Legal position of TSG established as case law by the Commercial Court of Appeal

The Commercial Court of Appeal has adopted our legal position presented in the appeal against the decision of the Commercial Court in Belgrade on final distribution of the bankruptcy estate, whereby the enforcement creditor, who is being settled in the enforcement proceedings through attachment of the enforcement debtor’s (being bankruptcy creditor’s) claim and transfer thereof, does not enter the bankruptcy proceedings as a bankruptcy creditor, i.e. the enforcement creditor will not be settled proportionally along with the bankruptcy creditors.

Our legal understanding, accepted by the Commercial Court of Appeal, is that the enforcement creditor who has acquired the pledge on the enforcement debtor’s claim against the bankruptcy debtor and to whom the attached claim was transferred for collection, is entitled to separate and complete settlement of his claim against the enforcement debtor (being the bankruptcy creditor) and not against the bankruptcy debtor. Namely, the enforcement creditor settles its claim from the value of the enforcement debtor’s (i.e. bankruptcy creditor’s) attached claim against the bankruptcy debtor, up to the full amount that the enforcement debtor (as the bankruptcy creditor) would have collected in the bankruptcy proceedings.

The essence is that the enforcement creditor does not become a bankruptcy creditor, either instead of or jointly with the enforcement debtor, but rather the bankruptcy creditor remains the enforcement debtor, albeit with one important limitation – that there is a pledge on its claim in bankruptcy proceedings in favour of the enforcement creditor, and that the enforcement creditor shall collect its claim up to the full amount of the claim of the enforcement debtor, that the enforcement debtor itself, as the bankruptcy creditor, could have collected against the bankruptcy estate.

In this way, we changed the erroneous practice of the commercial courts’ judges and bankruptcy administrators, which used to consider that, by means of attachment and transfer of claim for collection, there occurs a simple transfer of claim from the enforcement debtor (as bankruptcy creditor) to the enforcement creditor, whereby the enforcement creditor becomes the bankruptcy creditor and acquires the right to proportional settlement of claims together with the enforcement debtor and other bankruptcy creditors.


TSG Lawyers