By Tomislav Šunjka, lawyer
Law office of Tomislav Šunjka
Serbia is a country of transition in every sense of the word. Transitions of economic system, social and political system and the judicial system. Legislation is constantly changing, improving, harmonizing with reached international legal standards and regulations of EU. In that change, unfortunately, often concessions are made to the daily political interest political party in power. Regardless of the mentioned imperfections and political concessions during changing of legislative and enactment of new legal regulations, it must be admitted that Serbian jurisdiction belongs to civilized and recognized civil law legal systems, with high-impact of common law legal standards in the newly enacted legal regulations.
Serbia is jurisdiction where the assets appear in the form of cash primarily due to investments in various projects, privatization processes, real estate investment etc., which means the money that would eventually be subject of asset tracking in Serbia changes its shape and becomes a different asset, e.g. real estate, or shares in some company, or equipment or similar. On the other hand, money constantly goes to offshore centres or centres of preferential tax regime in particular towards The Netherland, Swiss, Cyprus, known offshore centres Monaco, Delaware, The Netherlands Antilles, BVI, Hong Kong and others. The money is mainly transferred in a legal way as acquired dividend, capital gain, the return of loans and credits and similar. Trade goods usually goes to Russia, and from the side of Russia mainly arrive energy generating products and in accordance with that cash payments are made. The financial system, despite the imperfections, is transparent to a reasonable extent and there are corresponding provisions to prevent money laundering. The courts, police, prosecution and other state authorities, although overworked, busy, and therefore slow and sluggish, mainly have the will to cooperate in asset recovery cases, except when it is not in contradiction with the legal system or interfere with the investigation and criminal proceeding. Of course, it depends mainly on individual approach of each individual judge or prosecutor and his personal commitment and the will to cooperate.
Serbia as a country has the best double tax agreement with The Netherland, and only then with Cyprus, while the best double customs agreement is with Russia.
Victims of frauds, dishonesty, criminal offenses can have confidence in Serbian jurisdiction and authorities, can initiate proceedings, submit various requests, including requests for compensation and damages. In civil proceedings victims can have standing and active role that trough the lawsuit actio pauliana void legal affairs to initiate court disputes for restitution of property (asset recovery claims) regarding these disputes can rely on public registers, such as register of companies (business register), register of intellectual property civil registry, real estate cadastre, mortgage register, register of pledges on movable property and rights (pledge) etc. There are advantages of the system in the sense that each legal entity has its tax number (tax id, Serb. PIB), and that through a tax number it can be checked the account numbers and the names of the banks where these accounts are held. Other evidence and information victims of fraud can obtain and realize directly through public registries or through the court in special proceeding - securing of evidence or through special state body authorized to allow insight into the information of importance for seeker of information. In criminal proceeding victims of fraud have passive role, because active role and standing primarily has public prosecutor. However in criminal proceeding victims have the right to question witnesses and defendants, put objections and propose evidence. In some cases, if and when public prosecutor withdraws the prosecution of the defendants, victims have the right to assume the prosecution of those indicted by the public prosecutor and to directly represent charges. Victims have the right and obligation to set its property claims in criminal proceeding i.e. request for asset recovery and / or compensation. Criminal court shall decide about that request by itself or shall instruct the victims to achieve its request directly in the civil proceeding. In both cases, criminal and civil, victims have the right to seek to order temporary measures. 
Specific laws or their certain parts and parts and provisions which are applied in cases of asset recovery are:
- Law on civil procedure ("Official Herald of RS ", no. 72/2011, 49/2013 – decision of CC, 74/2013 – decision of CC and 55/2014);
- Law on contracts and torts ("Official Herald of SFRY", no. 29/78, 39/85, 45/89 – decision of CC and 57/89, " Official Herald of SRY", no 31/93 and " Official Herald of SCG", no 1/2003 - Constitution charter)
- Criminal procedure code ("Official Herald of RS", no. 72/2011, 101/2011, 121/2012, 32/2013, 45/2013 and 55/2014);
- Law on confiscation of assets derived by criminal offence ("Official Herald of RS", no. 32/2013);
- Criminal code ("Official Herald of RS", no 85/2005, 88/2005 – correction, 107/2005 - correction, 72/2009, 111/2009 and 121/2012, 104/2013 and 108/2014);
- Law on liability of legal persons for criminal offenses ("Official Herald of RS", no. 97/2008);
- Law on international legal aid in criminal matters ("Official Herald of RS", No 20/2009);
- Law on enforcement and security ("Official Herald of RS", no. 31/2011, 99/2011 – other law, 109/2013 – decision of CC, 55/2014 and 139/2014);
- Company Law ("Official Herald of RS", no. 36/2011, 99/2011, 83/2014 – other law and 5/2015)
- Law on agency for business registration ("Official Herald of RS", no. 55/2004, 111/2009 and 99/2011);
- Regulations on tax identification numbers ("Official Herald of RS", no. 57/2003, 68/2003, 32/2009 and 48/2010);
- Law on banks ("Official Herald of RS", No. 107/2005, 91/2010 and 14/2015);
- Law on advocacy ("Official Herald of RS", no 31/2011 and 24/2012 – decision of CC);
- Law on open accesses to information as of public importance ("Official Herald of RS", No 120/2004, 54/2007, 104/2009 and 36/2010);
- Law on prevention of money laundering and the financing of terrorism ("Official Herald of RS", no. 20/2009, 72/2009, 91/2010 and 139/2014);
- Law on resolving conflict of laws with regulations of other countries ("Official Herald of SFRY", no. 43/82 and 72/82 - correction, "Official Herald of FRY", no. 46/96 and "Official Herald of RS", no. 46/2006 and "Official Herald of RS", no. 46/2006 – other law);
- Law on insolvency ("Official Herald of RS", no. 104/2009, 99/2011 – other law, 71/2012 – decision of CC and 83/2014);
- Law on foreign persons of Republic of Serbia ("Official Herald of RS", no. 97/2008);
- Law on Whistle-blower Protection ("Official Herald of RS", no. 128/2014).
