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Another conflict between execution and insolvency

09. 29. 2020

Authors: JUDr. Martin Šubrt, Ph.D., LL.M., Mgr. Ondřej Křížek, Mgr. Lucie Kačerová, Mgr. Barbora Šimková

The Supreme Court has already dealt with the conflict between execution and insolvency proceedings several times. In general, insolvency proceedings have priority over execution proceedings, which is evident among other things, from the Insolvency Act itself, which stipulates that although execution can be ordered or initiated after insolvency proceedings are initiated, it still cannot be carried out (Section 109 Par. 1 letter c) of the Insolvency Act).

According to a recent decision of the Supreme Court on August 11, 2020, Ref. No. 20 Cdo 2081/2020, this rule of priority of insolvency proceedings has no exceptions, that is, even in cases of creation of an executor’s lien, where according to the rules of execution procedure execution is already enforced by the legal force of the warrant of execution. The reason is simple. Even though a mere linguistic interpretation of statutory provisions leads to the conclusion that after insolvency proceedings are initiated a warrant of execution to create an executor’s lien cannot come into legal force, meaning that this type of seizure should not be carried out, it is necessary to take account of the fact that the creation of an executor’s lien does not lead to execution itself, i.e. to the sale and monetization of the real property item in question, but leads only to securing the debt by means of creating an executor’s lien with respect to real property. At the same time, the prohibition on carrying out execution within the meaning of Section 109 Par. 1 letter c) of the Insolvency Act leads exactly and only to the (im)possibility of carrying out execution.

Despite the fact that initiating insolvency proceedings does not hinder the creation of an executor’s lien, the newly expressed decision of the Supreme Court is not a reason for excessive joy, since the Insolvency Act still regulates that an executor’s lien acquired after the initiation of insolvency proceedings is not effective in the course of insolvency proceedings, and even in this case the creditor will not gain the right to satisfy its claim from such security.

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