What Conditions Must Debts Meet Prior To the Recovery
The basic prerequisite for a successful recovery of debts, either amicably through the service of a pre-litigation notice and/or proposal for out-of-court settlement, or before the court, is the ability of the creditor to prove and document the existence of a debt (claim).
Under the Slovak law, claim on money must meet the following conditions in order to be recoverable through the court:
- it must have become due, meaning that the date as on which the debtor must perform for the benefit of the creditor must already have occurred;
- the claim should not be statute barred, meaning that the creditor must initiate recovery of the debt through the court within certain statutory time limit that is four and three years for trade disputes and civil law disputes, respectively. Statute barred debts can also be recoverable with, however, the risk that the debtor will invoke statute of limitations and the judicial proceedings will be discontinued for that reason.
What Are the Options for Out-of-Court Recovery of Debts through in Slovakia?
- Pre-Litigation Notice
Even if serving a pre-litigation notice or attempt for out-of-court settlement are neither mandatory nor required under the Slovak law, they are both recommended as a first step on the road to the payment of a debt for delivered goods or service.
The law does not prescribe any mandatory form nor specific formal elements for a pre-litigation notice. It happens that debtors perform after having been served such a notice, and this would save both the time and additional costs the creditor would need to incur in judicial proceedings.
As a rule, pre-litigation notices are served by lawyers representing creditors under powers of attorney.
- Notarial Deed
Another option for out-of-court settlement is to draw-up a notarial deed under which the debtor acknowledges the debt; notarial deeds are recognized support documents for initiation of the debt enforcement procedure.
What Is the Procedure for Recovery of Debt in Judicial Proceedings?
Creditors have a number of ways of recovering their claims through judicial proceedings in Slovakia:
- Proceedings for the Order for Payment
An accelerated procedure is concerned making it possible to seek a court decision on monetary claims in an expedite and cost saving manner without the need to resort to judicial proceedings. If the submitted motion to issue an order for payment meets the statutory conditions, the court will urge the debtor to pay the debt in question to the creditor within 15 days of delivery of the order to pay, or to contest the order to pay in the same time limit; if the latter occurs, the court may order a hearing on the case.
Filing an action incurs a court fee. The amount of the court fee is six per cent of the principal of the recovered debt and in any case not less than EUR 16.50.
- Dunning Procedure – This is an alternative debt collection procedure that is very much similar to the payment order procedure, the difference being that it is executed solely through electronic means.
The advantages of the dunning procedure include also its cost efficiency, as only one half of the standard court fee is paid, i.e. three percent instead of six per cent.
3. Standard debt recovery procedure
If the creditor decides to file standard action rather than motion to issue the order to pay, the court will initiate judicial proceedings for payment of debt and will send the action to the defendant to obtain the defendant’s position; subsequently, additional positions of the parties to the proceedings may be sought until the court will order a hearing.
Court verdict will be delivered only after the completion of the above procedure, and the parties have 15 days to appeal against the verdict. Failure to appeal and/or missing the deadline for the appeal means that the judgment has become final.
Filing an action incurs a court fee. The amount of the court fee is six per cent of the principal of the collected debt, and in any case not less than EUR 16.50.
How To Collect Debts in Slovakia Through Arbitration Proceedings?
Another way of avoiding judicial proceedings is to initiate arbitration proceedings before an arbitration court.
More than 100 arbitration courts have been established in the Slovak Republic and these exist separately from the general (district, regional) courts.
Creditors may opt to submit their disputes for resolution to such arbitration courts, provided that the jurisdiction of the arbitration court is established through a written arbitration agreement, or it follows from the arbitration clause included in the written agreement/contract in place between the creditor and debtor.
Creditors need to consider this option in advance, it is therefore useful to rely on the assistance of a law professional (attorney-at-law) during the agreement/contract drafting process.
Compared with general courts, the procedure before an arbitration court has its pros (speedy procedure, lower costs), but also cons (not all legal cases can be referred to arbitration).
How to Recover a Debt Through the Enforcement Procedure (exekúcia) in Slovakia?
If judicial (or arbitration) proceedings are successful, the plaintiff obtains a decision (order to pay, judgement, arbitration award) setting out the time limit in which the debtor is required to discharge the debt. If the debtor fails to do so, the relevant decision automatically becomes the enforcement title. After the relevant decision has been marked as final and enforceable, the creditor may seek the collection of the debt through enforcement proceedings (exekúcia).
A notarial deed through which the debtor has acknowledged the debt also serves as the enforcement title.
The enforcement procedure commences by delivery of the motion to carry out enforcement proceedings to the competent court, which is the District Court in Banská Bystrica.
The court will review the delivered motion to carry out enforcement proceedings for compliance with the statutory requirements and will request the beneficiary party to pay the uniform fee of EUR 16.50 that is independent of the amount of the enforced claim.
In addition to other things, the court reviews also the supporting documentation attached to the motion (in particular the enforcement titles) for their compliance with the statutory requirements. If no reasons for the dismissal of the motion are established, the court will grant the mandate to carry out the enforcement procedure to a court enforcement officer. Unlike the past practice, cases are allocated to court enforcement officers randomly through a case handling software that does not allow for tampering with the allocation process.
The enforcement procedure per se begins with serving the enforcement notice in which the enforcement officer requests the obligor to either satisfy the beneficiary’s claim within 14 days of delivery of the notice, or to contest the procedure. At the same time, the enforcement officer freezes those of the obligor’s assets that are the subject of the enforcement.
Impediment to, and the reason for discontinuation of the enforcement procedure is the lack of assets on the debtor’s part. If this is the case, the enforcement officer will discontinue the procedure and will seek compensation for the procedure costs from the creditor.
Is it Possible in Slovakia to Verify in Advance Whether Debtors Own Any Assets or are “in the money”?
Today, successful recovery of a claim does not depend solely on success in the judicial or arbitration proceedings, as rigorous analysis of the debtor’s assets and their verification prior to and during the dispute are equally important.
If this is neglected, it may happen that the creditor may win the dispute, but the debtor has become a have-not in the meantime. If this happens, any recovery of the debt is rather difficult, if not utterly unrealistic.
We therefore recommend that the condition of the debtor’s assets be thoroughly assessed before the action is lodged to the court (including arbitration court) and subsequently also in the course of the proceedings.
As of July 2016, a public register of enforcement procedures is available allowing to verify (through an attorney-at-law) whether the debtor is subject to any enforcement procedures. Such public registers also allow to establish whether any insolvency proceedings are conducted against the debtor where creditors should register their claims.