Any creditor (be they a natural or legal person) who has a right to recover a debt of more than EUR 15,000 (e.g. an unpaid invoice) against a debtor (either a natural or legal person) can initiate debt-recovery proceedings against the latter.

Before initiating debt-recovery proceedings, the creditor must ensure that the debtor is not bankrupt. If the debtor is bankrupt, the creditor must file a claim declaration with the clerk of the District Court that declared the bankruptcy.

Preliminary steps

Formal demand

If, in spite of several reminders from the creditor in the form of visits, phone calls, letters or dunning letters for the attention of the debtor, the latter still refuses to pay their debts, the creditor may send the debtor a formal demand as a last resort before initiating any legal proceedings.

The creditor may:

• either have the formal demand served by a bailiff; or
• send the debtor the formal demand directly by registered letter with acknowledgement of receipt.

If the debt is guaranteed by a surety, the formal demand must also be sent to the person (natural or legal) who acts as surety.

The formal demand must make mention of:

• the exact extent of the debtor's obligation;
• a formal order to pay addressed to the debtor;
• an ultimatum for the debtor to pay by a certain deadline;
• the legal proceedings which the creditor is considering should the debt not be paid;
• if applicable, the warning that conventional late-payment interest will begin to be charged, either from the date of the formal demand or from the stated final deadline.

If the formal demand is unsuccessful, the creditor may initiate legal proceedings to recover the debt.

Jurisdiction

The competent District Court:

• for personal and property matters relating to debt is that of:
  • the domicile of the defendant, if the debtor is officially declared there; or
  • the place of residence, if the debtor lives there without being officially declared;
• for contractual matters, the application may also be filed with the Court of the location where the obligation was or is to be enforced.

Request for a payment order

Filing an application

This procedure, initiated by ex parte application, is possible if and only if the debtor is domiciled or resident in Luxembourg. It allows the creditor to receive some payment.

The creditor must file the application by way of a request for a payment order. It must be addressed:

• to the President of the District Court with jurisdiction for the territory;
• in its original form, along with 4 copies.

The request must:

• be submitted in a folder marked with the names of the claimants and defendants; and
• contain the following information for both parties:
  • their surname;
  • their first name;
  • their address;
  • if applicable, the legal form of the company;
  • if applicable, details of their legal representative.

Interest is not to be taken into consideration when determining the amount of the debt.

Should a single creditor have multiple claims on the same debtor, the claims arising from the same cause may be added together to determine the total amount of the debt and, consequently, the competent court.

Supporting documents

The application must be accompanied by supporting documents (a single copy of each will suffice), which:

• prove the existence and amount of the debt; and
• establish its validity.

Decision by the President of the Court

The President of the Court may:

• deny the request, if they believe the claim to be unfounded. They will then pronounce an order of dismissal which cannot be appealed. In such a case, the creditor can file a request for an interim payment order;
• order the debtor to pay the amount being claimed, by means of a conditional payment order. The court clerk will notify the debtor of the order, by letter, and send a copy to the creditor. The notification:
  • stops the clock on the limitation period;
  • marks the start of the accrual of interest against the debtor.

Within 30 days of notification of the conditional payment order, the debtor may:

• pay the creditor the claimed amount, and in so doing, settle the dispute; or
• lodge an objection if they deem that all or part of the amount is not due.

Objection by the debtor: objection

Declaration to the court clerk

The debtor may, within 30 days of notification of the provisional payment order, lodge an objection by means of a simple written declaration to the clerk of the District Court which handed down the provisional payment order:

• stating the reasons for the objection; and
• attaching any documentary proof which may justify the objection.

Appearance in open court

When the debtor lodges an objection against the provisional payment order, the clerk will summon the parties to a summary judgment hearing in open court to discuss the validity of the debt.

Should the debtor fail to appear, they will be deemed to have forfeited the opportunity to submit their arguments, and the judgment will be handed down by default.

Should the creditor fail to appear (without a legitimate reason), the debtor may ask for a ruling on the validity of the debt, unless the judge decides to postpone the case for a later hearing, or adds it to the court's general case list.

Should neither of the parties appear, the judge may automatically cancel the case, or add it to the general case list.

Hearing

The parties may request that the case be:

• admitted and heard at the hearing; or
• postponed and heard at a later date; or
• struck off the case list, if there are no longer any grounds for the case due to the fact that the parties have reached a settlement.

