Last week I dealt with on the jurisdiction of the courts. I have also discussed the question of the jurisdiction of the law for particular contractual legal relationships. All of this is in terms of the assertion of claims in a situation where one of the parties is an entity domiciled abroad. Today, I would like to mention the possibilities for cross-border redress. Recovery of debts from EU counterparties This is an important issue from the perspective of many entrepreneurs. The types of proceedings outlined below are intended to facilitate the recovery of debts, as well as to reduce the time to enforceability of judgments in other Member States.
European order for payment (EOPA)
The European order for payment (EOPA) allows for the direct collection of debts from a foreign debtor. It has been introduced European Parliament and Council Regulation No 1896/2006 (hereinafter: the Regulation). The EAW procedure applies to all Member States of the European Union with the exception of the Kingdom of Denmark.
Cross-border case
According to Article 3 of the Regulation, a cross-border case is to be understood as:
"a case in which at least one of the parties is domiciled or habitually resident in a Member State other than the Member State of the court seised."
Example
The proceedings are pending before a Polish court between:
- A GmbH, Berlin, and
- Company C with its registered office in Wrocław.
Recovery of debts from EU counterparties and jurisdiction
A lawsuit on the issuance of an ENZ can be brought before a court in Poland according to the procedural rules applicable in our country. Of course, only if a clause establishing the jurisdiction of the Polish court is included in the text of the agreement. I talked about the clause in a previous article: How do I pursue receivables from EU counterparties? In the absence of such a clause in the contract, the jurisdiction of the court will be determined on the basis of the Brussels I bis Regulation.
Recovery of debts from EU counterparties - example
It may therefore be the case that injunction proceedings concerning a contract for the sale of furniture by a Polish manufacturer to a shop in Berlin for an unpaid invoice by that shop will be initiated before the court in Wedding (the court designated to hear disputes with ENZ in Germany). This is because disputes under a cross-border sales contract are decided by the courts of the defendant's domicile or the place where the goods were delivered.
In our case, the two properties are identical due to the fact that the Polish furniture manufacturer delivered the furniture simultaneously to the defendant's shop in Berlin. Ultimately, in the example under consideration, the court in Wedding will have quite a nut to crack. It will have to decide the case on the basis of Polish law, due to the fact that the parties did not specify to which law they subjected the contract they concluded. As a result, the legal relationship between the parties will be governed by EU law. These in turn establish the law applicable to the contract of sale, which is the law of the place of the seller's registered office or residence. In our case, this will be the law of Poland. In order to prevent such situations, it is very important to introduce clauses into cross-border contracts establishing the jurisdiction of the court and the law under which the court will rule in the case.
European injunction proceedings fall under the jurisdiction of district and regional courts depending on the value of the subject of the dispute. In Poland, in cases with the value of the subject of the dispute exceeding PLN 75,000, the district court is competent. On the other hand, in cases not exceeding this amount, the district court is competent.
Application for a European order for payment
The application for a European order for payment shall be submitted using form A. It is set out in Annex I to Regulation No 1896/2006 of the European Parliament and of the Council of 12 December 2006. The form is accompanied by information instructions on how to fill it in correctly.
In some courts, it is possible to complete and submit the form both on paper and electronically. Here you can complete the application electronically.
The lawsuit must include:
- the names and addresses of the parties and, where applicable, their representatives, and of the court to which the application is made;
- the amount of the claim asserted, including the amount of the principal claim and, as appropriate, interest, contractual penalties and costs;
- if interest is demanded by the claimant, the rate of interest and the period of time for which interest is demanded, unless statutory interest is automatically added to the principal under the law of the Member State of origin;
- the grounds for the claim, including a description of the circumstances invoked as the basis of the claim and, where applicable, of the interest claimed;
- a description of the evidence supporting the claim;
- circumstances justifying the court's jurisdiction;
- justification of the cross-border nature of the case.
Currency of the claim
Claims must be asserted in the currency in which they were originally expressed. If the contract was based on a claim in zloty, that is the currency in which the claim must be asserted in the ENZ.
Recovery of debts from EU counterparties and legal costs
A court fee must be paid when applying to the court for an EAW. It depends on the size of the asserted claim according to the legislation of the country in which the dispute is considered. In Poland, the ENZ is subject to a proportional fee, which amounts to 5% of the value of the object of the dispute. However, not less than PLN 30 and not more than PLN 100,000. You should also bear in mind the possible costs of the legal representation and the attorney's fee in the case of using a professional attorney.
ENZ issue
Once the statement of claim has been filed, the competent court is obliged to conduct a preliminary examination of the case. The court does not yet assess the evidence at this stage. If necessary, it will give you the opportunity to complete or rectify the application. The court will set a time limit within which such additions or corrections can be made.
