize assets issued in a European Union Member State within the scope of criminal proceedings;
• e) judicial notice of the costs of criminal proceedings or costs of arrest or escort, or notice sent by the court registry of a fine imposed by a notary, a fine for wilful contempt or the costs of criminal proceedings imposed by the public prosecutor or the authority responsible for the investigation, and the costs set by the National Parole Board in mediation proceedings, put forward by the government and which are subject to reimbursement;
• f) criminal seizure order;
• g) the order to seize assets associated with the implementation of restrictive measures imposed by the European Union on liquid assets and other financial investments."

It emerges from this article that the law does not consider the various decisions of national and international bodies as binding, but in some cases of other acts, issued outside of any litigation (for example the notarial deed mentioned in point b.).

Here it should be noted that the enforcement order should not be confused with the document containing the obligation to be executed.

It is based on the latter that the court issues the enforcement order.

The order to be executed is carried out in principle through the issue of an enforcement certificate (végrehajtási lap) or with the appending of the enforcement clause (végrehajtási záradék (see points a. and b.).

At the same time, it should be noted that both the enforcement implemented on the basis of an enforcement certificate and that implemented on the basis of the enforcement clause follow the same rules. The difference lies in the fact that within the scope of an enforcement based on a decision containing the enforcement clause, the debtor has more legal resources at his disposal to prevent the effective enforcement of the decision.

APPLICATION FOR ENFORCEMENT

Article 11 contains the information that the claimant of the execution measure (the creditor) must provide in order to proceed with the enforcement. It is possible for this information to be divided into two groups: those that must be provided in all cases (name of the debtor and, either his date of birth, or his mother's name, and if it is a legal corporation, its registration number), and those that must be provided according to the circumstances of the case.

CERTIFICATE OF ENFORCEMENT (ARTICLES 15 AND 16)

Article 15 "(1) The court that ruled in first instance issues a certificate of enforcement:

• a) Based on the sentence of the court in civil matters;
• b) Based on the criminal decision pronounced in civil claims;
• c) Based on an agreement approved by the court.

(2) (...)"

It is clear from this article that the court can issue a certificate of enforcement concerning judgements given in civil matters, or judgements given as part of a criminal ruling on civil claims.

The certificate of enforcement can only be issued by the court having handed down the ruling in first instance.

Article 16 contains specific provisions concerning the certificate of enforcement (concerning both its field of application and its range).

ENFORCEMENT CLAUSE

Article 20 "(1) The competent local court of the place of residence or of the registered office of the debtor, failing that the location in which the debtor's enforceable assets are located, attaches an enforcement clause to the documents listed in Articles 22 and 23.

(2) The provisions related to the certificates of enforcement apply formally to the enforcement clause."

Article 22 "The court issues an enforcement clause:

• a) regarding a decision made by the notary of a village, town or district of Budapest within the scope of the settlement of assets litigation in order to award payment due to a loss of profits, damages and costs;
• b) regarding a decision made by the disciplinary authority of the prosecutor and the disciplinary bodies of designers, engineers and architects, by the ethics committee of experts of the chamber of justice and by the bodies mentioned in Article 140/B (1) and Article 140/C (2) of Act CLIV of 1997 on Health Care, ordering the payment of penalties and legal costs.
• c)
• d) regarding private deeds with the full probative force of a contract on termination of joint ownership or a property after an auction, if the deed stipulates the estimated value of the property, the terms of the auction, and the rate for managing the legal costs and the breakdown of revenue;
• e) regarding a decision by the Hungarian Patent Office on the costs to bear;
• f) regarding a decision made by the notaries of a village, a town, a district of Budapest, with territorial jurisdiction in the place where the damage occurred, as part of their procedures initiated under the Act on the Protection of Game, Game Management and Hunting, on the approval of the agreement between the injured party and the party suspected of infringement, with regard to compensation for damage caused by wild animals, losses attributable to hunters or any other damage caused to game, and the management of the legal costs advanced."

Article 23 "(1) The court issues an enforcement clause regarding the documents hereafter, from employers and adopted in line with the Hungarian Labour Code:

• a) a written, uncontested notification addressed to an employee for purposes of reimbursement of wages paid to the employee without legal grounds or any other debt of the employee associated to his employment;
• b) a final and enforceable decision ordering the employee to repair the damage;
• c) an agreement with the employee through conciliation.

