Court-Free Handling of Credit Disputes Poses Swindle Risks
26 July, 2012
Court-Free Handling of Credit Disputes Poses Swindle Risks

The recently adopted time-and-cost-saving summary proceedings of the National Bureau of Enforcement (NBE) mandating the NBE to solve the unpaid credit disputes bypassing court procedures is supposed to discharge the overloaded courts but pose swindle risks.  


“Is anybody facing monetary commitment to you? A new service launched by the NBE of Georgia - summary proceedings - enables citizens to solve the disputes referring to monetary commitment without any legal procedure swiftly and cost savingly,” the NBE web-site elaborates the essence

of its new service enforced since May 22, 2012.

The sector pundits say the summery proceedings was adopted in  order to help financial institutions  to levy unpaid loans as well as discharge the overloaded court from minor and less complicated cases. Some experts fear swift settling of financial disputes bypassing long-term court procedures may unleash cheating schemes thanks to legislative loopholes rather than be helpful to discomforted creditors and courts.

The new service gives an opportunity to solve the insolvency cases without any court procedures within 10 calendar days [or a little bit more] after the NBE hands in the notification to the defendant that its creditor registered an application on the debt clearance at NBE thus sparing creditors from expensive and long-term court litigations. This form of proceedings is applicable to the monetary commitments with obvious evidence of the debt namely, an agreement, a receipt or a compare act not obliged to fulfill any responsive liability.

The NBG is responsible for handing a notification to a debtor informing about the feasible negative impacts of ignoring to pay the due and possible legal actions. After handing in the notification the countdown start ticking and within 10 days the defendant must either acknowledge the due in which case the summery proceedings start and the NBE swiftly draws its decision, or disclaim the liability in which case the summary proceedings stop and the case can be solved only through court. If a defendant keeps silence it will be assessed as consent and the summary proceedings will go ahead. The proceeding mandates the NBE to arrest the debtor’s property/banking accounts if required in pursuance with Georgian law without court decision.

According to Beka Dochviri, a lawyer with Georgian Young Lawyers’ Association, this mechanism seems to be a solution to both legal and physical entities to raise unpaid loans from swindlers who take loans and disappear ultimately abroad – this kind of practice is quite familiar in Georgia especially after the financial crisis of 2008 when insolvency increased.

“Court can be discharged from these kinds of cases and creditors be able to get their money back at last without chasing hidden debtors all around and bypassing tiresome and expensive court procedures,” Dochviri said in the interview with Georgian Journal. Although he fears that the inexperienced NBE judges unlike court judges can be less competent and draw out irrelevant decisions.

Ditrikh Muller, a legal and economic analyst with Georgian Investment Group, fears that the much trumpeted swiftness of summary proceedings may give a carte-blanche to cheating and black raid [misappropriation of others property through faked paper-work and machinations].

The point is that law includes a certain loophole: according to law, the notification is assessed handed for sure if either the defendant itself or his/her family member signs the notification receipt [that is sent back to court]. Therefore if a swindler knows that the defendant is not at home it may crackdown on family members to sign the notification thus depriving the opposite side to attend the hearing. However court delays hearings at least three times in case if defendant does not show up while the NBE simple proceedings settle the case immediately even if the other side is absent.

Muller presumes that this swift proceeding may lead to following scheming: a black raider may target on a certain wealthy person who is in prison or abroad, draw a fake liability note on loan or stake at company and appeal the NBE summary proceedings. Since the targeted victim is not at home a swindler may crackdown on the family members, or just deceive them to sign the NBE notification and since the unaware defendant cannot appear at the hearing the NBE will settle for the swindler and deprive the victim of its property consequently.

“The court delays for several times if the defendant does not appear and other procedures may take approximately 3-4 months that is a protective mechanism within itself, while the NBE decision drawn in about 10 days makes people vulnerable to swindling.  A swindler can sell out the misappropriated property/money and run abroad in a blink of the eye till the scheme is transcripted,” Muller elaborated and exemplified one case from his practice when court saved one person whose companion planned to seize the client’s company stakes. To mislead the court that companion gave incorrect address of that person in order to prevent him to appear at court, but court delayed hearings several times and at last found out the real address and that guy escaped the swindling.

The NBE explains that summary proceedings have been successfully implemented in many countries worldwide and that the Georgian version is based on the Swedish and French experiences and the interests of Georgian society are taken into account. But Muller argues that the mentality of Georgian and developed European countries differ very much and expects swindlers will take an advantage out of the novelty.

“This so called time-cost-saving summary proceedings is a disastrous thing to me that will deteriorate the investment climate and beget black raid leading to economic holocaust,” Muller said. “Maybe the simpler proceedings will help financial institutions to levy money from few debtors but not from key cheaters who are already safe abroad. I believe more innocent people will suffer and more cheaters will proliferate eventually,” Muller regrets.

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