In the absence of objections, the court shall issue an EOP using Form E. In accordance with Article 12 of the Regulation, Form E shall contain the names, addresses and other particulars of the parties and their representatives and shall direct the defendant to pay the amount claimed by the claimant as set out in Form A.
The court is obliged to issue the order as soon as possible. Usually, the European order for payment is issued by the court within 30 days of the date of lodging the claim.
Service of the ENZ
The European order for payment should be served on the defendant in accordance with the national law of the Member State where the order was issued. However, the method of service of the order on the defendant must meet the minimum requirements laid down in the Regulation. These provisions allow for two types of service of the European order for payment.
Firstly, service by acknowledgement of receipt by the debtor, which consists of:
- personal service with acknowledgement of receipt signed by the defendant,
- a statement by the competent person who effected service that the defendant has received the document or refused to accept it,
- served by post with an acknowledgement of receipt signed by the defendant,
- served electronically with an acknowledgement of receipt signed by the defendant.
Secondly, it is possible to serve a European order for payment on the debtor without acknowledgement of receipt. The rules set out the following permissible methods of such service:
- Service at the defendant's address on persons who are living in the same household as the defendant or are employed there; in the case of a self-employed person or a legal person, service may also be effected at the defendant's business premises on persons who are employed by the defendant,
- postal service without proof of receipt where the defendant has his address in the Member State where the merits of the case are being examined,
- service by electronic means with automatic proof of delivery, provided that the defendant has expressly accepted this method of service in advance.
Defendant's objection
It should be borne in mind that the issuance of the European order for payment does not definitively solve the problem of the enforcement of claims. The defendant may lodge an objection to the European order for payment within 30 days of service of the EOPA on him. If the defendant lodges the statement of opposition, the European order for payment becomes null and void. The case is then transferred, at the plaintiff's request, to civil proceedings under the law of the country concerned. If no objection is lodged, the court declares the EOPA enforceable and sends the enforceable order to the claimant.
Feasibility of the ENZ
A European order for payment which has become enforceable in the Member State of origin jis equally enforceable in all other Member States. It is not necessary to obtain a declaration of enforceability (exequatur) in the Member State of enforcement. The authorities of the Member State of enforcement may not, as a general rule, re-examine the circumstances or procedures which led to the payment order being issued.
Application for execution of an EES
An application for enforcement of the order should be submitted to the court or competent authority for enforcement in the Member State where enforcement is needed.
The enforcement proceedings are governed by the law of the Member State of enforcement.
Example:
According to the contractual provision, the Polish court is the competent court to resolve disputes. The trader benefiting from the jurisdiction clause filed an application for an ENZ with a Polish court. The court issued the ENZ. However, the debtor's registered office and assets are located in Germany. In order to enforce his claims under the EZ, the entrepreneur should apply to the German enforcement authority (the equivalent of the Polish bailiff), the so-called Gerichtsvollzieher.
Recovery of debts from EU counterparties - European Small Claims Procedure
Finally, it is worth noting a separate procedure that can also be helpful in cross-border disputes. Namely, the European Small Claims Procedure. When dealing with disputes in the small claims procedure, the Polish court relies on two pieces of legislation:
- Regulation (EC) No 861/2007 of the European Parliament and of the Council of 11 July 2007 establishing a European Small Claims Procedure. Its content can be found here,
- Code of Civil Procedure.
To which claims?
The small claims procedure may be used in cross-border civil and commercial cases where the value in dispute does not exceed €5,000 at the time the claim form is received by the court. The jurisdiction of the court is determined in the same way as for the ENZ procedure (above).
As in the case of proceedings for the issuance of an EAW, the plaintiff also files a statement of claim on the official form A. The claim form may be submitted directly to the court (at the court office) or by post. In some courts, it is possible to submit the claim form electronically using a qualified signature. The small claims procedure is in writing. Upon receipt of the claim, the court sends it and its attachments to the defendant. He or she has 30 days to file a response to the claim. The court in a special situation, if it considers it advisable in the case, may also schedule a hearing. In this case, the court also has 30 days to deliver a judgment. The judgment shall be served on both parties ex officio with instructions on the remedies available to them.
A judgment given in a Member State in the European Small Claims Procedure shall be recognised and enforced in another Member State without the need for a declaration of enforceability.
Recovery of debts from EU counterparties. Summary
At the moment, there are many possibilities to assert one's rights in cross-border cases. What I would like you to remember from the above entry is how important it is to include a clause establishing the jurisdiction of a Polish court and Polish law as applicable to a given contract already in the content of a contract concluded with a foreign counterparty. This will save you not only money, but also unnecessary nerves and time.
Should you have any questions regarding the procedures discussed, I would of course encourage you to contact me.