(2) An enforcement clause can be issued for the written notification, the decision or the agreement described in paragraph (1) if the debt cannot be settled via direct deduction from wages, or if such a measure fails to achieve results, or if the results are likely to be achieved only after a long period."

Article 23/A "If the requirements have been met, the competent local court at the registered address of the arbitration committee responsible for consumer protection or medical mediation advice bringing an action in this case, attaches an enforcement clause to the compulsory resolutions adopted by the committee and the agreements concluded prior to the medical mediation advice."

Article 23/B "(1) The authentic deeds cited in Council Regulation (EC) No. 44/2001 on jurisdiction, recognition and enforcement of judgements in civil and commercial matters (hereinafter referred to as "Council Regulation (EC) No. 44/2001" must be accompanied by an enforcement clause appended by the competent local court of the competent national jurisdiction of the place of residence or the registered office of the debtor - failing this, the place where the enforceable assets of the debtor are located or, in the presence of Hungarian branches or sales offices of companies registered abroad, the legal address of said branch or said sales office (in Budapest, the Central District Court of Buda). The authentic deed cited in Council Regulation (EC) No. 2201/2003 must be accompanied by an enforcement clause appended by the competent local court of the District Court of First Instance of the place of habitual residence of the person to whom an enforcement is sought or the child concerned (in Budapest, the Central District Court of Buda).

(2) The competent local court of the District Court of First Instance of the place of residence or the registered office of the debtor - failing this, the place where the enforceable assets of the debtor are located or, in the presence of Hungarian branches or sales offices of companies registered abroad, the legal address of said branch or said sales office (in Budapest, the Central District Court of Buda). - issues the enforcement order of a ruling having been certified as a European enforcement order in accordance with Regulation (EC) No. 805/2004."

Article 23/C "(1) The notary who prepares the deed appends an enforcement clause to the notarial deed, if it contains:

• a) an undertaking of enforcement and consideration, or a unilateral undertaking;
• b) the names of the creditor and debtor;
• c) the subject of the dispute, the value (amount) and legal grounds for the obligation;
• d) the enforcement terms and deadline.

(2) If an obligation is imposed under a condition or date, the occurrence of said condition or date must be verified by an authentic deed so as to render the obligation enforceable.

(3) The notary who prepares the deed includes an enforcement clause in the authentic deed of a contract of pledge if the enforcement deadline of the claim has already expired.

(4) The notary who prepares the deed includes an enforcement clause in the authentic deed of a contract whose object in the termination of the co-ownership of a real property after a sale at auction, if the deed stipulates the estimated value of the property, the terms of the auction, and the rate for managing the legal costs and the breakdown of revenue;

(5) The enforcement can take place under this Article if the claim specified in the notarial deed is subject to an enforcement of court decisions, and if the enforcement deadline of the claim has already expired."

Article 1 states "Court decisions and decisions made by bodies deciding a dispute, as well as certain obligations contained in certain documents, must be enforced through the courts and according to the contents of this Act."

According to this article a measure may be requested to enforce court rulings and decisions by bodies deciding a case, but in parallel this article also gives the opportunity to seek the judicial enforcement of particular deeds.

With regard to these deeds, and this is not the deeds mentioned in articles 15 and 16 (i.e. court rulings), the court appends an enforcement clause to these deeds with a view to their being enforced.

The same provisions apply both to the enforcement clause and the issuance of a certificate of enforcement. As a result, the law only regulates in detail the system of the certificate of enforcement, whilst the enforcement clause is only regulated for specific matters.

To summarise: The various media to order an enforcement measure in Hungarian law:

• The certificate of enforcement - in principle, the enforcement is carried out using a certificate of enforcement which is a court ruling ordering enforcement.
• The enforcement clause - the court directly appends an enforcement clause to the deeds to be enforced.
• Direct seizure by the court (közvetlen bírósági letiltás) - If the debt must be exclusively repaid through deductions from the wages and income of the debtor, the court will itself seize the sums from the employer or the competent organisation so they are repaid directly to the creditor.

AVENUES OF APPEAL AGAINST DEEDS ACCOMPANIED BY AN ENFORCEMENT CLAUSE

The option to follow avenues of appeal is open to both the creditor and debtor.

In the event that the court orders the enforcement by issuing an "enforcement order", and it subsequently finds that it shouldn't have been issued, it is possible to request that it be rendered void, that is, either the certificate of enforcement is withdrawn, or the enforcement clause is revoked.

