Seizure in the hands of a third party under a "framework agreement" (the example of the online e-sales platform)

legal insight    

October 2023

Eleanna Karanikola, Lawyer

Summary: A business partners with a marketplace platform to make online sales. However, this business has debts to third parties, who decide to seize what it receives each month from the marketplace platform. What are the lenders' options and how does this type of enforcement process ultimately work? This article discusses certain issues in relation to third-party seizure in the context of the debtor's legal relationship with the online services platform. 

1. Introduction

The attachment of the debtor's claims in the hands of a third party is a particularly important weapon in the quiver of creditors, and as a result it has become one of the most important means of enforcement, as it can ensure the attaching creditor the immediate and effective satisfaction of its monetary claims. The legislature, in the more specific provisions of Articles 982 et seq. of the Code of Civil Procedure, defined the procedure for seizure in the hands of a third party, defining the object of the seizure, the procedure and method of enforcement, as well as the means of defence of the enforcing creditor against the inaccurate or incorrect declaration of the third party. In particular, the practical importance of that enforcement measure lies in the fact that a large proportion of modern economic transactions give rise to monetary claims which, until they are satisfied, form part of the assets of legal entities. A decisive element in the successful outcome of the attachment procedure in question is the correct choice of the third party on whose behalf the creditor seeking recovery of the claim will choose to enforce the attachment in order to obtain the recovery of his claim.

To that end, and in order to increase the chances of their claim being satisfied (in addition to the imposition of this type of seizure on credit institutions, which are the main recipients of such seizures), creditors, taking into account the structure of modern economic and commercial life, are now also targeting online platforms for online services with which their debtors cooperate, bearing in mind that a large volume of transactions is now carried out online. As a result, more and more creditors are choosing to levy a seizure on these online platforms in order to increase their chances of recovering their claims. 

In particular, 'online platforms' are those online platforms that provide online business-to-consumer intermediation services, i.e. platforms that mediate the provision of access to specific content to internet users. The majority of these online platforms are e-commerce marketplaces, social media, online application distribution services and collaborative marketplaces, in which various business users operate. Indicatively, such platforms can be found both on an international scale, such as Alphabet, Amazon, Apple, ByteDance, Meta, Microsoft, which count millions of users and have recently been designated as 'Gatekeepers', and on the domestic market, such as Skroutz.gr and Efood.

2. Conditions and procedure for imposing a seizure in the hands of a third party

A third-party attachment is imposed by the enforcing creditor, who is equipped with an enforceable title under which his claim against the debtor can be paid (the majority of enforceable titles are court judgments or payment orders), decides to proceed against a third person who either owes a pecuniary claim against the debtor, or possesses movable property which appears to be the property of the debtor, or is obliged to transfer ownership of such property to the debtor. It should be noted that seizure in the hands of a third party is a means of enforcement, with the result that the general provisions on enforcement apply, always in the light of the specific nature of seizure in the hands of a third party, which will be briefly explained:

Α.  The general conditions for enforcement:

A basic prerequisite for the validity of the procedure is the issue of an enforceable title against the debtor. In particular, the enforcing creditor must be provided with an enforceable title (as listed in Articles 904 - 905 of the CCP), which must be valid in the sense that it must not have become effective, in particular in relation to a provisionally enforceable judgment or payment order. Subsequently, as provided for in Article 918 of the CCP, the enforceable instrument in question will have to be executed in the enforceable form and a document will have to be issued, by virtue of which it will be possible to recover the claim against the debtor who is the subject of the attachment, provided that the claim of the creditor who is the attaching creditor is certain and has been settled (see Articles 915 to 916 of the CCP). Consequently, the debtor must be served with a copy of the copy of the enforceable title with a cheque for execution (see Article 924 CCP) and the period of three (3) working days from the date of service must have elapsed (see Article 926 CCP) in order for the creditor to be able to enforce the attachment in the hands of the third party. 

Β. Procedure for enforcement of attachment in the hands of a third party:

According to the provision of Article 983 of the CCP, the attachment in the hands of a third party is enforced by serving an attachment document on the third party and by serving the attachment document on the debtor who is the subject of the attachment. It should be noted that failure to comply with the time limit for notification of the seizure within the exclusive period of eight (8) days from the date of service of the seizure document on the third party shall render the proceedings null and void. Upon such last service, the seizure in the hands of a third party shall be completed and shall be deemed valid. With regard to the attachment document, it must contain (a) the exact description of the executory title and the claim supporting the attachment in the hands of a third party, (b) the amount for which the attachment is imposed, (c) the check to the third party not to pay the debtor's defendant and (d) appoint a counterparty, as defined in par. 1 of Article 983 of the CCP. 

After the above steps have been carried out, the third party is invited, within eight (8) days after being served with the seizure order, to declare in writing to the registry of the magistrate's court of his place of residence, whether the claim seized exists (or whether there is an unseized claim if the attachment was imposed in the hands of a credit institution), whether he has the seized property in his hands, and whether another attachment was imposed on his hands by another creditor and for what amount. In the meantime and until the claim is recovered or the attachment imposed is otherwise lifted, the third party shall be made a bailee of the claim or the movable property and shall be prohibited from disposing of it or, in the case of a pecuniary claim, from paying or setting it off. In addition, as regards the defendant, the law also provides for a prohibition on disposing of the seized claim or movable property.  

It should be noted that, by virtue of the attachment imposed, and provided that the creditor includes in the attachment all future claims arising between the parties, all future claims arising from the legal relationship in question will be assigned to him, without the need to impose a new attachment each time on the executory contract in question. Furthermore, in this case, if the parties decide, as a result of the seizure, to terminate the existing legal relationship and conclude a new contract, this would constitute a circumvention of the institution of attachment in favour of a third party. 