II LEGAL RIGHTS AND REMEDIES
i Civil and criminal remedies
Whole and each compensatory remedy, civil and criminal can be sought:
The civil procedure in Republic of Serbia is regulated by the Law on civil procedure ("Official Herald of RS ", no. 72/2011, 49/2013 – decision of CC, 74/2013 – decision of CC and 55/2014). Civil procedure is initiated by submission of the lawsuit before competent court. Main stages of the proceeding are:
- Initiation of the proceeding by submitting lawsuit by plaintiff;
- Preparation of the main hearing;
- A main hearing in which parties bring out before the court their legal opinions, exchange and explain arguments, propose evidences and dispute evidences of other parties. At these phase court executes evidences. After all of the evidences proposed by parties have been executed court shall close the main hearing and render decision;
- The duration of civil proceedings to the full and binding court decisions is around 3 years.
a) Institute of damages in civil proceeding
Institute of damages is regulated by the Law on contracts and torts.
This Law prescribes that damages may be:
- diminution of someone's property (simple loss-damnum emergens);
- preventing its increase (profit lost-lucrum cessans);
Provisions of Article 18 of the aforementioned Law are important to point out, considering that in carrying out obligations, party shall be bound to act with care required in legal transactions of the kind of obligation relations involved (the care of a good businessman, or respectively the care of a good master of the house).
In carrying out obligations relating to his professional activity, a party to obligation relations shall be bound to act with increased care, according to professional rules and usage (the standard of care of a good expert).
Also, the damage arising from a breach of contract and damage that arises from a tort must be distinguished from one another. The basic difference between these two types of damage liability is in the presence or the absence of the prior obligation. In the first case, the liability comes from the existence of a certain legal arrangement and in the second case the liability comes from a certain tort.
Bearing the aforementioned in mind, it is clear that in case of a tort, a much wider range of persons can be accounted as responsible for the damage that occurred and that, when a tort is in question, the liability for damage arising from a tort can be based not only on (proven or presumed) fault, but regardless of it.
A person who has suffered damage can file a lawsuit for reimbursement of suffered damages.
In case which will be presented in text bellow, such wide range of liability is critical for understanding the passive legitimation in civil lawsuit which considers ability of certain legal person or person to be sued in lawsuit and to find himself in position of respondent.
A legal person shall be liable for damage caused by its members of branches (branch is an organizational part of a company which does not have the capacity of a legal entity) to a third person in performing or in connection to performing of its functions.
Also, it is important to point that liability for damages in civil court proceeding is considered much wider than liability in criminal court proceeding.
In criminal proceeding liability may be only subjective (on the grounds of fault for damages) and damages in court proceeding may be awarded only if connection between action or failure to act of by offender and damages caused by the offender is established. Only in that case court in criminal proceeding shall award claim damages to injured party.
Once judgement of the court in criminal proceeding is rendered court in civil proceeding are obliged to apply judgement rendered in criminal proceeding in respect to the liability for committing criminal offence.
Law on contract and torts prescribes that liability in civil court proceeding for damages may be:
- on the grounds of fault for damages - in case when connection between action and failure to act of the respondent and damages caused by the respondent is established.
- liability on the ground of equity;
- liability of enterprises and other legal persons (which are liable for damage caused by an employee while working or in relation to work, to a third person shall be the enterprise at which the employee was employed at the moment of causing the loss or injury, unless it is proved that the employee, in given circumstances, had proceeded as he should have);
b) Refuting (contesting) debtor's legal actions / acts in respect to asset recovery
Serbian Law on contracts and torts prescribes rules for refuting debtor’s actions by the lawsuit (or claim) (Actio Pauliana) which represents an institute of Roman law.
By Article 280 of aforementioned Law it is prescribed that every plaintiff / creditor (person which request asset recovery) whose claim is due for payment, regardless of the date of its taking place, shall be entitled to refute a legal act of his debtor taken to the damage creditors. A legal act shall be considered to have been taken to the damage of creditors if due to it the debtor is left without sufficient means to satisfy the creditor's claim.
Aforementioned Law prescribes that debtor’s disposal of property may be refuted in case of:
- disposal on the debt side, if at the time of effecting the disposal, the debtor was aware or could have been aware that such action would do harm to his creditors, and if a third person benefitting from the legal act undertaken was aware of the fact, or could have been aware of it;
- a gratuitous disposal and a legal act equal to it, the debtor shall be considered to have been aware that the disposal undertaken would do harm to creditors, so that in refuting such acts there shall be no requirement that the third person was aware, or was supposed to be aware of the fact.
Refuting of debtors acts or action is possible to achieve by submitting a lawsuit before the competent court or by objection.
A lawsuit to refute must be submitted against a third person being a party to the legal act (acquirer of the debtors property), or to whose benefit the act to be refuted was undertaken. In case if a third person has transferred, by a transaction on the debit side, the benefit acquired through the disposal to be refuted, the lawsuit may be initiated against the acquirer only if the latter was aware that the acquisition of his predecessor was prone to be refuted, but if such benefit was transferred by a gratuitous transaction, the lawsuit may be initiated against the acquirer even if he was not aware of the fact.
A defendant may avoid the refuting by performing debtor's obligation.
In case if court adopts plaintiffs claim for refuting and renders a judgement, effect of refuting of debtor’s acts / actions is that legal action / act of debtor shall become ineffective only as to the plaintiff / creditor (person which request asset recovery) and only to the degree necessary for meeting his claim.
For success in such lawsuit it is necessary to meet the following requirements:
1) Creditor (plaintiff) must prove that he has been really damaged by debtor's legal actions which he refutes in litigation. Usually, in practice it is proven by unsuccessful attempted of enforced collection of the debtor's assets.
2) It has to be debtors fault, that by his legal action, damage is caused (which consists in the fact that the creditor is not able to collect claim) to the creditor. Debtor must be designated as undutiful. Whether he knew or could have known that their actions were taken on creditor’s damage. This is of course a subjective element that creditor must prove and establish in front of the court in each and every case.
3) The third person who gains benefit from the refuted legal action of debtor also must be undutiful if it is matter of a transaction on debtors debit side.
A lawsuit to refute debtor’s actions must be initiated within a year in case of the disposal on debit side, while in case of a gratuitous disposal of the debtor lawsuit must be initiated within a three year time limit.
By refuting legal acts / actions of debtor in proceeding before the competent court plaintiff may submit lawsuit and request a following:
- Annulment of the debtor’s acts;
- Annulment of debtor’s legal action;
- Determination that legal action is null and void;
- Termination of legal action.
