Suspension of enforcement and bankruptcy procedures in Croatia as a response to COVID-19 economic turmoil

A special act suspending the enforcement and bankruptcy procedures for a period of at least three months entered into force on 1 May

On 30 April 2020 the Croatian Parliament unanimously passed the latest piece of legislation aimed at alleviating the consequences of the economic turmoil caused by COVID-19 pandemic, entitled the Act on Emergency Measures in Enforcement and Bankruptcy Procedures for the Duration of Special Circumstances (the ‘Act’). The Act has instituted a nationwide stay of all enforcement proceedings, without limiting its scope to natural persons, as had been introduced previously by the Amendments to the Act on Enforcement of Funds dated 17 April. Therefore, from 1 May until the elapse of a period of three months, which may be extended for an additional term of three months by the decision of the Croatian Government, all enforcement proceedings pending before the Croatian courts will be suspended, except for the proceedings relating to the collection of child support, payments of future instalments upon their maturity (i.e. personal injury damages), employment- related claims and criminal-law injunction proceedings. In addition to listed exceptions, the Act provides the courts with discretionary authority to decide on the continuance of individual enforcement proceedings, in cases where urgency of enforcement takes precedence. Out-of-Court enforcement proceedings initiated by employers over debtors’ salaries also fall under the scope of this Act, as do the enforcement proceedings over the project and financial assistance transfers, funds and grants paid out by the Croatian state or the European Union. Furthermore, bankruptcy reasons occurring after 1 May (and until the expiry of previously mentioned period of three to six months) will not represent grounds for the initiation of bankruptcy procedure over a debtor upon the proposal of a creditor. Finally, the Act has also suspended default interest being charged for the duration of the same period.

As stated before, the Croatian Parliament has previously passed the Amendments to the Act on Enforcement of Funds (in force as of 18 April 2020), instituting a stay on enforcement proceedings executed by the Croatian Financial Agency over funds of natural persons (e.g. bank accounts). The exceptions to this rule are the same as in the case of the previously discussed Act on Emergency Measures. This stay on proceedings will last for a period of three months, beginning with 18 April, which can be extended by the decision of the Croatian Government for a period of another three months. No default interest will be charged during the term of the suspension mentioned above.