On 11 March, the Department of Civil Cases of the Supreme Court decided to ask the Court of Justice of the European Union for reference for preliminary ruling in the case on respondent’s right to use money placed in debtor’s account for repayment of secured liability. The Supreme Court asked five questions to the Court of Justice of the European Union. The goal of these questions is to specify the goal and the scope of the Directive 2002/47/EC. Interpretation of the Directive provided by the Court of Justice of the European Union will serve as a ground to assess whether Latvian domestic law adopted for the purpose of implementation of this Directive has not exceeded margins of implementation of the Directive, and, if it has exceeded these margins, whether such exceed was admissible.  The Supreme Court stayed proceedings in the case until the ruling of the Court of Justice of the European Union will enter into force.  

On 25 February, the Department of Civil Cases of the Supreme Court in the sitting in extended composition of the court heard opinions of parties to the case – “Private Equity Insurance Group” Ltd. as successor of “Izdevniecība STILUS” Ltd. and representatives of “Swedbank” JSC on opportunity to ask prejudicial questions to the Court of Justice of the European Union and to submit an application to the Constitutional Court in this case. The court asked parties to the case to provide their opinion, because, when reviewing the case in written procedure, the Department of Civil Cases established possible non-compliance of applicable norm of the Financial Collateral Law with the Constitution. Since the above mentioned legal provision is implemented, when transposing the EU Directive, asking of preliminary questions to the court of Justice of the European Union should be considered, in opinion of the court.  The case was transferred from written procedure for review in oral hearing due to this reason.

The representative of the claimant said in the court hearing that it would not be necessary to ask preliminary questions to the court of Justice of the European Union or to file an application to the Constitutional Court, as the dispute may be resolved by interpreting applicable norms, which may be done by domestic court. The representative of the respondent, in turn, pointed out that the question is important and, when having doubts, the court should address the Court of Justice of the European Union.

The dispute in the case concerns right of a bank to use money placed in debtor’s account as financial pledge, to cover debtor’s liabilities to the bank. Applicable provisions of the Financial Collateral Law cause situation, when financial pledge is granted priority, comparing to other types of pledge and provisions of the Insolvency Law. It means that financial pledge, on which there is no publicly available information, actually is given priority over the registered pledge, to which principle of public certainty refers (for example, mortgage or commercial pledge).  Moreover, the bank gets pre-emptive right to recovery of a debt opposite to all other creditors of insolvent debtor.    

The claim was filed by “Izdevniecība STILUS” Ltd., asking to recover from “Swedbank” JSC money withheld under the mentioned procedure. Courts of the first instance and appellate instance rejected the claim.

Baiba Kataja, the Press secretary of the Supreme Court
Telephone: 67020396; e-mail: baiba.kataja@at.gov.lv