Rules on enforcement proceeding
The enforcement procedure is regulated by Law on enforcement and security ("Official Herald of RS", no. 31/2011, 99/2011 – other law, 109/2013 – decision of CC, 55/2014 and 139/2014).
In the Republic of Serbia enforcement procedure is initiated by a Motion of enforcement submitted by the enforcement creditor in front of competent court (in front of first instance courts of general jurisdiction or commercial courts considering parties in the proceeding). Enforcement procedure may be initiated by submitting Motion of enforcement based on executive titles (final and enforceable court judgements, decisions, settlements and et.) or authentic documents (invoices, bills, bill of exchange or cheque, business book excerpt, bank guarantee and etc.).
By submitting Motion of enforcement an enforcement creditor must propose means and object by which enforcement proceeding shall be conducted. The court may during enforcement proceeding, on motion of the enforcement creditor or debtor, designate enforcement mean or object instead of the one proposed and determined.
Object of enforcement proceeding are things and rights on which enforcement of the claim may be carried out (for example: money, funds on bank account, shares, movable and immovable property) while means by which enforcement proceeding may be conducted are enforcement actions used to enforce a claim in accordance with law (for example: sale of chattels, sale of immovable property, transfer of monetary claim).
This kind of procedure is urgent and court acts urgently in proceedings for enforcement. The court shall decide on a motion of enforcement within five working days after filing a motion to the court.
If the motion for an enforcement is based on authentic documents, when the court issue the decision on enforcement, the enforcement debtor may challenge a decision on enforcement by objection within five working days from the receipt of decision on enforcement. Timely filled objection postpone enforcement and the procedure is continued in accordance with the Law on civil procedure.
If the motion for an enforcement is based on executive titles, when the court issue the decision on enforcement, the enforcement debtor may challenge a decision on enforcement by objection within five working days from the receipt of decision on enforcement. Timely filled objection shall not postpone enforcement.
Criminal procedure in Republic of Serbia
In respect to the Law which regulates criminal procedure in the Republic of Serbia there is Criminal procedure code ("Official Herald of RS", no. 72/2011, 101/2011, 121/2012, 32/2013, 45/2013 and 55/2014; hereinafter referred to: Criminal procedure code).
Serbian Criminal procedure code prescribes that criminal proceeding may be initiated by, public prosecutor, private prosecutor and injured party (victim of the fraud), but only in public prosecutor is in charge. Private prosecutor and injured party have limited standing in special cases.
Criminal procedure code determines and prescribes following stages of the criminal proceeding:
- preliminary investigation proceeding;
- rising of the indictment;
- main hearing and judgement;
Considering that Criminal procedure code prescribes numerous rights of injured party from which most important are those that injured party is entitled to take part in criminal proceeding and right to submit claim request for damages as well as request for securing claim for damages by temporary measures. Injured party is also entitled to propose evidence in proceeding, to be present at questioning of witnesses and offender and asking questions, to be present at hearings, hire a representative, to make closing speech and etc. Most important right of injured party is that it is entitled to initiate criminal proceeding and afterwards in case if public prosecutor for any reason stops / withdraws a criminal proceeding against offender it is entitled to take over prosecution of the offender himself.
Time duration of criminal proceeding is not strictly prescribed by law, however it usually takes about three years for rendering of final and enforceable court decision.
a) Criminal responsibility of legal entities in criminal proceeding
Law on liability of legal persons for criminal offenses ("Official Herald of RS", no. 97/2008) regulates liability of legal entities for criminal offenses, criminal sanctions that may be imposed on legal entities and rules of procedure for deciding on the liability of legal entities as well as imposition of criminal sanctions on legal entities.
This Law also prescribes some rules on confiscation of property of legal entities.
Article 25 of aforementioned Law prescribes that objects which were used or which were intended to be used for a commitment of a criminal offense or objects which arises from a criminal offense may be confiscated in criminal proceeding if they are property of the legal entity. Objects also may be seized even if they are not owned by legal entities if it is in the interest of public safety or moral reasons, but in that case it does not affect the rights of third parties for damages.
ii Defences to fraud claims
In civil lawsuit for damages is necessary to prove active legitimation right to sue standing, passive legitimation, that defendant is determined properly, basis of the claim legal basis, contract, tort, legal and enforceable criminal judgment, other legal basis, the amount of the claim and most important to prove causal connection between TORT-FEASOR and occurrence of harmful event. Damage, as such, must be certain, the probability of damage is not enough for adjudication. For all the abovementioned defendant would have insisted in his defence from the claim.
SEIZURE AND EVIDENCE
a) Criminal procedure / Confiscation of the offenders assets by state / government authorities
Serbian Law on confiscation of assets derived by criminal offence ("Official Herald of RS", no. 32/2013) prescribes rules and conditions, procedures and authorities responsible for detection, seizure and management of assets of natural and legal persons which derived from and by committing criminal offence.
Law prescribes that asset recovery is possible in criminal proceedings for the following criminal offences: of organised crime; of abduction; against property (such as criminal offence of criminal offences of robbery, fraud, extortion); criminal offences against businesses (such as criminal offence of counterfeiting of money, counterfeiting of credit cards, counterfeiting of securities, creating, obtaining and providing other means for forgery, money laundering, smuggling, abuse of position of the responsible person, causing false bankruptcy, making damage to the creditor); of unauthorized production, possession and distribution of narcotics; against public order; against official duty (such as criminal offence of abuse of official position); against humanity and other goods protected by international law.
By this Law new organizational unit responsible for financial investigation (hereinafter: the unit) is established and founded. This unit is a specialized organizational unit of the Ministry of Interior of Serbia for detection of assets derived from criminal offences.
Unit acts on the order of Court, public prosecutor office or ex officio.
b) Criminal code and Criminal procedure code
Serbian Criminal code ("Official Herald of RS", no 85/2005, 88/2005 – correction, 107/2005 - correction, 72/2009, 111/2009 and 121/2012, 104/2013 and 108/2014); also prescribes rules on confiscation of objects and seizure of property gained by committing of a criminal offence.
Article 87 of aforementioned Penal code regulates security measure of confiscation of objects and prescribes that objects which were used or which were intended to be used for a commitment of a criminal offense or objects which arises from a criminal offense may be confiscated in criminal proceeding as well as objects when there is a danger that the object will be reused for commission of a crime, or when it is necessary to protect public safety or for moral reasons.
