Recovering debts of over EUR 10,000

Unpaid invoices are a major risk for any business.

A company can put in place preventive measures in order to avoid unpaid invoices and limit their impact on the business.

When faced with a debtor who refuses to pay their debts, the creditor has several possibilities to recover their due:

  • extra-judicial procedures (amicable settlement of debts);
  • judicial procedures.

If the amicable settlement is unsuccessful, the creditor can engage in legal proceedings. A legal proceeding will vary depending on the amount of the debt and the complexity of the case.

Claims higher than EUR 10,000 are within the competence of the President of the district court with territorial jurisdiction (Diekirch or Luxembourg depending on the domicile of the debtor).

There are 2 possible types of procedure:

  • ex parte application (or request for a payment order);
  • interim payment order (procedure by summons).
  •  

    If the case is more complex compared to a simple recovery of debts, the creditor can use a court lawyer to refer the matter to the competent district court by way of a summons on the merits (assignation au fond).

    Claims up to EUR 10,000 fall under the jurisdiction of the magistrate's court (justice of the peace).

Who is concerned

Any creditor, natural or legal person with a legal claim for a debt (eg.: unpaid invoice) of a person or company (the debtor) can initiate a recovery procedure against the debtor.

Prerequisites

Before initiating a debt recovery procedure, the creditor must ensure that they are not faced with a debtor in bankruptcy. If such is the case, the procedure changes and the creditor must submit a declaration of claim to the clerk of the district court who declared the bankruptcy.

Preliminary steps

Formal demand

If, in spite of several reminders from the creditor (visits, phone calls, letters or dunning letters), the debtor still refuses to settle their debts, the creditor may send the debtor a formal demand as a last resort before initiating legal proceedings.

From a legal point of view, dunning letters or a formal demand are not required by law before initiating a judicial recovery procedure.

In most cases, the formal demand is not necessary to set a deadline with a view to late-payment interest unless a compensation for damages is claimed.

The creditor may:

  • either serve the formal demand by bailiff;
  • or address the formal demand by registered letter with acknowledgment of receipt directly to the debtor.

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

The formal demand must make mention of:

  • a formal order to pay addressed to the debtor;
  • the legal proceedings considered by the creditor should the debt not be paid;
  • the exact extent of the debtor's obligation;
  • a final deadline for the debtor to pay (recommended clause).

If the formal demand is unsuccessful, the creditor must initiate legal proceedings in order to recover their debt.

Payment time frames

Transactions between professionals or with a public authority

If the debtor has passed the payment deadline, late-payment interest is due:

  • from the day following the payment due date or the end of the payment deadline 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 cannot be clearly established; or
      • the debtor receives the invoice before 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.

All parties to the contract have the possibility to agree on other terms of payment.

However, abusive clauses in the contract can be invalidated by the court.

Transactions between a professional and a consumer

A consumer is deemed to be in arrears with payment from the third month after the date:

  • of receipt of the goods; or
  • of completion of work or the provision of services.

Late payment interest

Within the framework of transactions between professionals or with a public authority, the creditor can, in the event of late payment, claim:

  • late payment interest;
  • a basic flat-rate amount of EUR 40;
  • the payment of a reasonable recovery fee, such as lawyer's fees;
  • a reasonable compensation for any other fees exceeding that amount.

Within the framework of transactions with a consumer, the late payment interest:

  • starts accruing from the third month after the date:
    • of receipt of the goods; or
    • of completion of the work or the provision of services;
  • can only be claimed if:
    • the invoice was issued within one month of receipt:
      • of the goods by the customer; or
      • of completion of work or the provision of services;
    • the professional has expressly stated on the invoice that the legal rate of late payment interest will be applied where necessary.

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

How to proceed

For debts of EUR 10,000 or more, the creditor may file:

  • an ex parte application (or request for a payment order) if the debtor is domiciled or resides in Luxembourg; or
  • a request for an interim payment order (procedure by summons) if the debtor is not domiciled or does not reside in Luxembourg.

The amount of the debt to be taken into account includes accrued interest due on the date of the request.

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

Request for a payment order

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

This procedure does not require the intervention of a lawyer.

Submission of the request

The claim is filed by submission of a request for a provisional payment order. It is sent:

  • to the President of the district court with territorial jurisdiction;
  • as an original accompanied by 4 copies.

the request must contain the following information on the claimants and on the defendants:

  • their name;
  • their first name;
  • their precise address;
  • the legal form in the case of a company;
  • their legal representative.

It must be submitted in a file marked with the names of the claimants and defendants.

If the creditor is making a claim against several jointly and severally liable debtors domiciled at different addresses, they must submit a separate request (including supporting documents) for each debtor.

The competent court

The President of the district court with jurisdiction:

  • in personal matters relating to a right of claim is:
    • depending on the domicile of the defendant, provided it is the debtor's officially declared home address; or
    • depending on the place of residence, if the debtor lives there without being officially declared;
  • in contractual matters is depending on the place where the obligation was or will be enforced.

