In every legal system, the State has a position of authority as the public body responsible for the protection of the interests of private persons. This is considered to be a necessity in all well-functioning societies; however, there is a fine line between an abuse of power and law enforcement. Therefore this fine balance has to be carefully regulated in all areas of law.

As this matter raises issues in all fields of law, the aim of this article is to discuss one which was recently raised in the Romanian courts. In order to recover the state’s prejudice caused by an offence, the court decided to confiscate a piece of land free of all warranties, even though a bank was having a mortgage over the land in order to recover its debt. The questions raised are the following: what will happen with the bank’s mortgage and moreover, does the State’s interest solely justify the termination of a secured right? 

Firstly, I will discuss the arguments brought by the courts and by theoreticians in order to justify such an action. Secondly, I will present how a private person could defend himself/herself in this situation based on the Romanian doctrine, Romanian and European Court of Human Rights (ECHR) case law. 

In my opinion, the core issue in this case is that courts had no difficulties in deciding to confiscate the goods and to make the mortgage disappear. The judges argue that public interest must be safeguarded and given priority over private interest, even though there are no clear regulations stating this. On one hand, the special confiscation of the land procedure aims to ensure the reparation of the prejudice and the enforcement of a criminal sentence. On the other hand, the mortgage of the bank seeks to protect its claim from preference of other creditors. In the present case, the Romanian courts gave priority to the state interest, placing the private interest of the bank on an inferior place. This way, banks became simple creditors which can only satisfy their claim after the state executes the land and so, the general interest prevailed over the private one (Popescu and Dobre, 2013). According to the court, this is the only way in which the efficiency of the institution of special confiscation can be ensured. The fact that the bank’s mortgage was made public long before the confiscation has no influence over this institution.

Another argument brought in favour of the states’ right to confiscate and to eliminate the mortgage is that while the mortgage has a private nature, the confiscation is a public legal measure, so it must prevail. However, the same authors arrived at the conclusion that in no way the legality of the measure has an effect over the person’s possibility to recover his debt (Popescu and Dobre, 2013). I agree with the last argument and also believe that the courts cannot base their decision only on the different judicial nature of the two rights: the public nature interest of the State versus the private nature interest of the Bank. It is clearly stated in the law that once the mortgage is made public, it has a preferred rank as opposed to other creditors, no matter who the other creditors are.

The bank’s arguments in this situation are that the state could have had a preferred rank to recover its prejudice only by respecting the conditions and the limits set by the law. The Romanian doctrine is trying to bring arguments supporting the fact that the existing legislation cannot allow for this to happen. For example, it was said that the confiscated goods become the State’s property as a result of criminal conviction, without affecting any security interests (e.g. a mortgage) that existed and were made public before the criminal conviction. Moreover, these rights can be liquidated respecting the conditions set by the law (Hoffman, 2008).

Another argument in favour of the private person’s interest often brought in courts is that since the State is recovering its prejudice through the Ministry of Finance, the debt becomes a fiscal one and so, the execution of it has to respect the procedure regulated in the Fiscal Procedure Code. According to this, when executing the goods, it does not matter whether the creditor is a private person or the State. What matters is the date when the mortgage was made public. If the mortgage was already public when the criminal conviction was given, the interest of the bank will have priority over the interest of the state. Thus, when it is time to distribute the amount of money after selling the goods, the execution authority is forced to contact the creditor that has a mortgage made public previous to the conviction in order for him to collect his debt first. Even though this regulation is protecting the persons without being subject to interpretation, the courts tend to overlook it, therefore it is rarely enforced. Unfortunately, the conclusion is almost always that the general interest of the State has a priority and that is why the provisions of the Fiscal Procedure Code or the ones regulating the preferential character of the mortgage have no applicability in this situation. 

Since the regulations of the mortgage, which claim that the creditor can execute a good no matter in whose hands it is, or those of the Fiscal Procedure Code, are not always taken into consideration by courts, there is a need for a new argument. In a similar case to the one discussed in this article, the bank’s lawyer tried to argue that by paralysing the mortgage, the State is violating the European Convention of Human Rights. Article 1 of Protocol 1 of this Convention provides the right to peaceful enjoyment of one’s possessions which, according to the precedents, also includes the rights that emanate from a mortgage. The applicability of this article is extended to protecting not only the right of property, but also other rights in relation with one’s property, even claims and economic interests. They all constitute financial values according to the ECtHR case law (Birsan, 2005).  The conclusion is that the State, in this case, is not respecting its negative obligation which consists of not taking any measures which violate the private person’s right to protect their claim (Chirita, 2008). As a result of the criminal conviction, the economic interest of the bank is directly affected. However, this limitation is not clearly regulated in Romanian law and such claims can be based solely on the ECtHR case law. 

In conclusion, even though the State is entitled to have certain privileges due to the general interest of the society, the courts should not use this argument whenever there is a conflict between the public and private interest. Otherwise, there is a high risk of power abuse which will lead to the violation of the European Convention of Human Rights. There should be a balance between these interests and the only way it can be reached is through a clear legislation in this field.


Our Supporters Opportunities Masters Abroad Newsletter