3. Legal relationship between the third party and the debtor in execution: 

As is evident, the institution of attachment in the hands of a third party presupposes the participation of a third party in the enforcement procedure, which is the key factor in the enforcement procedure. A third party, in whose hands the monetary claims of the defendant in enforcement or movable property belonging to the latter are attached, is any natural or legal person, whether public or private, who, by virtue of a legal relationship, owes the defendant in enforcement a certain benefit which is subject to attachment. In the context of a third party attachment, a third party in substance shall be deemed to be a person who is in the position of a debtor vis-à-vis the debtor against whom the attachment is directed by the creditor who is being enforced. It is emphasised that the third party is legally independent of the debtor, as it is the holder of foreign property (and in particular of the object of the attachment) by virtue of its own authority and cannot be a mere collecting agent, which it holds in the name and on behalf of the debtor.

The purpose of this construction is to create a triangular relationship between the creditor - the debtor - the enforcement debtor - the third party, with the aim of satisfying the former more quickly and efficiently. The legal relationship by virtue of which the debtor in default and the third party are parties may take the legal form of any contract, provided that it gives rise to a pecuniary claim by the debtor in default against his third party counterparty, without that claim being dependent on any consideration on his part. 

By way of example, this contractual relationship may be a lease contract, under which the defendant's claim for rent due to him may be seized, or a contract of sale, under which the third party owes a consideration, a certain sum of money as a price to the debtor in execution, provided that the latter has fulfilled his obligations under the contract, but also any contract under which the third party owes a pecuniary claim or a movable thing to the defendant in execution (cf. e.g. a contract of mandate, a contract of servitude, etc.). Of course, most creditors are accustomed to seizing claims held by their debtors against credit institutions, in particular those arising from the maintenance of all types of bank accounts (sight, current, savings, fixed-term deposits, etc.), under the terms of the contract of unauthorised deposit between them. The seizure of bank deposits, provided that the latter are not unseizable (see Article 982(2) of the CCP), is considered the most appropriate solution for the more effective and faster recovery of creditors' claims, with the result that the majority of creditors resort to seizure in the hands of most of the systemic credit institutions in order to ensure full repayment of their claims. 

But what happens when the seizure imposed on the credit institutions is unsuccessful and the debtor in execution has no other assets? 

In this case, the creditor who is enforcing the attachment must seek alternative means of recovering his claim, taking into account the specific characteristics of the debtor in question. More specifically, if the debtor is a sole proprietorship or a company, the creditor must take into account the type of business activity it carries out in order to look for other partnerships from which it can reasonably assume that there will be outstanding financial claims in the context of their business relationship. A typical example of this is the ever-increasing number of businesses working with online platforms that provide online services to their counterparties, as mentioned above. 

These online platforms contract with business users through the establishment of a certain 'framework contract'. This contract is appropriate in the specific cases, as it precisely defines the general framework of the future cooperation between them, and creates a lasting obligation between the parties.  In particular, the 'framework contract' defines the mutual obligations of the parties and the terms that will apply to the individual contracts that they will conclude in the future in order to implement their cooperation, in the sense that it prepares and supplements the individual implementing contracts that will subsequently be concluded. For example, a typical example of this way of doing business is the online platform Skroutz.gr, which draws up a contract with identical content with all the cooperating companies, i.e. a 'framework contract', the terms of which will be compulsorily applied to each individual contract between them in the context of their commercial relationship. However, this 'framework contract' does not oblige the parties to conclude the individual, more specific contracts, because it is usually chosen as the contractual link in cases where the parties are not in a position to foresee precisely from the outset what or how many individual future contracts will be concluded, since the specific content and number of such contracts depends on the needs arising during the course of the cooperation. However, where contracts are concluded to achieve the economic purpose of the parties, the terms agreed in the 'framework contract' will automatically apply. 

Furthermore, in the context of this cooperation between the online platform and the business user in question, mutual claims are created, which may be subject to seizure by the cooperating online platform by the creditor of the business user in question. It should also be noted that, if the creditor includes in the attachment all future claims arising between the parties, all future claims arising from the legal relationship in question will be assigned to the creditor, without the need to impose a new attachment each time on the executory contract in question. In this case, if the parties decide, as a result of the seizure, to terminate the existing legal relationship and conclude a new contract, this would constitute a circumvention of the institution of seizure in favour of a third party.

Simply put, when a commercial shop cooperates with a platform such as Skroutz.gr, the initial cooperation contract does not always result in sales. If sales do occur, there will probably be (depending on the relationship between them) a claim by the shop/business against the online platform, since it is the latter that invoices and not the shop. This receivable, and any future receivable arising from the cooperation between them, can be seized by the store/business's creditors to satisfy any claim of their own. Consequently, the rapid and continuous growth in the presence of these online platforms, both internationally and nationally, provides the lender with an additional opportunity to satisfy its claims, while creating suffocating pressure on the debtor, who is being fired on multiple fronts.

4. As an epilogue:

In summary, third-party seizure is a way out for the creditor in question, who, while having obtained an enforceable title against his debtor, chooses not to proceed directly against himself, either because he has reasonable grounds to suspect that the foreclosure of his assets will be fruitless or because he aims to recover his claim more quickly. Instead, the creditor has the option of seizing the monetary claims or movable property of his debtor, which are in the hands of a third party, by opting for a procedure of enforcement which is distinguished by its speed and effectiveness. Already today, the category of 'third party' has expanded considerably, as more and more creditors, taking advantage of the growing presence of online platforms in commercial life, decide to include them in the enforcement procedure, thus increasing the chances of full repayment of their claims.