In respect to seizure of property gained by a criminal offence, Law prescribes in article 92 that property gained by commitment of criminal offence shall be confiscated from offender. Under the court Decision property gained by committing a criminal offence such as money, things of value, and any other property shall be confiscated from offender in amount of gain acquired by criminal offense determined in criminal proceeding.
If in criminal proceedings a property claim of injured party (victim) is determined, court shall order confiscation of property gained by commitment of criminal offence only if it exceeds the amount of awarded property claim of the injured party (victim).
i Obtaining evidence
Pursuant to the Article 284 of Law on civil procedure it is possible to seek securing of evidence before initiating civil proceeding, as well as during the conduct of civil proceeding. The reason for securing of evidence is if there is reasonable concern that evidence will disappear or that its later presentation would not be possible. The Court shall render a separate decision and schedule a special hearing for presentation of evidence. The procedure is usually urgent and prompt.
Court Pursuant to the Article 241 and 242 may from the defendant and a third person to request a document that is in possession of them. Such decisions can be enforceable. The court may fine the person who does not present the document upon the court decision.
A party may refuse to present a document if by this document party has obtained some information in confidence:
1) as representative of a party;
2) as religious confession;
3) as legal counsel, doctor or member of other profession, where there is the duty to keep and protect the confidentiality of information obtained through performing profession or activity;
4) and or especially if they would bring disgrace or significant material damage or criminal prosecution upon themselves or their lineal relatives to any degree and lateral relatives by disclosure of documentation.
If a party who is obliged to present a document to the court denies that it is in the possession of the document, the court may order the party to prove such allegation.
Taking into account all circumstances, the court shall assess the significance of the fact that the party holding the document does not comply with the order of the court to present such document or denies that the document is in their possession, contrary to the conviction of the court.
III FRAUD IN SPECIFIC CONTEXTS
i Banking and money laundering
Law on prevention of money laundering and the financing of terrorism ("Official Herald of RS", no. 20/2009, 72/2009, 91/2010 and 139/2014) set up rules for prevention of money laundering.
This Law prescribed actions and measures to be undertaken for the purpose of detection and prevention of money laundering.
Actions and measures for the detection and prevention of money laundering should be undertaken before, during and after receiving, converting, keeping, using, depositing and withdrawing cash and foreign currency from an account, cross border assets transfer, business operations which result in acquisition of assets or any treatment of the assets (hereinafter referred to as: transactions).
Obligors and responsible persons within obligors are obliged to undertake actions and measures for detection and the prevention of money laundering.
The Law prescribes that Obligors of undertaking actions and measures for detection and the prevention of money laundering are: banks; an exchange offices; companies for managing investment funds; companies for managing of the Voluntary pension funds; companies of financial leasing; insurance, insurance brokerage, insurance companies for insurance and insurance agents who are licensed to conduct life insurance business; persons dealing with postal communications; broker-dealers; organizers of special games of chance in casinos; organizers of games of chance to the Internet, by telephone or other telecommunications link; Auditing; authorized auditors.
Obligors are also entrepreneurs and legal entities that carry out the following activities: in real estate brokerage; providing accounting services; tax advices; assistance in credit transactions and provision of loans; factoring and forfeiting; provision of guarantees; providing money transfer services; as well as Attorneys at law and Law offices.
The obligor is bound to establish the identity of the customer, collect data about the customer and the transaction as well as other data which is, for the purpose of this Law, relevant for the detection and prevention of money laundering (hereinafter referred to as: Identification) in several cases, of which the most important for understanding the fraud described in the following text are:
- when opening an account or establishing other form of business cooperation with the customer;
- in case of any transaction (cash or non-cash) or several interrelated transactions with the total sum amounting to or exceeding EUR 15.000 in dinar counter value according to the official rate of the National Bank of Serbia on the day the transaction is effected (hereinafter referred to as: Dinar counter value) except in the case when the identification has already been performed on the basis of item 1 of this Paragraph;
- in case of any transaction (cash or non-cash) regardless of the value of transaction if there are reasons to suspect money laundering with regard to a transaction or a customer;
The obligor was bound to refuse to effect the transaction if it was not able to establish the identity of the customer according the Law.
Bank secrecy in legal system of Republic of Serbia
In legal system of Republic of Serbia, bank secrecy rules are regulated by Law on banks ("Official Herald of RS", No. 107/2005 and 91/2010). Serbian Law on banks defines bank secret by Article 46 and prescribes that bank secret shall be considered as a business secret and that following shall be considered as a bank secret: Data which are known to a bank, and which refer to personal data, financial status and transactions, as well as ownership or business relations of the clients of such bank or another bank; Data on balance and transactions on individual deposit accounts; Other data which the bank has become aware of in the course of performing business activities with clients.
Also Law on banks prescribes that following shall not to be considered as a bank secret: Public data and data accessible from other sources to interested persons with legitimate interest; Consolidated data on the basis of which the identity of an individual client is not disclosed; Data on bank shareholders and the amount of their participation in the bank share capital, as well as the data on other persons holding a participation in the bank and the data on such participation, regardless of whether they are bank clients; Data related to timeliness of a client fulfilling obligations towards the bank.
Serbian Law on banks prescribes several exceptions from obligation to guard bank secrets. The obligation to guard bank secrets shall not apply if the data are disclosed: on the basis of the decision or request of the competent court; for the needs of Ministry of Internal Affairs, which is the authority responsible for combating organized crime and the authority responsible for preventing money laundering, according to the regulations; in connection with property proceedings, on the basis of a request of the guardian of the property or the consular representative offices of foreign states, upon submission of written documents which prove legitimate interest of these persons; in the case of execution by the competent authority regarding property of the bank's client; to regulatory authorities of the Republic of Serbia for the purpose of performing activities within their field of competence; to a person established by banks for the purpose of collecting data on the total amount, type and timeliness in fulfilling obligations of individuals and legal entities, which are clients of banks; to a competent authority with regard to performing the supervision of payment system operations of legal entities and individuals conducting their activities, in compliance with payment system regulation; to tax administration pursuant to regulations which regulate activities within its field of competence; to the authority competent for the supervision of foreign currency operations; upon the request of the organization for deposit insurance, in compliance with the law which governs deposit insurance; to foreign regulatory authority under the conditions stipulated in the Memorandum of Understanding, concluded between the foreign regulatory authority and the National Bank of Serbia.
