Enforcement of Judgments in the EC

Enforcement of Judgments in the EC

The European Council Regulation (EC No 44/2001) ensures the free movement of judgments in civil and commercial matters, setting out the minimum requirements and procedures for the recognition and enforcement of judgments where the defendant is domiciled in one of the member states.

The matter is relevant with the judgments issued by the Cyprus Courts in relation to debts created through housing loans obtained for the purchase of immovable properties either by physical or legal persons.

According to the aforesaid Regulation, mutual trust in the administration of justice in the Community justifies judgments given in a member state to be recognised automatically without the need for any procedure, except in cases of dispute. By virtue of the principle of mutual trust, the procedure for making a judgment given in one member state enforceable in another must be efficient and rapid. The declaration that the judgment is enforceable should be issued automatically, after formal checks of the documents supplied, however the rights of the defendant to appeal are respected in case he considers that there are grounds for the non enforcement of the judgment.

The economic crisis and the drop in the prices of immovable properties in Cyprus, as well as the increase of the value of the Swiss Franc in comparison with the Euro and the Sterling pound, has worsened the financial situation of many purchasers, who are now unable to re-pay their housing loans. Consequently, the creditors, who are mainly banks, have been initiating legal actions for the recovery of their money, including the issue of judgments and various orders for the total amount due with interest, the right to take possession of the property, its re-sale, the cancellation and withdrawal of the sale contract from the Land Registry and the right of specific performance. The purchaser will eventually become a judgment debtor responsible to satisfy the judgment issued against him.

Thus, in the event the judgment creditor cannot sell the property or the net proceeds from its sale do not satisfy the judgment debt, he can make use of the above Regulation to have the judgment recognised and enforced in the member state where the debtor domiciles. This will be an unpleasant development for the purchaser/debtor, since himself personally and his assets at home will be subject to the execution of the judgment. Therefore, leaving the property to the creditor/bank does not solve the problem; instead, there should be co-operation with the creditor and where possible with the vendor, in an effort to resolve the issue amicably, best serving the interest of the debtor.

For a judgment issued in Cyprus to be recognised and enforced in another member state, according to the Regulation, the applicant must produce to the Court of the member state a copy of the judgment duly authenticated (apostile) together with a certificate issued by the Court stating the name of the Court, the judgment issued, the parties to the judgment, the date of the service of the action or the document instituting the proceedings where judgment was given in default of appearance, the text of the judgment and the signature of the Court.

The application is simple and is accompanied by an affidavit verifying the issue of the judgment, attached with a copy of the judgment and the aforesaid certificate. Moreover, the affidavit must state that the judgment can be executed from one country member of EC to another and that no appeal has been filed against such judgment or any application to have it set aside. No judgment can be recognised or enforced if it is contrary to public policy or where it was given in default of appearance if the defendant was not served with the action or the document which instituted the proceedings.

However, the Regulation does not apply to rights in property arising out of a matrimonial relation, wills and succession, the status or legal capacity of natural persons, bankruptcy, proceedings relating to the winding-up of insolvent companies or other legal persons, judicial arrangements, social security and arbitration.