Q&A: How to collect a claim in Croatia

1. What does a debt collection process in Croatia look like?

Foreclosure proceedings are initiated by creditor and securing proceedings are initiated by submitter of motion.

In case the law stipulates that institution or a person, who are not beneficiaries of a certain claim are authorized to initiate foreclosure or securing proceedings for such claim, such institution or a person act as creditors, i.e. submitters of motion in such proceedings.

Foreclosure orders are issued exclusively on basis of enforceable or credible documents.

Enforceable documents are:

1. enforceable court decision and enforceable judiciary settlement,
2. enforceable settlement from Article 186.a of the Law on Civil Proceedings,
3. enforceable decision of arbitration court,
4. enforceable decision passed in administrative proceedings and enforceable settlement in administrative proceedings, in case they refer to payment of a monetary claim and unless law stipulates otherwise,
5. enforceable notarial decision and enforceable notarial document,
6. settlements entered into in proceedings in front of court of honor at chambers in the Republic of Croatia and settlements entered into in mediation proceedings, in accordance with provisions of the law stipulating mediation proceedings,
7. other documents stipulated by law as enforceable documents.

Pursuant to the Law on Enforcement, credible documents are invoices, bills of exchange, cheque with protest and returned invoices, whenever it is necessary to constitute a claim, public documents, extracts from commercial records, legally notarized private documents that are considered to be public documents in accordance with special regulation. Calculation of accrued interest is considered to constitute invoice.

Foreclosure orders in the basis of enforceable documents are passed by courts and on the basis of credible documents by public notaries.

In case a public notary estimates that motion for foreclosure is permitted and substantiated, public notary shall issue foreclosure order on the basis of credible document and submit it to parties within 30 days, at the latest, counting from the date of receipt of such motion.

In case a public notary estimates that motion for foreclosure is permitted and substantiated, complete or substantiated, public notary shall forward the file to a competent court for passing of decision.

Foreclosure order is submitted to both the creditor and the debtor.

Foreclosure order on the basis of enforceable document, before its validity and enforceability, is submitted to the agency that implements foreclosure on debtor’s account, i.e. Central Depository &Clearing Company Inc. and other persons and agencies, whenever necessary for purpose of implementation of foreclosure. Foreclosure order on the basis of credible document is submitted for implementation only upon its validity and enforceability.

A court orders foreclosure, i.e. securing of claim on means and objects listed in motion for issuance of foreclosure order, i.e. motion for securing of claim. In case valid and enforceable foreclosure order may not be implemented by specific means or on specific object, creditor may propose new means or object for purpose of collection of the same claim. In case the creditor fails to propose new means or object of foreclosure within two months from receipt of notice on impossibility of implementation of foreclosure, foreclosure proceedings shall be discontinued.

Debtor may file complaint against foreclosure order on the basis of credible document. Debtor may file appeal against foreclosure order on the basis of enforceable document (only in legally stipulated cases).

In its complaint against foreclosure order, the debtor shall specify in which part such order is contested. Complaint against foreclosure order on the basis of credible document must contain reasons for complaint, in which case proceedings continue as litigation proceedings in front of a court. Court shall reject unsubstantiated complaint as incomplete, without requesting the debtor to complete or correct it.

Foreclosure may be implemented on real estate, movable assets, debtor’s monetary claims, undocumented shares and shares and stakes in commercial companies, on securities listed at Central Depository & Clearing Company Inc., on other property, i.e. material rights (patents, technical improvements, usufruct or other similar debtor’s right).

2. Are there options to “freeze” or secure debtor’s redress objects ?

For purpose of securing of monetary claim of submitter of motion by encumbrance of certain assets, submitter and opponent of motion may consensually request the court to order and implement for the benefit of submitter of motion:

1. registration of mortgage on real estate of opponent of motion,
2. depositing agreement between the parties on mortgage on unregistered real estate with the land registry court,
3. registration of lien on movable assets of opponent of motion,
4. registration of lien on monetary claim of opponent of motion,
5. registration of lien on part of receivables of opponent of motion on the basis of employment or service contract,
6. registration of lien on part of pension, disability benefit or compensation of loss of income,
7. registration of lien on claim of opponent of motion on bank or saving account,
8. registration of lien on claim to relinquish or deliver movable objects or to deliver real estate,
9. registration of lien on other property, i.e. material rights,
10. registration of lien on documented shares and other securities and depositing thereof for safekeeping,
11. registration of lien undocumented shares and shares and stakes in commercial companies,
12. registration of lien on securities listed at Central Depository & Clearing Company Inc..

