Justice system strike costs billions

Officially, the pace of operations slowed in the justice sector. Practically, there is a full strike. The commercial cases, including those for insolvency, will be settled next year. For the legal system, the crisis and the budget constraints turned into a conflict between public institutions.

The High Court of Justice, Romania’s supreme court of law, sued the government and won. At the High Court. The attempt to mediate the conflict at the Constitutional Court failed. With no independent mechanism to finance the High Court, there is no solution at the horizon.

Thus, some billions of euro are blocked in the economy, according to attorney Gheorghe Piperea, specializing in insolvency cases. “There are so many damages. The 40,000 insolvency files that are now open mean a €1.2 billion blockage. In commercial law suits, the amounts are three-four times higher. (...) The Trade Register is open one day per month. There are 200 applications every day,” Piperea said. He added that these applications include requests for suspending micro-enterprises that should pay the lump-sum tax.

There are also lenders that need approval before initiating the foreclosure procedure, and, in the meantime, the debtor can even sell the collateral. Moreover, there are companies that need protection from lenders. According to Piperea, “you can get this protection in five days in Bucharest. In Galaţi [eastern Romania], you cannot,” the attorney said.

Iulian Urban, Senator and attorney at the Urban şi Asociaţii debt collection company, confirms Piperea’s assessments, saying that damages could even by higher. “A state with no justice [system] will collapse. In this case, there is a snowball effect, and damages rise exponentially. We are talking about debt enforcement and insolvency, but also partition, divorce, all with high financial stake. We can easily talk about a €10 billion blockage,” Urban said.

The senator added that Romanians only pay when they are obliged to, and they tend to take advantage of the fact that the country is going through an economic crisis and offer themselves a grace period from payments. “But what will delinquents think, considering they know the law better than 80 percent of the lawyers? Misdemeanors are expected to rise, as well as promissory note and bad cheque frauds,” Urban added.

The situation would be solved if the justice is financially independent, that is, if judicial fees did not go into the local budgets, he added. Lawyer Gabriel Biriş, Tax Advisor at Biriş Goran, said that the situation is catastrophic for the economy and that the effects will still be felt after the protest subsides. Biriş added that this protest of magistrates must be “thought through more responsibly. It is affecting the confidence of investors in the long-run. We are becoming a country that serious investors would not want to come near to. They made the decision to invest and we cannot register their company. They are leaving!”