Debt collection involving a foreign element represents one of the more complex issues in legal practice, as it requires the simultaneous application of domestic regulations, rules of private international law, bilateral and multilateral international treaties, as well as the procedural rules of foreign legal systems. A foreign element may exist with regard to the parties (a foreign natural or legal person), the place where the obligation arose, the place of performance, or the location of the debtor’s assets.
This text will address two basic situations:
- Debt collection in the Republic of Serbia, where the creditor is a foreign natural or legal person and the debtor is a domestic natural or legal person;
- Debt collection abroad, where the creditor is a domestic natural or legal person and the debtor is a foreign natural or legal person.
with particular emphasis on debt collection based on an authentic document and an enforceable title.
A foreign element exists when at least one of the relevant facts is connected to more than one country. In practice, the most common situations occur when one party to a given legal transaction is a foreign natural or legal person, or when the debtor has residence, registered office, or assets abroad, as well as when the obligation arose or is performed outside the Republic of Serbia.
In cases where a foreign element is present for any reason, this will affect the establishment of the jurisdiction of the court or other authority, the applicable law, and, ultimately, the recognition and enforcement of foreign court and arbitral decisions.
1. Debt collection in the Republic of Serbia when the creditor is a foreign natural or legal person
Foreign natural and legal persons generally enjoy procedural equality in the Republic of Serbia with domestic persons, in accordance with the Civil Procedure Act and international treaties. Some of the situations in which a foreign person may initiate court proceedings before a court in the Republic of Serbia include when the defendant has residence or a registered office in Serbia, when the obligation is to be performed in Serbia, when the harmful act or the consequence of the damage occurred in Serbia, or when the dispute relates to immovable property located in Serbia, etc.
However, a deviation from equality with domestic persons may exist, as a foreign person initiating proceedings before a Serbian court may be required to provide a plaintiff’s security deposit. A plaintiff’s security deposit serves as a guarantee for the litigation costs that the foreign person would be obliged to pay in advance in order to be able to pursue proceedings before the domestic court. The purpose of the plaintiff’s security deposit is to protect the defendant from the risk of not being able to recover awarded litigation costs from a foreign plaintiff who does not have residence or a registered office in Serbia.
The obligation to provide a plaintiff’s security deposit does not always exist, and the court does not impose it ex officio, but only upon the request of the domestic defendant. Likewise, the obligation to provide a plaintiff’s security deposit does not exist when reciprocity exists between the Republic of Serbia and the state of which the plaintiff is a citizen or where the plaintiff has a registered office, as well as when the plaintiff has residence or a registered office in the Republic of Serbia.
Finally, it is important to note that there are situations in which a foreign person cannot initiate proceedings before a court in the Republic of Serbia. This is most often the case when the parties have agreed on the jurisdiction of a foreign court or when a particular matter falls exclusively under the jurisdiction of a foreign court (e.g., disputes relating to immovable property will be under the exclusive jurisdiction of the court of the country where the immovable property is located).
Debt collection based on an authentic document
Article 52 of the Enforcement and Security Act prescribes what may be considered an authentic document under domestic law. In accordance with domestic regulations, authentic documents include, among others, invoices, extracts from business books, interest calculations, promissory notes, checks, bank guarantees, letters of credit, and so on.
A foreign creditor may initiate enforcement proceedings based on an authentic document before the competent court in the Republic of Serbia, provided that the debtor is a domestic or foreign person with assets in Serbia and that the document is eligible for recognition under domestic law. The authentic document must be translated into Serbian and certified by a court-appointed translator.
Debt collection based on an enforceable title
Article 41 of the Enforcement and Security Act prescribes what may be considered an enforceable title under domestic law. In accordance with domestic regulations, enforceable titles include, among others, domestic court judgments and court settlements, mortgage agreements and pledge declarations, notarial deeds with the force of an enforceable title, settlement agreements through mediation, and so on.
If a foreign creditor holds a foreign court or arbitral decision, it is necessary to carry out the recognition procedure of the court decision in the Republic of Serbia, unless otherwise provided by an international treaty. Only after recognition does the decision acquire the effect of a domestic enforceable title and may be enforced against the debtor’s assets in Serbia.
2. Naplata potraživanja domaćeg poverioca prema stranom fizičkom ili pravnom licu
The first step in collecting a claim from a foreign party is to determine whether the domestic court has international jurisdiction to hear the specific dispute, whether the jurisdiction of a foreign court or arbitration has been agreed upon, and which law is applicable to the contractual relationship. In practice, contractual clauses on jurisdiction and applicable law play a significant role.
A domestic creditor may also initiate proceedings before a domestic court if a foreign natural person has residence and/or assets in Serbia, or if a foreign legal person has a representative office or branch in Serbia, provided, of course, that there is no exclusive or agreed jurisdiction of a foreign court.
If jurisdiction cannot be established before a domestic court, the domestic creditor must initiate proceedings before a foreign court, and the procedure will vary depending on the documentation available.
Enforcement based on an authentic document
Unlike the domestic system, many countries do not recognize enforcement based on an authentic document in the same form. For this reason, a domestic creditor often has to initiate civil proceedings before the competent foreign court, or first obtain a court judgment in Serbia and then seek its recognition abroad. The possibility of direct enforcement depends on the procedural law of the country where the debtor’s assets are located.
Enforcement based on an enforceable title
If a domestic natural or legal person holds a final and binding court judgment of a domestic court, a court settlement, an arbitral award, or a notarial deed with the force of an enforceable title under domestic law, it is necessary to initiate a recognition procedure of the domestic enforceable title in the debtor’s country.
This procedure depends on bilateral and multilateral treaties and the principle of reciprocity between the Republic of Serbia and the foreign country, as well as on the procedural rules of that foreign country.
The procedure is initiated before the competent court of the foreign country or another authority responsible for the enforcement of foreign decisions (depending on the legal system). If the conditions are met, the foreign court issues a decision recognizing the enforceable title issued in the Republic of Serbia and gives it the effect of a domestic decision. From the moment of recognition, the decision becomes enforceable in that country and may be executed compulsorily in accordance with the enforcement rules of the foreign country.
Conclusion
Debt collection involving a foreign element requires a thorough understanding of both domestic and international regulations, as well as a strategic approach to each individual case. The distinction between enforcement based on an authentic document and an enforceable title is crucial for choosing the appropriate legal path and the speed of realizing the claim.
Due to the legal complexity of the matter, this text has addressed only some of the possibilities and limitations that may arise in the collection of claims with a foreign element.
Given the legal and procedural complexity, and the risks that may arise from a lack of knowledge of foreign law and international mechanisms for recognition and enforcement, it is advised that such proceedings be conducted with the professional assistance of a lawyer.
The information contained in this document does not constitute legal advice on any specific matter and is provided solely for general informational purposes.
