Legal Compensations

By Cristian Cercel

Decision of the High Court of Cassation and Justice

The High Court of Cassation and Justice was notified, by the Oradea Court of Appeal, in order to issue a preliminary ruling on the following question: “If, in the interpretation and application of the provisions of art. 90 para. (1) and (2) of Law no. 85/2014, is it permissible to invoke the legal compensation of the mutual debts between a creditor added to the list of creditors and the debtor who is insolvent, by another creditor added to the list of creditors, which is not part of the legal report?
Are the provisions of art. 1617 para. (3) of the Civil Code compatible with the insolvency procedure or not?“

Short presentation of the problem

The pending litigation concerns the challenge against the debtor’s additional table of debt, by which the total or partial removal from the debt table of the debts was requested, belonging to the creditors, companies in the same group with the debtor, as illegitimate, as a result of their settlement by legal compensation.

Specifically, the debtor holds claims on the three creditors, who are in the insolvency proceedings, being registered in the list of creditors.

In the opinion of the claimant the judicial administrator is obliged, according to art. 90 para. (1) of Law no. 85/2014, to ascertain the extinction of the creditors’ debt through the mechanism of legal compensation in fulfilling their legal duties.

Thus, it was shown in the notice that the legal compensation operates legally, and it is not up to the parties to accept or not to produce the effects of the compensation.

Another issue in this case is related to the waiver of compensation. According to art. 1617 Civil Code “(1) The compensation operates in full right as soon as there are two definite debts, which are liquid and outstanding, whatever their source, and which have as their object a sum of money or a certain amount of tangible property of the same nature. (2) A party may request the judicial liquidation of a debt in order to operate the compensation. (3) Either party may expressly or tacitly waive compensation“, but art. 1622 para. (3) states that “The compensation does not take place, nor can it be renounced to the detriment of the rights acquired by a third party“.

Thus, it was shown in the case law, that by making an application for registration at the credit bureau, without invoking the compensation of mutual claims, the creditor implicitly renounced the benefit of the legal compensation, so that the effects of the compensation were withdrawn retroactively. In other situations, it was shown that the provisions of art. 1617 para. (3) are incompatible with the insolvency procedure and no compensation can be waived, in relation to the principle of competitive participation, or this waiver does not operate in the insolvency procedure, as the rights of the participating creators would be affected.

Decision of the High Court of Cassation and Justice

“The renunciation of compensation is compatible with the insolvency procedure, except in the case in which the debt that is the object of the compensation belongs to the creditor entitled to request the opening of the procedure.

It is permissible to invoke the legal compensation of the mutual debts between a creditor added to the list of creditors and the debtor who is insolvent, by another creditor entitled to participate in the procedure, if the latter can prove the damage caused by the refusal or negligence of the insolvent debtor and the insolvency practitioner in the exercise of this right.“

The full decision is not yet been reasoned.