Articles 211 and 212 contain provisions applicable to the withdrawal of the certificate of enforcement and the revocation of the enforcement clause:

Article 211 "(1) If the court issues a certificate of enforcement in breach of the law, said certificate of enforcement must be withdrawn.

(2) If the court issued an enforcement order in breach of the law, this enforcement clause must be revoked.

(3) The court withdraws the certificate of enforcement or revokes the enforcement clause if it has established, at the request of the debtor, that the enforcement should be refused or rejected pursuant to Article 21 of Regulation (EC) No. 805/2004, Article 22 (1) of Regulation (EC) No. 1896/2006 or Article 22 (1) of Regulation (EC) No. 861/2007."

Article 212 "(1) On the basis of a report by a judicial officer or at his initiative, the court ordering the enforcement may, at the request of either party, require the withdrawal of a certificate of enforcement or the revocation of a convergence clause by returning a decision.

(2) Both parties must be notified of this decision, who may appeal the decision."

Article 213 contains provisions regarding appeals against a decision ordering enforcement: "(1) If a court orders the enforcement through a decision, or makes a decision on an exception in an enforcement order, if it is issued by derogation of its application, the parties may appeal such a decision.

(2) An appeal of the decision specified in paragraph (1) has no suspensive effect in respect of the enforcement proceedings; however - unless stipulated otherwise by this Act - the objects seized cannot be sold and the amounts collected by the enforcement procedure cannot be returned to the claimant.

(3) The party seeking enforcement may appeal a decision, rejecting the issuance of an enforcement order.

(4) If the enforcement is based on a direct judicial notification (Article 28), the parties can appeal the decision that contains said direct judicial notification."

Article 217, meanwhile, contains the rules applicable to the request for a dismissal directed against an application for compulsory execution: "(1) The party or any other person involved may apply for the dismissal of an application for enforcement with the court of origin which authorises the enforcement in respect of unlawful acts of the judicial officer or his inaction (hereinafter referred to as "execution measure").

(2) A dismissal must be requested within fifteen days of the contested decision and subject to a judicial officer who must send it to the court of origin which authorises the enforcement within a period of three working days, by attaching the copies of documents related to the contested decision. If the party requesting the dismissal has been informed of such decision at the end of this period, or it was prevented from requesting the dismissal after the fifteenth day, the deadline for the application of dismissal of an enforcement runs from the notification or removal of the obstacle.

(3) No dismissal of an application for enforcement can be made against an execution measure after a period of six months. No justification is allowed if an application has not been submitted during this period.

(4) The court must expedite its decision on the dismissal of an application for enforcement, if need be after having heard the parties.

(5) The court must act within eight working days after receipt of the dismissal of an application for enforcement in order to obtain the documents - otherwise - that are required for its decision, while the judicial officer in question shall comply with the court's request within eight working days. The court returns a decision - in accordance with Article 50 (2) - on the dismissal of an application for enforcement within sixty days, unless it involves the need to hear the parties or consideration of other evidence."

Articles 221 and 222 regulate the suspensive effect of avenues of appeal.

According to Article 221: "An appeal against a court decision has a suspensive effect, unless:

• a) contrary provisions of the law exist; or
• b) the appeal is directed against the participation of the police."

Article 222 "The avenues of appeal against the measures practised by judicial officers and police authorities have no suspensive effect".

Thus, according to these articles, the parties have the right to appeal against decisions that order and implement an execution measure. In principle, the appeal has suspensive effect, except in a few specific cases (see Articles 221 and 222).

ISSUE OF COURT DOCUMENTS

In accordance with Act III of 1952 on civil procedure, court documents must be served by post -unless otherwise provided by law. This service must be made in accordance with the legal provisions applicable to the service of official documents.

Court documents sent by post are deemed to have been served on the day of the attempted service if the addressee refuses to accept them. In case of failure of the service on account of the refusal of the addressee to accept the document (it was returned to the court marked "unclaimed"), the document - unless proved otherwise- is deemed to have been served on the fifth working day following the second service attempt by post.

If the debtor is domiciled in HUNGARY

Act LIII of 1994 on the enforcement of judicial decisions provides for the service of procedural documents by judicial officers. Service by judicial officer provides identification of the addressee and the delivery of the document in person in order to ensure that the document is actually delivered to the addressee and that the purpose of the document is recorded in an authentic deed.

Article 31/D "(1) If a ruling specified in Article 15 or Article 16 a) and b) was delivered and is deemed to have been served, the party authorised to request the enforcement based on this ruling may request that the document containing this ruling is served to the addressee by the judicial officer of an independent court (hereinafter referred to as "judicial officer") and pay the service costs in advance.

