Doing business in Luxembourg has many advantages for investors, but sometimes companies and individuals engaged in business relations must go through the less pleasant step of recovering debts from their business partners who did not honor the necessary payments.
Our lawyers in Luxembourg can helpin a number of debt recovery procedures, especially the amicable debt collection phase, or the pre-court phase. To make sure that you do not have to go to court, our Luxembourg attorneys will take any measure to ensure that the debt is recovered in a short amount of time and with the least amount of legal implications as possible.
Any debt collection claim needs to take into consideration the specific and unique situation that has led to the debt accumulation and also take special consideration in understanding both the claimer and the debtor.
A debt collection claim starts after a client sends the necessary information about the debtor and the supporting documentation that will provide all the necessary details referring to the payment, the conditions in which the business partnership took place and other details. Our lawyers in Luxembourg will start by sending a demand letter or debt collection letter, to persuade the debtor to make the necessary payments. This is the amicable phase of the recovery and if the debtor’s response is positive, we will make sure to follow through and see that the payment is made.
If the debtor does not offer a response, usually within 60 days, our attorneys in Luxembourg can commence any necessary legal action. The complaint is served to the debtor and our lawyers in Luxembourg will see that the trial date is set and the necessary arrangements are made to enforce the final court decision.
Foreign investors in Luxembourg should be very well informed before doing business with other legal entities. Scams or other problems when engaging in business relationships can be avoided by performing a company due diligence: verifying that the company is legitimate. Our attorneys in Luxembourg can help you, if you want to obtain information about a company.
Business contracts should contain an arbitration clause - this is an alternative conflict resolution method and it is preferred compared to suing the debtor.
Enforcement of a Court Decision in Luxembourg
The judicial system of Luxembourg include: the Superior Court of Justice (composed of the Supreme Court, Court of Appeal and the Attorney General’s Office) ,the district courts and the Justices of the Peace.
The enforcement of the decisions taken by these courts is made by the State Attorney which is responsible for execution of sentences imposed by criminal courts and the general direction and supervision of prisons. It directs and controls the conditions of the enforcement application.
In commercial matters, such us recovery of debts, the court which will take a decision related to the matter is determined by the principal amount of the debt. The Justice of the Peace is competent for less than EUR 10,000 debt while the district court has jurisdiction over theEUR 10,000 debt.
Before the judgment in front of the above the creditor may chose the simplified recovery by application procedures. For this, the request is sent directly to the competent court by a printed or downloadable form. The court order the debtor to pay the amount claimed. The last one can object to the decision of debt enforcement. The objection is made in writing. In this case, the case is argued in open court if the creditor or the debtor requests the convening of the parties to the court to make a decision.
If the simplified procedures are not accepted, the creditor may proceed by way of summons before the magistrate (Justice of Peace) or assignment before the district court to summon the debtor to the public hearing.
In the first case, when the disputed amount is below 10000 EUR, the case is ruled by the Justice of Peace through a magistrate. The creditor is submitting an application or payment in Court and if the request appears to be justified, the magistrate orders the debtor to pay the claimed amount. A conditional payment order is served to the debtor by the Registry which is also sending a copy to the creditor.
If the application does not seem justified, the magistrate rejects it through an order of dismissal which is not subject to appeal.
Within 15 days of notification of the conditional payment order, the debtor may: either pay the claimed amount or make an objection against the decision. The objection is made by a written or oral statement made at the office of justice of the peace who initially made the provisional order of payment. The application contains a summary of the means of the debtor. In this case, the parties are summoned to the hearing by the court. If the debtor fails to appear, the court will make a judgment without its posibility to defend its case. If, without good reason, the creditor does not appear, the debtor may request a ruling on the merits, without the possibility for the judge to refer the case to a later hearing. If neither party appears, the judge may strike the case by a decision not subject to appeal after a final notice to the parties or their representative. If the doubt is well founded, the conditional payment order is considered void. If the contradiction is partly founded, the magistrate convicts the debtor for the portion of the receivable recognized.
The creditor has a period of six months from the notification of the conditional payment order to the debtor, to request that the conditional payment order is enforced. This process is done by simple verbal or written to the office of the justice of the peace who made the provisional order for the payment statement. After this period, the conditional payment order will be considered void, which means that the creditor must start the procedure again if it intends to act against the debtor.
The collection of receivables to a sum of money exceeding EUR 10 000 may be prosecuted before the president of the district court or by the procedure of unilateral query .The procedure of unilateral query is possible only when the debtor is domiciled or resident in the Grand Duchy of Luxembourg. The request is made using a downloadable form from the Luxembourg Justice site. The application must be accompanied by all documents required to prove the existence and amount of the debt and establish the merits (eg purchase order, invoice, reminder, etc.).The application and supporting documents must be sent by post or filed with the competent district court, in 5 copies. The request must state the qualities of the plaintiff and defendant (full name, full address, and, if a married woman or widow, the name and maiden name), respectively the legal form of the plaintiff and defendant if society and its statutory body or its legal representative.
The President of the competent district court examines the merits of the application in light of the delivered documents. If the request appears to be justified, the President of the competent district court orders the debtor to pay the amount claimed by the creditor. The Registry will deliver a conditional order and a copy of the request to the debtor. It also notifies a copy of the order to the creditor. If the application does not seem justified, the President of the District Court rejects it through an order of dismissal which is not subject to appeal.
