Towards Efficient Enforcement by Professional Officers
Investors, especially in these times of global economic uncertainty, look for a reliable legal system and a stable economy that can provide them full security when it comes to collecting their claims—a conclusion drawn at the recent “Effective Enforcement: A Competitive Necessity in a Global Financial Crisis” conference organized by the Ekonomist magazine and USAID’s Bankruptcy and Enforcement Strengthening program in Serbia.
“Owing to the global financial crisis, security standards for foreign investments will become much higher worldwide, and investors will increasingly seek safe destinations for their investments. On the other hand, without foreign direct investments, the Serbian economy can not move forward,” said Milan Samardžić, attorney and representative of the Foreign Investors Council, adding that the World Bank ranked Serbia 141st in terms of the enforcement of judgments.
Reality in Serbia has proven that the enforcement and claims collection system is not functional, posing serious repercussions for the economy and citizens. Under the current system, only one out of 100 dinars in debt is actually recovered. In the absence of official statistics, a 2007 survey revealed that the collection rate in monetary claims in Serbia is only 1.16 percent, compared with nearly 35 percent in other countries in the region, including Macedonia, Bulgaria and Hungary.
According to a USAID survey, one reason for such inefficiency is the case overload in Serbian commercial courts, which receive 75,000 new enforcement cases annually and have a total of only 38 enforcement officers. As a result, 73 percent of businesses never or rarely even attempt to collect their claims through courts.
Due to the inefficiency of the system, the European Court of Human Rights in Strasbourg identified the enforcement system in Serbia as the cause of human rights violations through seven separate judgments. Court decisions in these cases were not enforced for periods stretching to even 15 years, meaning that citizens and businesses were waited more than a decade to collect on claims through legal court procedures.
USAID Mission Director Michael Harvey said that judicial reforms are not complete without a reform of the enforcement system. “The fundamental question remains: Just how meaningful can all these judicial reforms be if court orders are still not enforced effectively? Without that critical final step – enforcement -- all previous efforts by courts and parties are lost. Justice is not served. Confidence in the system is diminished. And the law itself is in jeopardy of becoming a dead letter,” he said, adding that the efficient enforcement of judgments will contribute to the strengthening of the economy and greater stability for the country.
Serbian experts agreed that the enforcement system must be changed, and that the best option is to introduce a modern and efficient system of licensed professional enforcement officers, in addition to enforcement officers working for courts. Such systems exist in one-third of European countries, including countries in the region—Hungary, Macedonia, Bulgaria, Rumania and Slovenia—and studies have proven that it is efficient, well-regulated and self-financing.
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| USAID Mission Director Michael Harvey addresses attendees at the enforcement conference. |
Slobodan Spasic, a Supreme Court Judge and member of the Enforcement Law Drafting Committee, said that the introduction of a parallel system of court and professional enforcement officers is crucial and expressed his hopes that such system will come to life in the first part of 2009.
Members of the Enforcement Law Drafting Committee also agreed that the reform the existing system for enforcing court orders would be both expensive and elusive and that therefore the privatization of the enforcement function is the right solution. Reforms would cost Serbia $35 million annually and pose an excessive burden on the state budget, which can be avoided by shifting to a professional enforcement system, they argue.
The new draft law, submitted to Parliament for adoption in October 2008, foresees that enforcement officers, in order to operate alongside the existing court enforcement officers, must possess a law degree, pass a professional exam, and be licensed by the line Ministry. They will be required to register as entrepreneurs, meaning that they will be liable for their work to the full extent of their assets. Their work will be fully supervised by courts, and the cost of their services would be covered by taking a percentage out of the recovered debt sum.
For the business sector, and in particular for investors, the reform of the enforcement system and the introduction of professional enforcement officers will bring predictability and safety and save their time and money. This would certainly support Serbia’s goal of becoming a more desirable investment destination that can succeed in an increasingly difficult competitive environment.
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