Except for the provisions specified above, a bank shall have the right to disclose the data that represent bank secret to the investigative judge, public prosecutor, and courts and/or other bodies that have public and legal authorities, solely for the purpose of the protection of its rights in compliance with the law.
The rights of creditors in national and international insolvency proceeding are regulated with the Law on insolvency ("Official Herald of RS", no. 104/2009, 99/2011 – other law, 71/2012 – decision of CC and 83/2014)
a) Rights of creditors in National Insolvency Proceeding
The insolvency proceeding in Republic of Serbia has following phases:
- preliminary insolvency proceeding;
- opening the bankruptcy proceeding;
- Submitting a claim of all creditors;
- Realization and distribution of bankruptcy property and settlement of creditors;
- Conclusion of bankruptcy proceedings;
- Reorganization which can be filed concurrently with the petition for insolvency or after the opening of insolvency.
Insolvency creditors and secured creditors may satisfy their claims against the debtor only through insolvency proceedings by submitting their claims.
An insolvency creditor with a final court decision in his favour from a litigation to which he was instructed shall be entitled to request appropriate corrections to be made to the final list of claims.
b) International insolvencies
International insolvencies in legislation of the Republic of Serbia are also regulated by the Law on insolvency.
By the provisions of this law, international insolvency exists if foreign court or other foreign authority that exercises control or supervision on the assets or operations of the debtor or a foreign representative require assistance in connection with a foreign proceeding, court or creditor asks for help in a foreign country in connection with the bankruptcy proceedings that in Serbia are conducted in accordance with Law on insolvency or a foreign proceeding is conducted simultaneously with the insolvency procedure in the Republic of Serbia.
In general, on insolvency proceedings and its effect the law of the State in which insolvency proceedings started is applicable, unless it is stipulated otherwise by this Law.
In case of recognition of foreign proceeding under this Law, the laws of the Republic of Serbia shall apply to assets subject to excluding rights or secured assets and rights located in the territory of the Republic of Serbia, while the effects of insolvency on employment contracts are governed by the law which is applicable to the contracts itself.
Considering the recognition and confirmation of an foreign insolvency proceeding, the competent court is the Commercial court in whose area of jurisdiction the greatest part of assets of the debtor in the Republic of Serbia are located.
A foreign representative is entitled to approach directly to a court in the Republic of Serbia, i.e. has the right of direct access, the right to apply to commence an insolvency proceeding if conditions have been met to commence such a proceeding under Serbian Law on insolvency and to participate in a proceeding regarding the debtor.
A foreign representative may apply to the appropriate court in the Republic of Serbia for recognition of the foreign proceeding in which the foreign representative has been appointed, whereby the foreign representative shall be required to prove his status, accompanied by a statement made by the foreign representative identifying all foreign proceedings in respect of the debtor that are known to the foreign representative, translated into Serbian language.
c) Contesting debtor’s legal actions in insolvency proceeding (asset recovery in insolvency proceeding in Republic of Serbia)
Law prescribes rules on contesting debtor’s legal actions in insolvency proceeding.
According to the provisions of this Law, bankruptcy administrator, on behalf of the debtors, as well as creditors may contest legal transactions and other actions entered into or taken before opening the bankruptcy proceedings that are interfering with equal settlement of bankruptcy creditors, or damaging the creditors, as well as transactions and actions putting some creditors in a more favourable position over the others (hereinafter: favouring creditors).
Contesting of debtors legal actions can be performed from the day of opening bankruptcy proceedings until the day when the hearing on the main distribution of the bankruptcy estate is held.
What Legal transaction or another action may be contested under the regulation of Law on insolvency:
In regular settlement - Legal transaction or another action taken within six months before filing the petition initiating bankruptcy proceedings, providing security or settlement to a creditor in the manner and at the time in accordance with the substance of his right, may be contested if the bankruptcy debtor was insolvent at the time of taking this action, and the creditor knew or had to know of its insolvency.
In irregular settlement - Legal transaction or action providing security or settlement for one creditor which he was not entitled to request, or was entitled to request but not in the manner and at the time when it was provided may be contested if it was provided within 12 month before submitting the petition or initiating the bankruptcy proceeding.
In case of direct damage to bankruptcy creditors - A legal transaction of the bankruptcy debtor directly damaging the creditors may be contested if:
In case of intentional damaging of creditors - Legal transaction or action, entered into or taken with the intent to damage one or more creditors within five years before submitting the petition for initiating bankruptcy proceedings or after that may be contested if the bankruptcy debtor’s counterpart knew of the bankruptcy debtor’s intent. Knowing about intent is presumed if bankruptcy debtor’s counterpart knew there was a threat of insolvency against the bankruptcy debtor and that the action would damage the bankruptcy creditors.
Legal transaction or action of the bankruptcy debtor is contested by filing a claim initiating litigation. Also, legal transaction or action of the bankruptcy debtor may be contested by a counterclaim or objection in the litigation.
The plaintiff in litigation proceeding may be the creditor and the bankruptcy administrator, on behalf and for the account of bankruptcy debtor. The claim is instituted against the individuals (contestation opponent) with whom a legal transaction was entered into or against whom the action was taken and against the bankruptcy debtor, except if the bankruptcy administrator did not file a claim on his behalf. The claim contesting a legal transaction or a legal action may be instituted against the inheritor or other legal successor of the contestation opponent.
Effects of contestation - If the claim contesting a legal transaction or other legal action is duly adopted by competent court, the contested legal transaction or action shall have no effect on the bankruptcy estate and the contestation opponent shall be obliged to return all assets acquired from the contested transaction or other action to the bankruptcy estate. After returning these assets the contestation opponent shall realize his counterclaim as a bankruptcy creditor.
In Serbian jurisdiction does not exist fraud cases related with arbitration in any kind of relationship.
iv Fraud’s effect on evidentiary rules and legal privilege
Serbian legal system does not provide a general provision which regulates use of information obtained by rules on disclosure.
Indirectly, in respect to the profession of attorney at law in Republic of Serbia there are no restrictions for use of information obtained by rules on disclosure in court proceeding beside those prescribed in Article 20 of Serbian Law on advocacy ("Official Herald of RS", no 31/2011 and 24/2012) which regulates professional confidentiality and which prescribes that attorney at law is obliged, in accordance with bar statute and bar code, to keep as professional secret and to ensure that persons employed in his law office keep it as professional secret, all information which client or his representative entrusted him about and in respect to the case in which he has provided legal service and every other information which he has obtained or gathered, in preparing, during and after representation of client.
