LATVIA Law and Practice Contributed by: Jānis Kārkliņš, Edijs Brants, Pauls Zeņķis and Kristens Vorslavs, BERG
of a collateral is the failure of the debtor to properly satisfy the secured lender’s claim. There are, however, specific rules that apply only to certain types of col- lateral. Mortgages Latvian law provides that mortgages can only be enforced by a sale on the open market in cases when the debtor has expressly granted such rights to the secured lender; otherwise, the pledged property can only be sold by way of auction through the courts. Nevertheless, the secured lender can enforce the mortgage by submitting an application for uncontest- ed enforcement of obligations in case of satisfaction of the application or by an application for the volun- tary sale of immovable property at auction through the courts. Commercial Pledges As provided by Latvian law, commercial pledges can firstly be enforced through court if the commercial pledge right is enforced through the process of uncon- tested enforcement of obligations or by a court deci- sion if the commercial pledge has been created on the basis of a court decision itself as well. Neverthe- less, a commercial pledge can be enforced through an out-of-court procedure as well by acquiring posses- sion over it and selling it afterwards. The type of sale, however, depends on whether the secured lender has been granted the right to sell the asset without an auc- tion. The default is through an auction. Financial Pledges According to the provisions of the Financial Collateral Law, once the event of enforcement has occurred, the secured lender can act with the financial pledge freely, without the performance of additional procedures, as long as the actions comply with the provisions and conditions of the financial pledge agreement. The spe- cific way of enforcement depends on what is used as a collateral in the fulfilment of financial obligations. 6.2 Foreign Law and Jurisdiction Choice of a Foreign Law as the Governing Law Typically, a foreign law can be the governing law of a contract, and this is made possible by the Rome I Regulation that is binding on Latvia as a member of the European Union. Moreover, the Rome I Regulation
provides that this choice may be rejected only if the selected law is manifestly incompatible with Latvian public policy. However, certain mandatory provisions of Latvian law will still apply even when the govern- ing law is a foreign one, such as rules designed to protect weaker parties. In addition, aspects such as the required form of the agreement must comply with Latvian law, otherwise the agreement may be deemed invalid in Latvia. Submission to a Foreign Jurisdiction Similarly to the choice of a foreign law as the govern- ing law, Latvian law generally allows parties to agree that disputes emerging from the contract can be sub- mitted to a foreign court. This provision, however, shall be considered and evaluated in conjunction with dif- ferent conventions to which Latvia is a party, such as the provisions laid out in the Hague Convention on Choice of Court Agreements of 30 June 2005, as well as European Union laws. Waiver of Immunity Latvian courts will recognise and give effect to waivers of immunity, particularly in commercial transactions, but enforcement will not extend to assets that enjoy absolute immunity (eg, diplomatic or military property, central bank assets, etc). 6.3 Foreign Court Judgments Judgments given by a Foreign Court Since Latvia is a member of the European Union, it is bound by the rules laid out in the Brussels I bis Regulation. The Regulation provides for general “free movement of judgments”, meaning that no prior judg- ment recognition procedure needs to be concluded when enforcing a judgment given by a European Union member state court. As for judgments given by a non-European Union member state court, the provisions laid out in the bilateral and multilateral treaties, which have been signed and ratified by Latvia, must be considered. For instance, judgments given by foreign courts can be enforced under the Lugano Convention or Hague Convention on Choice of Court Agreements, which Latvia and many non-European Union countries are a party to. If no treaty exists between Latvia and the foreign country, Chapter 77 of the Civil Procedure Law
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