(2) The management of the costs defined in other specific legislation does not apply when the procedural documents are served by the judicial officer. The service process costs are borne by the party who requests the service; however, if execution proceedings are initiated on the basis of a ruling cited in paragraph (1), the costs of service of the procedural documents served by the judicial officer (the cost of an application for enforcement) are the responsibility of the debtor.

(3) The judicial officer serves the document to the addressee in accordance with the provisions of other specific legislation and prepares a report of said service, a copy of which is sent to the court where the ruling was given and is deemed to have been served. The judicial officer also informs the party who requests the service if this has been carried out.

(4) The judicial officer - on request - is authorised to collect information as specified in Article 47 regarding the permanent or habitual residence of the addressee or any other place at which the addressee may be located. The judicial officer may not disclose information obtained on the addressee to the party who requests the service, other than the location of the service.

(5) The service may be carried out by a judicial officer of an independent court or an alternate judicial officer, or an assistant judicial officer provided that he is duly authorised to serve procedural documents.

(6) The service of documents in accordance with the provisions of this Article, other than what is described in paragraph (1), may also be prescribed by law. In this case, the legal provisions derogating from this Law can be applied as notification of the service of procedural documents."

If the debtor is domiciled in a Member State

Cross-border service of procedural documents is governed by European Parliament Regulation (EC) No. 1393/2007 and Council Regulation (EC) of 13 November 2007 on the service and notification of judicial and extrajudicial documents in civil or commercial matters in Member States (service or notification of documents).

A document to be served abroad - unless otherwise stipulated resulting from an international agreement concluded by the Hungarian State - must be submitted to the Ministry of Justice who will take responsibility thereof. Service abroad is deemed to be valid if it complies either with Hungarian law or the law of the country in which the service is to be performed.

What can I do if I do not have an enforcement order yet? Are there protective measures?

As mentioned above (point I), for the enforcement to be ordered, the decision to execute must contain an obligation, be final or benefit from the provisional enforcement, and it is also necessary for the deadlines given to the debtor for the enforcement to have expired (see Article 13).

For a court to grant a protective measure, the claimant only needs to allege that the debtor's conduct could compromise the recovery of his debt.

The emphasis here is on the concept of "alleging". Indeed, the law does not require concrete evidence of the debtor's conduct which would testify that the latter is in the process of making himself insolvent.

Article 185 establishes the framework of the protective measures: "If the enforcement order has not been issued in pursuance of Article 13 for the purposes of the enforcement of a claim, and the party seeking the enforcement fears that a delay in payment would jeopardise the enforcement of said claim, the court shall order the protective measures below, which must be taken at the request of the party concerned:

• a) the creation of a security interest on pecuniary claims; or
• b) the sequestration of specific goods."

According to this article, it is possible to order a protective measure to ensure a pecuniary obligation (Articles 191 to 193/A), but also to sequestrate a specific object (Articles 194-199).

WHAT CONDITIONS MUST BE MET TO ORDER A PROTECTIVE MEASURE?

The general terms and conditions and the field of application of the protective measures are defined in Articles 186 to 189.

According to Article 186 "(1) A protective measure can be ordered if the claim is based on a decision under which a certificate of enforcement might otherwise be issued in accordance with Articles 15 and 16, but cannot, given that:

• a) the decision is not yet final or is not subject to prior enforcement; or
• b) the decision is already final but the enforcement deadline has not yet expired.

(2) A protective measure shall be ordered by the competent court in order to issue a certificate of enforcement based on the decision, and if the required conditions are met.

(3) Protective measures may also be ordered under this Article for claims granted by decisions that Hungary must recognise in accordance with Council Regulation 44/2001/EC. The protective measures shall be ordered by the court referred to in Article 16 c)."

GRANTING OF A PROTECTIVE MEASURE

Article 190 "(1) The court expedites its decision on protective measures, returns a related decision within a maximum of eight days, and immediately forwards a copy thereof to the judicial officer.

(2) The court hands down the decision ordering a protective measure, notified by service of the procedural documents to the party seeking enforcement and the registration authority if the debtor is a company, in addition to the debtor in the case of an attaching order for immovable property.

(3) The interjection of an appeal against a decision regarding a protective measure has no suspensive effect.