Supporting documents

The request must be accompanied by supporting documents (in one copy) such as to provide proof of the existence and amount of the debt and to justify the request (e.g.: order form, invoice, reminder, account statement, etc.)

Decision by the President of the court

The President of the court can:

  • either reject the creditor's claim if they decide that the request is not justified. The magistrate then pronounces an order of dismissal which cannot be appealed. In such a case, the creditor can file a request for an interim payment order.
  • or instruct the debtor to pay the amount claimed by means of a provisional payment order. The court clerk notifies the debtor of the order and sends a copy to the creditor. The notification:
    • interrupts the limitation period;
    • starts accruing the interest to be borne by the debtor.

Within 15 days following the notification of the provisional payment order, the debtor can:

  • either pay the creditor the amount claimed which stops the procedure;
  • or file an objection if they deem that all or part of the amount is not due.

Objection of the debitor: the objection

Declaration to the court clerk

The debtor may make an objection simply by submitting a written declaration to the clerk of the magistrate's court that issued the provisional payment order:

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

The court clerk then summons the parties to a summary judgment hearing in open court to deliberate on the validity of the debt.

Appearance in open court

If the debtor does not appear in court, the judgment will be handed down without them being able to put forward their arguments.

If the creditor does not appear in court (without a legitimate reason), the debtor may request that a judgment be handed down on the validity of the debt, unless the judge decides to postpone the case for a subsequent hearing.

If none of the parties appear in court, the judge may automatically cancel the case by means of a decision which cannot be appealed against. Prior to this, they must send the parties (or their representatives) a final notice of hearing.

The parties may appear in person or be assisted or represented by:
  • a lawyer;
  • their spouse or partner;
  • their direct relatives (parents, grandparents, great-grandparents, children, grandchildren, great-grandchildren, etc.);
  • their collateral relatives up to and including the third degree (brother, sister, uncle, aunt, nephew, niece, brother-in-law, sister-in-law, etc.);
  • people in their personal employ or the employ of their company.
All representatives (apart from the lawyer) must have special authorisation (written power of attorney).
Hearing

The parties may request that the case be:

  • admitted and heard at the hearing; or
  • postponed and heard at a later date; or
  • removed from the list if the case is no longer valid due to the fact that the parties have come to an agreement.

If the claimant and the defendant appear at the first call, the case will be postponed to allow them to exchange their evidence, i.e. the documents in support of their arguments, and examine the evidence of the other party.

During the hearing of the case, the President will invite the parties to present their case. Although it is a verbal procedure, it is recommended that the parties present their financial statements ( e.g. statement of down payments, etc.) in writing. The parties may also present notes on submissions, stating their case in writing.

The debtor is authorised, if they so wish, to make a counterclaim against the claimant (e.g. request for procedural compensation).

Delivery of the judgment

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

  • well-founded: the provisional payment order is cancelled;
  • partially founded: the President shall sentence the debtor to pay the part of the debt recognised as founded;
  • rejected: the President pronounces the debtor's sentence.

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

Enforcement order

If the debtor does not pay and does not lodge an objection within 15 days, the creditor can request that the order be made enforceable.

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

Interim order for payment

The court summons

Before the competent district court, the creditor files their application for a court summons.

This procedure requires the services of a Court lawyer, as the summons requires the election of domicile at the lawyer's office.

Appearance at the hearing

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

The parties must appear in person or be represented and/or assisted by:

  • a lawyer;
  • their spouse or partner;
  • their direct relatives (parents, grandparents, great-grandparents, children, grandchildren, great-grandchildren, etc.);
  • their collateral relatives up to and including the third degree (brother, sister, brother-in-law, sister-in-law, nephew, niece, etc.);
  • people exclusively in their personal employ or the employ of their company.

All representatives (apart from the lawyer) must have obtained a special power of attorney.

In the event where the debtor should fail to appear at the hearing:

  • because they did not receive the summons: the President issues a default order against the debtor;
  • although they did receive the summons: the President rules with contractictory effect against the debtor.

If the debtor does appear in person or through representation to the hearing, the President shall rule as in an inter partes procedure.

The hearing process

The hearing process is the same as the objection process

Decision

If the claim made by the creditor:

  • can be seriously disputed (i.e. the creditor cannot justify the existence of a debt which is certain, of a fixed amount and due): the court President declares the summary proceeding inadmissible;
  • is partially founded: the President of the court will order payment of the part of the debt which cannot seriously be disputed.
  • cannot be seriously disputed: the President of the court pronounces the conviction of the debtor.

The interim order is provisionally enforceable, i.e. the decision on the principal matter is not a legally 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.

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 as in an inter partes procedure with regard to the defaulting debtor;
  • the subject of an objection within 8 days of the notification, if it was issued by default against the debtor.

Both the appeal and the objection must be filed by a lawyer.

Forms / Online services

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