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Comprehensive reform of enforcement law

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Comprehensive reform of enforcement law

As of 1 July 2021, a reformed enforcement law (‘GREX’) will apply to all enforcement actions received by the court after 30 June 2021. This will make it much more difficult to delay insolvency proceedings. 

The amendments are primarily intended to facilitate the enforcement of claims and property rights and to relieve third-party debtors by simplifying wage garnishments, but also to facilitate orderly insolvency proceedings by uncovering obvious insolvencies at the point of enforcement (e.g. by combining enforcement proceedings and appointing an insolvency administrator). 

Fundamentally, the “priority principle” continues to apply in enforcement proceedings, according to which creditors are satisfied according to their rank, i.e. usually in the order in which the applications for enforcement were filed. Unlike in the case of insolvency, it is assumed that the debtor is able to pay all claims. 

According to the GREX, the creditor is free to request specific enforcement measures for the recovery of monetary claims. If these are not specified, the “enforcement package” of section 19 of the EO (Exekutionsordnung, Austrian Enforcement Act) is generally deemed to have been applied for, which provides for execution against movable property and papers, execution against recurring pecuniary claims with limited attachability named by the executing creditor and on claims determined by the umbrella organisation of social insurance institutions as well as – if the enforcement action is unsuccessful – the compilation of a list of assets. In a case under section 19 of the EO, an administrator is to be appointed only in exceptional cases. 

In addition to the “simple” enforcement package, the creditor can also apply for the so-called “extended enforcement package”, which includes all possible types of execution against movable property (execution against movable property, execution against claims and execution against property rights). If the extended enforcement package is applied for, an administrator must be appointed. For claims below EUR 10,000, however, the application is only possible if an execution against movable property pursuant to sections 19, 252e para 3 of the EO was unsuccessful. However, execution against movable property remains admissible only if the enforcement of a claim is not possible. 

If an administrator is to be appointed in a case, an advance must be paid by the applying creditor before the appointment (currently EUR 500). In order to simplify the search for professionally suitable administrators for the courts, a generally accessible electronic list of administrators in execution cases is set up for the whole of Austria and maintained by the Linz Higher Regional Court (https://edikte.justiz.gv.at). However, it is not mandatory for an administrator to be entered in this list. 

The administrator in enforcement matters has the same powers as a bailiff, although he does not have any coercive powers – in this respect, the bailiff must be involved as previously. If an administrator has been appointed, he/she is obliged to collect the attachable assets and to seize them in a precisely designated manner and inform 

the court and the pursuing creditor. Furthermore, the administrator is entitled to do everything possible to enable the best possible realisation of the assets. 

This includes, inter alia, the assertion and enforcement of the seized right, the assertion of a partition, the initiation of settlement proceedings and termination as well as the submission of the liable party’s declarations otherwise required for the exercise and utilisation of the seized right. The administrator is granted relatively broad discretion in the recovery of assets. The administrator is solely obliged to attempt to choose the best form of recovery in the interests of the parties, even if certain measures require the approval of the court. 

A simplification of the GREX for the creditor seeking enforcement results from the fact that, in principle, no new application for enforcement and no new authorisation for enforcement is required for newly discovered assets, as an extension is regarded as an application for new enforcement proceedings (section 54f of the EO). 

Another simplification created by the GREX is that lawyers – unlike before – may also inspect the enforcement register on behalf of the debtor for the preparation of insolvency, restructuring or reorganisation proceedings or other debt relief. This significantly simplifies the legal and economic representation of overburdened debtors. 

Even though the main focus of the GREX (and also of the RIRUG, the Restructuring and Insolvency Directive Implementation Act) was not on the structuring of debt settlement or insolvency proceedings of natural persons, new regulations were also created in this regard that are worth mentioning. In particular, special debt settlement measures were introduced to insolvency proceedings (§ 184a of the IO), on the basis of which existing assets are realised and distributed. By its very nature, the above-mentioned priority principle does not apply to these special insolvency proceedings. 

Special provisions are provided for this insolvency proceeding that usually do not apply to debt settlement proceedings – for example, contract termination blocks for contracts concerning the use of living space (e.g. tenancy agreements and related utility contracts), but only if the current costs are actually paid. An insolvency administrator is only to be appointed in such proceedings if there is no case for self-administration and also only if the applicant does not pay the ordered advance on costs. 

The GREX, which has been successful overall, will probably make it easier for many creditors to enforce their claims and also counteract long-drawn-out insolvency proceedings through sensible measures – in particular the combination of enforcement proceedings and the possibility of appointing an administrator. The legislator has obviously hit the mark with the GREX. 


AUTHOR:

Mag. Valentin Neuser, Attorney-at-Law and Managing Partner at LANSKY, GANZGER + partner

GREX IN BRIEF:

  • Newly created enforcement packages simplify enforcement: the concrete specification of means of enforcement is no longer required.
    Enforcement proceedings are generally combined into one procedure – greater transparency for creditors. 
  • Avoidance of protracted insolvencies: An obvious inability to pay leads to an interruption of the enforcement. 
  • Upon application by the creditor, debt settlement proceedings can then be initiated (total enforcement).  

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