IV INTERNATIONAL ASPECTS
Conflict of law and choice of law in fraud claims
Recognition and enforcement of foreign judgments is regulated by the Serbian Law on resolving conflict of laws with regulations of other countries ("Official Herald of SFRY", no. 43/82 and 72/82 - correction, "Official Herald of FRY", no. 46/96 and "Official Herald of RS", no. 46/2006 and "Official Herald of RS", no. 46/2006 – other law).
A foreign court judgment shall be equated with the decision of the court of Republic of Serbia and have legal effect in Serbia only if it is recognized by a Serbian court.
Also, the decisions of other foreign state organs can be recognized by the Serbian court, if such decisions are considered equal with court judgments in that foreign state.
The foreign judgment has to be final by the law of that foreign state.
Foreign court judgment will not be confirmed by the Serbian court if in the legal matter in question there is an exclusive jurisdiction of the Serbian court, if in the same case the court or other authority of the Republic of Serbia made a final decision, if the Republic of Serbia already confirmed another foreign court judgment rendered in the same matter, or if it is contrary to the Constitution of the Republic of Serbia.
A foreign court judgment shall not be recognized if there is no reciprocity. Reciprocity exists if foreign country in question recognizes judgments of Serbian courts. The reciprocity in the field of recognition of foreign decisions shall be presumed until evidence to the contrary is presented.
When the enforcement procedure is in question and enforcement creditor execution proposal is based on a foreign executive title, it must be submitted in original or certified copy, translated into Serbian language, together with proof of its legal validity or enforceability under the law of the country which issued the executive title.
Collection of evidence in support of proceedings abroad
International legal assistance and aid in criminal and civil proceedings (Rules on rogatory)
Rules of Rogatoria are governing rules in respect of international legal assistance and aid. A letter rogatory or letter of request is a formal request from a court to a foreign court for some type of judicial assistance. The most common remedies sought by letters rogatory are service of process and taking of evidence.
In accordance with Serbian civil procedure code, Serbian courts are obliged to seek and provide legal aid to foreign courts in cases determined by the international agreements and if there is reciprocity in providing legal aid. If there is doubt concerning reciprocity, the Ministry of Justice shall give an expert opinion.
The courts provide legal aid to foreign courts in compliance with the national laws. An action requested by a foreign court may also be done as the foreign court requires and in accordance with foreign proceeding regulations, only if this is not contrary to the laws of Serbia.
Serbian civil procedure code prescribes that if it is not otherwise stipulated by an international agreement, courts shall proceed upon the request of a foreign court for legal aid only if such requests are submitted through diplomatic channels and if the application and attachments are in the Serbian language or officially translated in Serbian.
Serbian courts seek international aid and assistance in accordance with international agreements / treaties on assistance and aid which Republic of Serbia has concluded with other countries.
Unless it is otherwise stipulated by an international agreement, requests of a domestic court for legal aid are submitted to foreign courts through diplomatic channels. The applications and attachments must be written in the language of the relevant country or officially translated in that language.
Rules of rogatory in criminal proceeding in Republic of Serbia are set in Law on international legal aid in criminal matters ("Official Herald of RS", No 20/2009).
Aforementioned Law prescribes that international legal assistance shall include:
Other forms of mutual legal assistance include:
1) the performance of process activities, such as summoning and sending documents, interrogation of the accused, trial witnesses and expert witnesses, investigation, search of premises and persons, seizure;
2) the implementation of measures such as surveillance and recording of telephone and other conversations or communications and optical recording entities, controlled delivery, providing simulated business services, concluding simulated legal affairs, use of undercover investigators, computer search and processing;
3) the exchange of information and delivery of documents and items related to criminal proceedings in the requesting State, the submission of data without the request, the use of audio and video conferencing, the establishment of joint investigation teams;
4) a temporary hand over of a prisoner for examination before a competent authority of the requesting state.
It also prescribes that international legal assistance shall be provided in the proceedings relating to a crime which at the time the request for assistance falls within the jurisdiction of state which requested assistance.
International legal assistance is provided in the proceedings instituted before the administrative authorities for offense punishable under the law of the requesting state or of the requested state.
International legal assistance is also provided at the request of the International Court of Justice, the International Criminal Court, European Court of Human Rights and other international institutions established by an international treaty ratified by the Republic of Serbia.
The authorities responsible for providing of international legal assistance are domestic courts and public prosecutors offices.
A request for providing international legal assistance must be submitted in the form of the request.
i Seizure of assets or proceeds of fraud in support of the victim of fraud
c) Temporary measure and Preliminary measure in criminal and civil proceedings in Republic of Serbia
Temporary measures in legislation of Republic of Serbia are regulated both in criminal and civil proceedings, by Serbian Law on enforcement and security / enforcement law ("Official Herald of RS", no. 31/2011, 99/2011 – other law, 109/2013 – decision of CC, 55/2014 and 139/2014).
A temporary measure may be ordered before or in the course of a court (as we have previously stated both in civil and criminal proceeding as well as in enforcement proceeding) or administrative proceeding, as well as after the termination of such a proceeding, until such time as enforcement proceeding is conducted.
There are two types of temporary measures:
Requirements set for imposing such measure are that temporary measure for securing monetary claims may be ordered if the enforcement creditor shows the probability of the existence of a claim and the risk that without such temporary measure the enforcement debtor would prevent or considerably hinder satisfaction of the claim by disposing of, hiding or otherwise making unavailable his property or means. It is considered that the risk exists especially if the claim is to be realized abroad, if there is already an enforcement procedure against the same debtor for due instalment payments, if the paying obligations exceed the debtor’s earnings or there already has been an unsuccessful enforcement procedure against the same debtor, because he refused to give data about his assets, or gave untruthful data about his assets.
By this temporary measure following measures may be imposed:
- prohibition on the disposal of movable property, and possible confiscation of that property;
- prohibition on the disposal or mortgage of immovable property;
- prohibition to a debtor’s debtor to pay a claim to the debtor or to hand over property, and the prohibition to the debtor to receive property, or to collect a claim and dispose with it;
- order to a bank or other financial institution, in which the debtor has an account, to deny the payment of an amount which is determined by the temporary measure;
- Confiscation of cash and securities and their depositing.
