What is a Negative Declaratory Action?

1) Definition and legal basis

A negative declaratory judgment lawsuit is a lawsuit filed by a person alleged to be a debtor to determine that they are not indebted . The general framework is outlined in Article 106 of the Code of Civil Procedure (declaratory judgment lawsuit); the specific regulation regarding enforcement proceedings is found in Article 72 of the Enforcement and Bankruptcy Law (EBL) . The aim is to establish, through a court decision, that the debt relationship never arose, has ended (e.g., repayment, release), or that the amount claimed is excessive.

2) Times when the lawsuit can be filed

• Before enforcement proceedings: Before the creditor initiates enforcement proceedings, the debtor may have it determined that they are not indebted in the event of future proceedings (Article 72/1 of the Enforcement and Bankruptcy Law).

• During the enforcement proceedings: The proceedings can be initiated even while the enforcement is ongoing (Article 72/2 of the Enforcement and Bankruptcy Law). In this case, the suspension of enforcement a precautionary measure secured by a guarantee.

• After payment (restitution): If the debtor was forced to make the payment under threat of enforcement , the negative declaratory action transforms into a restitution action . The recovery of what has been paid can be requested within one year from the date of payment (or learning of it) (Article 72/7 of the Enforcement and Bankruptcy Law).

3) The competent and authorized court

• Jurisdiction: As a rule, the Civil Court of First Instance has jurisdiction. If the dispute arises from a commercial transaction , the Commercial Court of First Instance has jurisdiction; if it arises from a consumer transaction, the Consumer Court has jurisdiction.

• Jurisdiction: The general jurisdiction of the defendant's (creditor's) domicile (Code of Civil Procedure, Article 6). If enforcement proceedings have been initiated, the court of the place where the proceedings were initiated also has jurisdiction (Enforcement and Bankruptcy Law, Article 72/1).

4) Proof and evidence

The creditor, as a rule, proves the source of the debt when asserting the existence of a debt relationship (Code of Civil Procedure, Article 190). The debtor, when relying on facts that extinguish the debt, such as repayment, release, or statute of limitations , proves these facts themselves . In practice, the main evidence includes: contracts/additional protocols, promissory notes (bills of exchange/checks), invoices/delivery notes, current account reconciliations, bank statements, correspondence (emails/messages), commercial ledger entries, and expert examinations.

5) Temporary legal protection: Suspension of enforcement – ​​security deposit

• In a negative declaratory action filed before enforcement proceedings, the court may, if the conditions are met, prohibit the creditor from initiating enforcement proceedings by imposing a preliminary injunction (Article 72/1 of the Enforcement and Bankruptcy Law).

• filed during the enforcement proceedings , the suspension of enforcement the debtor providing security : The court a provisional measure; the amount of the security cannot be less than 15% of the amount of the debt (Article 72/2 of the Enforcement and Bankruptcy Law).
  This measure protects the debtor from the risk of irreversible harm; on the other hand, the security safeguards the creditor's right.

6) Compensation regime (Article 72/3–4 of the Enforcement and Bankruptcy Law)

In a negative declaratory judgment lawsuit , the losing party pays the other party a minimum of 20% of the damages incurred .

• If the creditor is found to be in the wrong and the debtor fails to pay, the creditor shall be ordered to pay the debtor of not less than 20% (Article 72/3 of the Enforcement and Bankruptcy Law).

• If the debtor is found to be in the wrong and the enforcement proceedings are halted by a precautionary measure, the debtor shall then pay the creditor of not less than 20% (Article 72/4 of the Enforcement and Bankruptcy Law).
  This provision aims to deter malicious/negligent enforcement and defenses.

7) Difference between negative determination and recovery

• Negative determination: "I do not owe any debt"; as a rule, an effective impact on the future and eliminates the threat of enforcement proceedings regarding the unpaid debt.

• Restitution: A lawsuit to recover a debt that has been paid, on the grounds that it was paid contrary to the reason ; restitution of the performance and interest are involved. The time limit is 1 year (Article 72/7 of the Enforcement and Bankruptcy Law).

8) Strategic/practical notes

1. Time management: Preparations for precautionary measures and security deposits should be made for lawsuits that will be filed after the enforcement proceedings ; otherwise, the enforcement will proceed and the hardship will deepen.

2. Economy of evidence: Objections concrete and supported by documentation ; the distinction between "the transaction giving rise to the debt never occurred/was subsequently terminated" must be clearly made.

3. Partial debt-amount dispute: Negative determination is also possible in disputes regarding the amount of debt ; the claim can be formulated as a partial determination .

4. Do not confuse it with enforcement denial compensation: Enforcement denial compensation (Article 67 of the Enforcement and Bankruptcy Law) for the annulment of objections ; compensation under Article 72 of the Enforcement and applies in negative declaratory judgments.

5. Division of jurisdiction: The parties' status as merchants, the nature of the transaction, and its consumer aspect must be determined from the outset; filing a complaint with the wrong court time and costs .

9) Conclusion

A negative declaratory judgment lawsuit is an effective legal avenue for individuals who wish to secure, through a court decision , that they are not indebted or that the debt/amount is different than what is actually owed. When Article 106 of the Code of Civil Procedure and Article 72 of the Enforcement and Bankruptcy Law are considered together, the correct management of issues such as when to file the lawsuit, the security requirement for suspending enforcement , the 20% compensation penalty, and the one-year recovery period determines the outcome of the dispute. Choosing the right court, a sounding strategy, and temporary protective measures significantly increase the chances of success in practice.

Asel DONGELLI