(4) Upon receipt of the decision ordering a protective measure, the judicial officer shall immediately request the party seeking the enforcement to advance the costs of recovery as soon as possible, and then start the enforcement of the protective measure upon receipt of said advance. In the case of enforcement of a protective measure, the funds must be advanced to the judicial officer to fully cover his fees, and estimated costs or part of the costs paid before commencement of proceedings."

According to this article, the court must rule on the protective measure without delay, but in any case within 8 days of the filing of the application.

It should be emphasised that the general rules applicable to the service do not apply to the service of the judgement ruling on the protective measure. The decision granting the protective measure must be sent immediately to the judicial officer, as the latter is obliged to enforce it without delay.

These provisions also reflect the urgency of the protective measure.

The decision granting the protective measure must be notified to the applicant of the measure and to the commercial court if the debtor is a company. On the other hand, it should only be served to the debtor if the subject thereof is the sequestration of a property.

However, the debtor may appeal against the protective measure, after having been served the decision directly.

As provided in point 3, the appeal against the decision ordering a protective measure has no suspensive effect, that is, that it benefits from provisional enforcement.

Point 4 of Article 190 lists the procedures that the judicial officer must implement. Upon receipt of the decision ordering the protective measure, he shall promptly invite the creditor to advance him, as soon as possible, the costs of the enforcement. As soon as he receives this, he must immediately commence the protective order.

OBTAINING AN ENFORCEMENT ORDER WITHIN A CERTAIN TIMEFRAME

Article 201/A "(1) If the enforcement proceedings of a claim results in an injunction brought by the debtor when the party seeking enforcement has not filed a petition for the recovery of said claim within three months after the date on which all the general terms of the enforcement (Article 13) have been met, the debtor is entitled to file an application with the court at the end of this period to ask for the release of this enforcement measure.

(2) If an application cited in paragraph (1) is filed, the court shall notify the party seeking the enforcement that the application for the recovery of the claim in question should be submitted to the competent court within thirty days. If the party seeking enforcement does not comply with this deadline, the court shall terminate the protective measure.

(3) No request for extension to the deadline is accepted where this period of thirty days is not observed.

(4) When a protective measure is terminated in line with paragraph (2), the court shall order the party seeking enforcement to pay the costs of proceedings regarding the protective measure, including the fees, costs and expenses of the legal liquidator where applicable."

Article 201 provides security to the debtor against the inertia of the creditor. In the event that the latter does not do all that is possible to effectively recover its claim, Article 201 gives the debtor the opportunity to request the release of the protective measures (see 1).

If the debtor uses this opportunity offered to him and requests the release of the protective measure, the court shall inform the creditor that if he does not file an application within 30 days with a view to obtaining an enforcement measure, it will order the release of the measure.

PURPOSE OF THE PROTECTIVE MEASURE

Within the scope of a protective measure, the court may order the sequestration of a specific object, or the provision of a security interest on a pecuniary claim (article 185).

Provision of a security interest on a pecuniary claim (article 191-193)

If the court orders the provision of a security interest on a pecuniary claim, the judicial officer delivers the decision to the debtor in person and the sum to be paid must be paid directly. If the debtor fails to meet this demand, the judicial officer may seize any object of value belonging to the debtor up to the value of the debt and recovery costs.

In order to be able to seize a property, the judicial officer must go straight to the land registry office in order to register its right in a register.

If a financial institution manages the bank account of the debtor, the judicial officer will notify the institution so that it refuses to pay the amount equal to its debt and the amount of recovery costs to both the debtor and third parties. If the account balance does not cover the full amount of the debt, the financial institution should act the same way for future payments.

This means that the financial institution must constantly observe the accounts of the debtor and make the amounts unavailable while the amounts seized do not cancel out the debt of the debtor.

Within eight days of receiving the order, the financial institution shall inform the judicial officer of the amount that it can allocate in response to the measure; after which, the assets of the debtor can only be seized up to the amount of the remaining debt.

Sequestration (194 § - of movable property; 195 § - immovable property)

Within the scope of a protective measure the object of the sequestration is a specified item and not the seizure of any item, as was the case within the scope of a protective measure of a pecuniary claim.

During the sequestration of a specific item and when this item has not been the subject of a dispossession of the debtor, the latter can thus use it, but cannot dispose of it freely. If the specified item has been sealed by the judicial officer, the opening of the room used for storage, the breaking of seals, the removal of the object or its disposal is a prosecutable offence.

When the sequestration concerns a property, the judicial officer is obliged to mention this on the real estate register.