Requirements set for imposing such measure are that temporary measure for securing non-monetary claims may be ordered to secure a non-monetary claim if the enforcement creditor has shown the probability of the existence of the claim and a risk that otherwise satisfaction of the claim would will be prevented or considerably hindered. A temporary measure may also be ordered when an enforcement creditor shows the probability that the temporary measure is necessary to prevent use of force or infliction of irreparable damage.
By this temporary measure following measures may be imposed:
- prohibition on the disposal and pledge of movable property concerning which the claim is directed, confiscation of these things, and entrusting them to an execution creditor or a third party, or safekeeping to the Court;
- prohibition on the disposal or mortgage of immovable property concerning which the claim is directed, and registration of such prohibition in the public registry;
- prohibition on taking actions that could harm the creditor, and prohibition to make changes on property on which the claim is directed;
- prohibition to debtors debtor to hand over property on which the claim is directed;
- prohibition on disposal and pledge of stocks and shares in the company concerning which the claim is directed, and registration of such prohibition in the Central Register of securities;
- order to the debtor to perform certain actions necessary to preserve the movable or immovable property, prohibit its physical change, damage or destruction;
- authority to the creditor himself, or through a third party to take an action or acquire a specific thing at the expense of the debtor, especially if it is necessary to establish the status quo ante;
- payment of compensation to an employee during a dispute about the illegality of the decision to terminate employment;
- Temporary arrangement of the dispute, in order to eliminate the danger of violence or major irreparable damage.
In criminal proceedings, on the motion of authorized persons, temporary measures can be determined for securing the claim for damages, under the provisions of law governing the enforcement and security, for damages that arose from the commission of a criminal offence or unlawful acts that are prescribed by law as a criminal offence.
A decision of the Court by which the temporary measure is determined must specify the duration of the temporary measure. When such a decision is made in civil proceedings before filing a lawsuit or commencing other legal proceeding, such measure must be justified by filing a lawsuit, or commencing other legal proceeding within the period set by the court.
Preliminary measures in legislation of Republic of Serbia are regulated both in criminal and civil proceedings, by Serbian Law on enforcement and security / enforcement law ("Official Herald of RS", no. 31/2011, 99/2011 – other law, 109/2013 – decision of CC, 55/2014 and 139/2014).
Requirements for imposing a preliminary measure - A preliminary measure shall be imposed on the basis of a decision of a domestic court on a monetary claim which has not become final or enforceable, if an enforcement creditor establishes the probability that there is a risk that, without such securing, satisfaction of the claim will be impossible or made significantly more difficult.
Presumed risk - a risk shall be deemed to exist if the motion for security is based on one of the following decisions:
Types of Preliminary Measures - The court may order the following preliminary measures:
The court may on request of the enforcement creditor, and in accordance with the circumstances of the case, order two or more preliminary measures if necessary.
Decision on Imposing Preliminary Measure - A decision imposing a preliminary measure must, specify the amount of the claim which is secured with interest and costs, the preliminary measure and its duration.
ii Enforcement of judgments granted abroad in relation to fraud claims
If the enforcement creditor’s motion to enforce is based on a foreign executive title, he must submit it in the original or a certified copy, translated into the language which is in official use in the court, together with proof of the finality and enforceability under the law of the country of the executive title. 
A foreign executive title previously recognized by the domestic court in accordance with law shall be enforced in the same manner and procedure which is applicable to enforcement of domestic executive titles. Also, an enforcement creditor may initiate an enforcement procedure before a competent court in the Republic of Serbia on the basis of a foreign executive title that has not been previously recognized by the domestic court. When the motion to enforce has been filed on the basis of a foreign executive title that has not been recognized, the court shall decide on recognition of such document as a preliminary matter.
iii Fraud as a defence to enforcement of judgments granted abroad
The usual defence i.e. objections of recognition of a foreign court decision are that before a foreign court has not given an equal right to the entity or person from Serbia to exercise their rights and interests, that it was not provided proper delivery of the summons, pleadings and court decisions, by which it was denied the right to discuss before the court, that it did not have an adequate translator for Serbian language, that foreign court decision is contrary to the constitutional order of the Republic of Serbia and is not eligible for legal domestic use.
3) Details of recent significant case - Actual FraudNet case in Republic of Serbia related to aforementioned Laws
In the following part of the text we shall present you a fraud case. It specifically relates to a fraud and illegal and unauthorized disposal of funds in the accounts at the commercial banks.
Company A had opened several bank accounts in the Republic of Serbia all in accordance with Decision on the terms and manner of opening, maintaining and closing of a bank account ("Official herald of RS", no. 33/2005 and 25/2009) rendered by the Governor of National Bank of Serbia in accordance with Article 3 paragraph 4 and Article 36 paragraph 2 of Serbian Law on payment instructions.
The fraud case itself was initiated at the beginning of the week, by two unidentified persons, one of whom falsely represented himself as a representative of company A to bank X by submitting a request to open a bank account. The bank is located outside company A’s seat and company A did not have an open account with the bank.
Unidentified person who falsely represented himself as a representative of the company A has submitted to the employees of the bank X the following documentation:
a) business name of company A - this data is public and it is possible to find it in the Business Register Agency;
b) headquarters of company A - this data is public and it is possible to find it in the Business Register Agency;
c) business address of company A - this data is public and it is possible to find it in the Business Register Agency;
d) phone number of company A - on the list of authorised signatures for the persons authorised to sign transfer orders were entered phone numbers which were not the phone numbers of company A;
e) identification number of company A - this data is public and it is possible to find it in Business Register Agency;
f) Company seal and signature of the company representative - data of the representative entitled for representation of the company A is public and it is possible to find it in Business Register Agency while it is possible to make a company seal in any store equipped for that purpose.
Considering that bank accounts are opened in a short time of no more than 24 hours, the bank opened the account on Thursday in accordance with the request of the unidentified person who falsely represented himself as representative of company A.
Meanwhile, unidentified persons have in another bank Y in the same manner opened a bank account for company B.
Afterwards, on Friday afternoon, in bank X, in which bank an account of company A had been opened, unidentified person who had falsely represented himself as a representative of company B entered with a counterfeited bill allegedly issued by company A for the purpose of securing company A’s duties towards company B for delivered goods, with the due date of the bill being that Friday. This counterfeited bill had been signed by the unidentified person who had falsely represented himself as a representative of company A and had previously opened an account in the name of company A with bank X as well as sealed by the forged company seal of the company A.