If the claimant and the defendant appear at the first call, a date will be set for the pleadings, allowing them sufficient time to exchange their evidence, i.e. the documents in support of their arguments, and examine the evidence of the other party.

If the defendant, having been validly informed that the hearing is being held, does not appear at the initial hearing, the case may be admitted in their absence.

If they believe the claim filed against them to be unfounded, the debtor is entitled to request that the claimant be ordered to pay a procedural indemnity.

Decision

On the day of the judgment, the President will issue a reasoned order. If the objection is:

• well-founded: the provisional payment order will be cancelled;
• partially founded: the President will order the debtor to pay that portion of the debt that is recognised as being valid;
• rejected: the President will pass sentence on the debtor.

Should the debtor be sentenced, the judgment handed down will serve as an order for execution of payment on the part of the debtor.

When the debtor fails to pay but does not lodge an objection

If the debtor does not pay and does not lodge an objection within 30 days, the creditor may request that the order be made enforceable.

The request must be submitted in writing to the court clerk by the creditor or their representative (on the copy of the order notified to the creditor).

The enforcement order issued by the President has the same effect as an inter partes order: it is provisionally enforceable, i.e. the decision on the principal matter does not have authority of res judicata (it is not a final binding court ruling). It is enforced by the creditor at their own risk. It may become subject to a new summary judgment should new circumstances arise.

Interim order for payment

Filing an application

The application must be filed by means of a summons to appear before the President of the competent District Court for summary proceedings.

There is no need to engage the services of a lawyer admitted to the bar.

Appearance at the hearing

The matter is referred to the district court as a summary judgment hearing.

Should the debtor fail to appear at the hearing:

• because the summons was not delivered to them personally by the bailiff: the President will hand down a ruling by default against them;
• despite having personally received the summons: the President will issue a ruling against them, deemed to have been handed down in their presence.

If the debtor appears in court or is represented at the hearing, the President will hand down an inter partes ruling.

Hearing

The procedure for the hearing is the same as that for an objection (see above).

Decision

If the claim made by the creditor:

• can be seriously disputed (i.e. if the creditor does not have proof of the existence of a debt that is certain, of a fixed and due): the President of the court will declare the provisional application inadmissible;
• is partially founded: the President of the court will sentence the debtor to pay that part of the debt which cannot be seriously disputed;
• cannot be seriously disputed: the President of the court will pass sentence against the debtor.

The interim order is provisionally enforceable, i.e. the decision on the principal matter does not have authority of res judicata (it is not a final binding court ruling). It is enforced by the creditor at their own risk. It may be amended or be the subject of a new summary judgment should new circumstances arise.

Interim order

The interim order may be:

• appealed against within 15 days of the notification, if it was issued after due hearing of all the parties, or with the same effect as an inter partes ruling against the defaulting debtor;
• objected to within 8 days of the notification, if it was issued by default against the debtor.

Good to know

B2B transactions

In the context of B2B transactions, in the event of late payment, the creditor may claim:

• late payment interest;
• a flat-rate compensation payment of EUR 40 for debt-recovery costs;
• reasonable compensation for any other costs incurred in recovering the debt, above and beyond EUR 40, such as lawyer's fees.

If the debtor is in default of payment, late-payment interest is due:

• from the day following the payment due date, or on the expiry of the payment term agreed upon by contract;
• if no date is stipulated by contract, 30 days after the date:
  • of receipt of the invoice; or
  • of receipt of the goods or the provision of services, if:
    • the date of the invoice is uncertain; or
    • the debtor receives the invoice before receiving the goods/services; or
  • of acceptance or verification of the conformity of the goods/services when:
    • this procedure has been agreed on by contract or is provided for by law;
    • the debtor receives the invoice before or on the date of acceptance/verification.

The parties to the contract are free to agree on other terms of payment.

Any unfair clauses in the contract may be rendered null and void by the court.

B2C transactions (i.e. between a professional and a consumer)

In the context of transactions with a consumer, late payment interest:

• is automatically incurred (without the need for formal notification) as from the 3^rd month following the date:
  • of receipt of the goods; or
  • of completion of the work or the provision of services;
• can be claimed if and only if:
  • the invoice was issued within one month of:
    • receipt of the goods by the customer; or
    • completion of work or the provision of services;
  • the professional has expressly stated on the invoice that they will claim the legal rate of late payment interest where necessary.

The applicable legal rate of late payment interest is set annually by Grand Ducal Regulation.

Procedures

Links