Within 15 days following notification of the provisional order provision, the debtor either pays the claim or contradicts it by declaration to the court. The declaration is made by a written statement with the clerk of the district court that made the provisional order provision. It contains an indication of the grounds on which it is based and is accompanied by all documents to justify the contradiction. The judges will hear both parties and can take one of the following decisions: if the doubt is well founded, the provisional order is considered void, if the contradiction is partially founded, the President shall declare the conviction for the portion of the debt well founded or can declare the debtor’s conviction if the doubt is not founded.
If the debtor is not resident or not resident in the Grand Duchy of Luxembourg, it is necessary to proceed by way of summons in chambers provision.
Recognition of an EU Court Decision in Luxembourg
The Court of Justice of the European Union is checking the legality of acts of the institutions of the European Union; it’s ensuring the compliance of the Member States with the obligations of the signed Treaties and interprets the law Union at the request of national courts. The Court of the European Union, headquartered in Luxembourg, consists of three courts: the Court of Justice, the Court of Human Rights and the Civil Service Tribunal.
There a number of procedures which can be performed by the judges of the Court of Justice in order to fulfill its task such as the preliminary procedures, the infringement , the actions for annulment, the actions for failure to act, the application for compensation based on non-contractual liability and the appeals on points of law.
In the beginning, during the preliminary procedures, the Court of Justice is working with all the ordinary courts of the Member States. To ensure effective and uniform application of EU legislation and to prevent divergent interpretations, the national courts can request a point of legal interpretation of the laws from the Court of Justice. The preliminary ruling may also seek control of the validity of an act of EU law. The receiving national court is bound by the interpretation given when it presents the dispute before the EU Court of Justice.
The infringement proceedings allow the Court to monitor compliance of the Member States with the EU law. Referral to the Court of Justice is preceded by a pre-procedure initiated by the Commission, which is to give the Member State concerned the opportunity to respond to the addressed complaints. If the Member State doesn’t end the infringement, an action for breach of EU law may be lodged with the Court of Justice. This action may be initiated by the Commission or by a Member State. If the Court finds a breach, the State shall immediately stop the actions immediately. If, after a new referral by the Commission, the Court of Justice finds that the Member State concerned has not complied with its judgment it may impose a lump sum or a penalty. However, in case of failure to notify measures transposing a directive to the Commission, on a proposal from the latter, a penalty may be imposed by the Court to the Member at the first stage of infringement ruling State.
The annulment is a legal action from which the applicant seeks the annulment of an act of an institution, body, office or agency of the Union (including regulation, directive and decision).
The action for failure verifies the legality of inaction institutions, organ or agency of the Union. Where unlawful omission is found, it is for the institution concerned to put an end to the failure by appropriate measures. Jurisdiction for failure to act is shared between the Court of Justice and the Court on the same basis as for annulment.
Seizure of assets in Luxembourg
When a debtor refuses to pay its debts, the creditors can initiate a legal action and try to enforce the payment. As a result the court may decide the seizure of assets. This is applicable only on tangible property.
This seizure, a very common in practice, allows in principle, to capture all the tangible assets. These assets may be animals, furniture, merchandise, and more generally anything that can be transported from one place to another without any deterioration in the possession of the debtor.
Certain assets cannot be subject of the seizure such as: clothing and essential laundry used by the debtor and his family, the necessary furniture for storage, a washing machine and iron, the appliances used for heating the family home, the tables and chairs used by the family to have meals, household utensils necessary for the debtor’s family, furniture for storing tableware and household utensils, devices used for preparing hot meals and for storing food, the objects used for the purposes of dependent children who live under the same roof, pets, objects and products necessary for personal care and maintenance of premises, tools necessary for the maintenance of the garden, books and other necessary for the pursuit of studies or vocational training, objects used for religious worship, food and fuel needed for a month.
The seizure of assets is formed by three actions: a notification, minutes of seizure and sale.
The procedure of seizure begins with the elaborating a notification to the debtor which contains the names and addresses of the parties and the bailiff, the date of enty of the notification, the owned amount, an order to pay the amount, the consequences of non-payment, the address of domicile in the municipality where the execution should be. At least one day after the notification, the bailiff will draw up a report of seizure. He will be assisted by two major Luxembourg witnesses or relatives of the parties.
If you need debt collection services in other countries, such as the Netherlands, we can put you in touch with our local partners.
The bailiff can start the procedures of enforcement in case the debtor is still not paying the debt. If the bailiff finds the doors closed, he can requires the Justice of the Peace or a police officer having territorial jurisdiction to assist the process of opening these doors.
After that, the bailiff is elaborating the minutes of seizure which contain: the payment order, the inventory of the property seized the names and addresses of witnesses, if any, of the officer who attended the opening doors and the day of the sale. The seized assets are put under the supervision of a guardian in order to avoid their misuse.
In case the debtor was subject to another entry made by another bailiff it cannot be subject to another entry. The second bailiff can only capture the effects which were omitted in the first notification.
The last step of seizure is selling the assets and cover the liabilities.If the furniture seized from the property belongs to a third party it can be claimed before the auction.