At that moment bank X did not have any doubt as to the authenticity and validity of the bill and immediately released the bill in accordance with the procedure for enforced collection. Considering that in the Republic of Serbia enforced collection is conducted by the National Bank of Serbia, at the request of the bank which has received the bill and on all of the bank accounts of the debtor registered under it tax identification number at the moment when the National Bank of Serbia started enforced collection, all available funds from all of the bank accounts of company A had been transferred to the account of company B.
Afterwards all of the funds which had been taken from the bank accounts of company A had been transferred to the bank account of company B with bank Y from which account in accordance with previously prepared transfer orders these funds were transferred from the bank account of company B with bank Y to the various individual accounts of natural persons.
Company A found out and registered an irregularity immediately after the releasing of the bill through the enforced collection by bank X in such manner that it could not make payment of its obligations because it did not have sufficient funds available in the accounts to make a payment.
Also, company A was informed at that moment that it was placed under the enforcement collection proceeding by National Bank of Serbia enforced all under request of company B with whom company A had never been in business relations.
The transfer of funds from the accounts of company A was stopped at the time when funds from the accounts of company A amounting to something like more than half of the value indicated on the bill had been collected through the enforced proceeding.
Once the enforced collection and further transfer of money from the accounts of company A had been stopped, company A addressed to bank X, which bank has opened illegally these bank accounts, with a request for reimbursement of damages and with request for closing illegally opened bank account by the unidentified person who had falsely represented himself as a representative of company A.
Meanwhile, bank X responded to company A that it considered that it does not bear any material liability to company A for any damages and refused to close the illegal account at the request of company A.
At that moment, company A had option to wait for identification and arrest of the offenders of the crime (which offenders had not been identified for 2 years) and to submit a claim for damages against them in criminal proceeding or to start civil litigation proceedings against the offenders beside possible criminal proceeding or to immediately initiate civil litigation proceeding against bank X for reimbursement of damages because of providing services while not complying with Decision on the terms and manner of opening, maintaining and closing of a bank account and obvious irregularities while opening an account for company A with bank X.
Company A decided to initiate a civil litigation proceeding against bank X, for reimbursement of damages on the basis of providing services while not complying with Decision on the terms and manner of opening, maintaining and closing of a bank account and obvious irregularities while opening an account for company A with bank X.
In civil litigation proceeding, the court has determined that account of company A with bank X had been opened while not complying with the rules of procedure for opening bank accounts (Decision on the terms and manner of opening, maintaining and closing of a bank account).
The acting court in accordance with the provisions of Article 18 of Law on contract and torts (duty of all parties to carry out their obligations and duties with due care or in some case increased care) obliged bank X to reimburse the damages to company A and to close the opened bank account with bank X.
Afterwards, company A has under this final court decision initiated proceeding on enforced collection against bank X for the payment of damages and managed to reimburse damages with interest rate throughout enforced collection proceeding.
V CURRENT DEVELOPMENTS
Even the most developed legal systems have their own voids, insufficiently regulated areas or established practices. In my opinion, the practice and the legislation must change in a manner that an institutional cooperation exists in the regulated legal framework and basis between the state body, courts, prosecutors, police and victims of fraud, exchange of data, evidence and other. That institutionalized relationship in all aspects would lead to better results in proceedings that aim to interest of victim of frauds and assets recovery.
Lawyer Tomislav Šunjka
 Article 50 of the Criminal Procedure Code
 Article 257 of the Criminal Procedure Code
 Article 191 of Law on civil procedure
 Article 155 of Law on contracts and torts
 Article 18 of Law on contracts and torts
 Article 18, paragraph 2 of Law on contracts and torts
 Article 567 of Company Law
 Article 13 of Law on civil procedure
 Article 170 of Law on contracts and torts
 Article 281, paragraph 1 of Law on contracts and torts
 Article 281, paragraph 3 of Law on contracts and torts
 Article 283, paragraph 3 of Law on contracts and torts
 Article 285, paragraph 1 of Law on contracts and torts
 Article 12 of Law on enforcement and security
 Article 18 of Law on enforcement and security
 Article 20 of Law on enforcement and security
 Article 39 of Law on enforcement and security
 Article 40 of Law on enforcement and security
 Chapter 15 of Criminal procedure code
 Chapter 16 of Criminal procedure code
 Chapter 17 of Criminal procedure code
 Chapter 17 of Criminal procedure code
 Article 52 of Criminal procedure code
 Article 2 of Law on confiscation of assets derived by criminal offence
 Article 6 of Law on confiscation of assets derived by criminal offence
 Law on civil procedure
 Article 4, paragraph 1 of Law on prevention of money laundering and the financing of terrorism
 Article 4, paragraph 2 of Law on prevention of money laundering and the financing of terrorism
 Article 9 of Law on prevention of money laundering and the financing of terrorism
 Article 48 of Law on banks
 Article 103 of Law on banks
 Article 184 of Law on insolvency
 Article 186 of Law on insolvency
 Article 119 of Law on insolvency
 Article 120 of Law on insolvency
 Article 122 of Law on insolvency
 Article 124 of Law on insolvency
 Article 129 of Law on insolvency
 Article 130 of Law on insolvency
 Article 20 of Law on advocacy
 Article 86 of Law on resolving conflict of laws with regulations of other countries
 Article 90 of Law on resolving conflict of laws with regulations of other countries
 Article 91 of Law on resolving conflict of laws with regulations of other countries
 Article 92 of Law on resolving conflict of laws with regulations of other countries
 Article177 of Law on civil procedure
 Article 178 of Law on civil procedure
 Article 2 of Law on international legal aid in criminal matters
 Article 83 of Law on international legal aid in criminal matters
 Article 4 of Law on international legal aid in criminal matters
 Article 293 of Law on enforcement and security
 Article 294 of Law on enforcement and security
 Article 296 of Law on enforcement and security
 Article 297 of Law on enforcement and security
 Article 276 of Law on enforcement and security
 Article 277 of Law on enforcement and security
 Article 279 of Law on enforcement and security
 Article 21 of Law on enforcement and security
 Article 21 of Law on enforcement and security