The criminal attachments applied to the assets of an insolvent company have in the past generated blockage in the proceedings for the recovery of debts through the insolvency procedure provided for by Laws No. 85/2006 and No. 85/2014 respectively.

The rights of bona fide creditors have suffered through delays beyond a reasonable period for the resolution of insolvency proceedings. In this respect, the situation of the mortgagees, financiers of the company’s business which subsequently became insolvent, is notorious. At the same time, case law has revealed an uneven practice, different opinions and solutions in the interpretation of legal norms throughout the country.

The most common criminal cases in which such precautionary measures have been imposed concern the investigation of tax evasion and money laundering offences. It should be noted that in the case of these offences, the law requires compulsory precautionary measures.

The purpose of criminal attachment is either to guarantee reparation of the damage caused by the offence or to guarantee the application of the security measure of confiscation. Usually what is confiscated is the proceeds of the offence, the rationale being that such goods cannot be kept. In either case, the possible enforcement of the goods subject to the attachment will suffice to the State.

The problem is that the goods, prior to the establishment of the attachment, may have entered the civil circuit and become either the property of the insolvent company or the subject of the mortgage right of a bona fide creditor participating as such in the insolvency proceedings. And as regards good faith in the acquisition of property, we stress that this is important even in the light of Directive 2014/42/EU of the European Parliament and of the Council of 3 April 2014 on the freezing and confiscation of instrumentalities and the proceeds of crime committed in the European Union. In this respect it is provided that the confiscation measure should not prejudice the rights of bona fide third parties. At the same time, mortgagees have an asset within the meaning of Article 1 of Protocol No. 1 to the European Convention for the Protection of Human Rights and Fundamental Freedoms, so their good faith is also an argument for invoking the protection of this international human rights instrument.

In practice, it has been shown that after the attachment was ordered at an early stage of the criminal proceedings, criminal proceedings were considerably delayed and creditors in insolvency proceedings had no effective remedies available to them as they were not parties to the criminal case. Since this year, the Criminal Procedure Code has been amended so that attachment is subject to regular review, for example every 6 months during the prosecution phase. The procedure provides for the interested party to have access to an appeal before the judge of rights and freedoms or, where appropriate, the higher court. In other words, creditors can take the initiative and refer the matter to the judicial body, if the latter remains inactive, with a request to verify the topicality of the attachment measure. And if the attachment is upheld, the decision can be challenged in court.

In relation to the uneven judicial practice referred to above, we note that the High Court of Cassation and Justice has taken progressive steps towards unblocking the situations that we examine. First, in 2013, the Court of Cassation issued a decision in favour of the continuation of the enforcement of seized goods (Decision No. 1392/23.04.2013). It was a common law enforcement, not the insolvency procedure. In 2015, a decision of the High Court of Cassation and Justice delivered for the resolution of a matter of law, although it is a decision rejecting the application as inadmissible, contains in its recitals the same reasoning in favour of the idea that attachments cannot constitute an impediment to the initiation or continuation of an ordinary enforcement procedure, the mortgage claim having priority over the claim of the injured party in the criminal case (Decision No 8/27.04.2015).

A first major step towards ensuring convergence in the interpretation and application of the law was Decision No 2/19.02.2018 delivered in an appeal in the interest of the law, which held that: “the existence of a criminal attachment on the real estate of a natural or legal person does not suspend the enforcement initiated by a mortgagee, whose mortgage right on the same property became enforceable against third parties prior to the establishment of the attachment measure in the criminal proceedings and does not determine the nullity of the enforcement acts subsequent to the establishment of the attachment measure in the criminal proceedings on the same property”.

And in its recitals the decision left room for interpretation of its enacting terms in a broader sense than the spectrum of common law enforcement, holding that: “the criminal law provisions on precautionary measures shall be supplemented by those on civil procedure (broadly speaking, including those on tax procedure) pursuant to the provisions of Article 2(2) of the Code of Civil Procedure – according to which the provisions of this Code also apply to other matters, insofar as the laws governing them do not contain contrary provisions, the rules of civil procedure constituting the source of criminal procedural law, insofar as certain issues raised in criminal proceedings are not regulated by the Code of Criminal Procedure and the application of civil rules does not raise any fundamental problems”.

On these premises, Decision No. 2/19.02.2018 was also invoked in insolvency cases. But the High Court of Cassation and Justice has ruled decisively and explicitly on these issues in Decision No. 1/20.01.2020 – of the Panel for the resolution of matters of law: “the existence of protective measures established in the framework of criminal proceedings over the assets of a legal person, prior to the opening of insolvency proceedings, with a view to special confiscation, reparation of the damage caused by the offence or guaranteeing the enforcement of legal costs: a) does not suspend the liquidation procedure provided for by Law no. 85/2014 with regard to the seized property; b) is not such as to render unavailable the property in respect of which the recovery procedure has been commenced in accordance with the provisions of Law no. 85/2014; c) does not prevent the liquidation of the property carried out by the judicial liquidator in the exercise of the powers conferred by Law no. 85/2014.”

We emphasize that despite the enacting terms, there are considerations of this decision that attenuate its meaning and application, namely in the reasoning of the decision we find the following reasoning: “the property may be sold in insolvency proceedings, with the charge resulting from the securing measure entered in the land register (where immovable property is involved)”

Therefore, in the case of attachments taken to secure the execution of the confiscation order, the assets are acquired together with the precautionary measure.

In conclusion, important steps have now been taken to unblock situations created in the past which had caused considerable harm to the rights of bona fide people. Please note that the above only applies to attachments. The attachments have always a limited objective: temporary protection of a factual situation, usually the preservation of assets until the end of the criminal proceedings. If the final decision of the criminal court is to admit the civil action or to order the precautionary measure of confiscation, the enforceable effects of the final criminal judgment are applied in the last phase of the criminal proceedings, the enforcement phase of the judgment, both on the criminal and civil side. Hence, we stress the importance of summoning in the criminal proceedings, other than the defendant, the persons whose assets are concerned by the confiscation measure. Having been summoned, these people can defend themselves in the very trial in which the fate of their property is being debated, prior to the court ruling.