Agreement between creditor and debtor, which pursuant to its content corresponds to agreement entered into between the parties in front of a court, may be entered into in form of a notarial document or notarized private document containing debtor’s statement of consent to register lien on its object for purpose of securing of creditor’s claim.

Law on Enforcement also stipulates securing of claims by interim measures and preliminary injunctions. Preliminary injunction may be proposed prior to initiation and during litigation or administrative proceedings and after termination of such proceedings, until implementation of foreclosure. Preliminary injunction for purpose of securing of monetary claim may be ordered in case submitter of motion demonstrates probability of existence of claim and risk that, without such measure, opponent of motion will prevent or significantly extenuate collection of claim by encumbrance, transfer, hiding or other disposal of its assets.

Any measure that achieves such securing purpose may be issued for purpose of securing of claim and particularly:

1. prohibition to the opponent to transfer or encumber movable assets, dispossession of such objects and entrusting thereof for safekeeping to submitter of motion or a third party,
2. dispossession and depositing of cash, securities and similar with the court, i.e. public notary,
3. prohibition to the opponent to transfer or encumber its real estate or registered real estate rights, with inscription of such prohibition at the land registry,
4. prohibition to debtor of the opponent to voluntarily fulfill its obligation to opponent of motion and prohibition to the opponent to receive fulfillment of such obligation. i.e. to dispose of its claims,
5. order the bank to refuse withdrawal of money from debtor’s account to the opponent of motion or a third party, on the basis of order of opponent of motion, for the amount for which preliminary injunction was passed.

Interim measure for purpose of securing of monetary claim may be ordered on the basis of:

1. decision of court or administrative body which has not yet become valid and enforceable,
2. settlement entered into in front of a court or administrative body, in case claim determined in such settlement has not yet become mature,
3. decision of a public notary or notarial document, in case claim determined in such decision or document has not yet become mature.

On the basis of the aforementioned documents, a court shall pass interim measure in case submitter of motion demonstrates probability of risk that, without such measure, opponent of motion will prevent or significantly extenuate collection of claim.

3. Do you need to be assisted by an attorney at law?

In Croatia it is not legally stipulated that parties in foreclosure proceedings must be represented by an attorney. However, since issues that may arise in foreclosure proceedings are numerous and complex, it is recommended that parties hire an attorney.

4. What are the costs of the procedure and are they eligible for reimbursement?

Foreclosure proceedings on the basis of enforceable document in front of a court: Court taxes are payable. Amount of court taxes is determined pursuant to the amount of the enforced claim.

For the amount exceeding 15.000,00 HRK, taxes are payable in amount of 500,00 HRK plus additional 1% for balance of amount exceeding 15.000,00 HRK, but no more than 5.000,00 HRK.

Foreclosure proceedings on the basis of credible document in front of a public notary: Notarial rewards are payable. Amount of notarial reward is determined pursuant to the amount of the enforced claim:

For the amount exceeding 15.000,00 HRK notarial reward is payable in amount of 500,00 HRK plus additional 1% for balance of amount exceeding 15.000,00 HRK, but no more than 5.000,00 HRK.

For issuance of confirmation of enforceability on foreclosure order, notarial reward is payable in amount of 30,00 HRK.

The aforementioned expenses are advanced by the creditor but these expenses are eligible for reimbursement by the debtor to the creditor.

Beside the aforementioned expenses, attorney fees are also payable for parties who hired attorneys to represent them in foreclosure proceedings.

5. What is the term of the procedure?

Public notary is under obligation to issue and submit foreclosure order or to forward the file to the court within 30 days, at the latest, counting from the date of receipt of motion.In case the debtor does not receive foreclosure, one more delivery shall be attempted within time limit that may not be shorter than 30 or longer than 60 days. In case of failed repeated delivery, document that had to be submitted shall be posted on court e-notice board. After that, in case debtor does not file a complaint, foreclosure order becomes valid and enforceable.

Upon enforceability of foreclosure order, proceedings are continued in front of agency that implements foreclosure order in accordance with provisions of the Law on Enforcement and the law stipulating foreclosure of monetary assets. Further proceedings depend on whether the debtor has sufficient assets to pay the debt or not.

Law on enforcement does not stipulate time limit in which foreclosure order must be issued. In practice, courts issue foreclosure orders within 2-3 months.