The recovery of receivables in the Grand Duchy of Luxembourg

1. Extra-judicial recovery of receivables in the Grand Duchy of Luxembourg

The formal demand is the document used by creditors to express their intentions with a view to requiring the payment of sums due, or in default, to impose the legal consequences of non execution.

The formal demand should incorporate:

1. A statement of the creditor’s intention to require payment of sums due;
2. The legal consequences that will result for the debtor in the case of non execution.

Although Article 1146 of the Luxembourg Civil Code requires a formal demand in the case of claims for damages and interest, it should be noted that the Law of 18 April 2004 on payment deadlines, transposing EU Directive 2000/35 into national law unified the regime of interest for late payment.

This Law provides that a formal demand is no longer necessary for the accrual of interest for late payment and differentiates the following different situations:

1. Receivables resulting from commercial transactions: interest for late payment is calculated from the expiry of a deadline of thirty days following receipt of invoices
2. Receivables resulting from agreements concluded between a professional and a consumer: interest for late payment is calculated from expiry of a deadline of three months following acceptance of the works, provision of the service or completion of the works

2. Judicial recovery of receivables in the Grand Duchy of Luxembourg

The judicial stage for recovering receivables in the Grand Duchy of Luxembourg may be initiated according to various procedures to be identified according to the actual details of the dispute.

The main factors to be taken into consideration to identify the judicial procedure in Luxembourg best adapted to recover receivables are:

1. The nature of the dispute: the complexity of some disputes, notably when there are challenges or uncertainty regarding the amount or identification of the debtor, prevents recourse to simplified proceedings. In addition, some specific matters cannot be brought before a Court except in the form of a motion (lease, receivables under a contract of employment, etc.)
2. The value of the receivables in dispute: in order to assess the value of the receivables, the principal sum should be taken into consideration together with interest for late payment due on the day of filing the writ.

2.1. Recovery of receivables of a value below 10,000 EUROS

2.1.1 Conditional payment injunction

This simplified procedure is reserved for receivables not exceeding 10,000 EUROS. These proceedings fall within the jurisdiction of a Justice of the Peace.

The application is formed by a declaration made to the Clerk of the Justice of the Peace stating on penalty of nullity:

1. The names, first name, profession and domicile of the claimant and defendant;
2. The reasons for and amount of the debt;
3. The request for a conditional payment injunction.

In support of the claim, all documents (contracts, invoices, etc) capable of proving the existence, the amount and reasons for the debt should be attached.

On the basis of this application, an injunction with an order to pay within fifteen days of notification is pronounced by the President of the Justice of Peace’ Court.

Following the injunction, two situations may arise:

• During the aforementioned 15 days, the debtor has the possibility of lodging an appeal stating the reasons for the refusal to pay the debt. The appeal, which may be lodged as a simple written or verbal declaration at the Court Registry, shall contain a brief statement of the grounds.
  In this hypothesis, either party may require the proceedings to be heard. The Justice of the Peace will then pronounce a reasoned judgement during the hearing, confirming or otherwise the conditional payment injunction.
• If no appeal is lodged within fifteen days, the creditor may request enforcement of the conditional payment injunction. This order produces the same effects as a judgement in default. The order is valid for six months, it being understood this period is interrupted by an enforcement procedure.
  The debtor ordered to pay may, however, contest the decision by any normal means, that is by lodging an objection and/or an appeal.

2.1.2. Summons to appear before the Justice of the Peace

The writ of summons known as the “citation” is the common law writ in disputes where the amount at issue is less than 10,000 EUROS.

It is served by a legal official on the debtor whether in Luxembourg or abroad.

The party is summoned to appear on a fixed date.

Unlike the payment injunction procedure, proceedings initiated by a “citation” writ of summons necessarily require appearance at a hearing to obtain a judgement.

2.2. Recovery of receivables of a value exceeding 10,000 EUROS

2.2.1. Judgement on a motion

This is the simplest and most efficacious procedure for recovering receivables in Luxembourg. It has the advantage of dispensing the creditor from recourse to a legal official in order to serve the writ of summons and also allows requiring the debtor to adopt a position before the pleadings.

By analogy with the payment injunction procedure, the debtor must be domiciled in the Grand Duchy of Luxembourg.

The procedure is initiated by a motion filed at the registry of the local Court with a view to obtaining a provision for receivables exceeding 10,000 EUROS.

The motion must state the following information:

1. The names, first names, profession and domicile of the claimant and defendant;
2. The reasons for and amount of the receivables;
3. The application for a conditional payment injunction.

On the basis of the information supplied, the Judge will pronounce an injunction with an order to pay into the hands of the creditor the amount claimed, or to lodge an objection within fifteen days.

Following the objection, the parties may require a hearing to be fixed so the parties can plead the grounds for their claims before the judge.

The injunction, backed up by provisional enforceability, may be appealed against and/or challenged.

2.2.2. Writ of summons before the local Court

The writ of summons known as the “assignation” is the common law writ in disputes where the amount at issue exceeds 10,000 EUROS.

It is served by a legal official on debtors who must appoint counsel to represent them in Court during the proceedings.

This type of proceedings allows obtaining a judgement in disputes which require an examination on the merits and generally, in the event of debtors submitting a defence and challenges as to the well-founding of the claim for payment of the receivables.

3. New European Community procedures

The civil enforcement procedures available in domestic law present various inadequacies regarding the recovery of receivables from debtors domiciled abroad. On the basis of this observation and the standpoint of creating a truly “European Judicial Area” the European Union has began to establish Community procedures to facilitate cross-border debt recovery.

i. Regulation (EC) No. 805/2004 of the European Parliament and Counsel of 21 April 2004 creating a European right to enforce the repayment of uncontested debts;

This Community regulation entered into force on 21st January 2005 and addresses the following situations:

The regulation applies to decisions, judicial settlements and certified deeds concerning undisputed debts.

A debt is deemed undisputed if:

1. If the debtor has expressly acknowledged it by accepting or having recourse to a negotiated settlement approved by a Court or concluded before a Court during judicial proceedings; or
2. If the debtor never issued any form of challenge pursuant to the procedural rules of the original Member State, during the judicial proceedings; or
3. If the debtor failed to appear or be represented at a hearing concerning the debt after initially challenging it during judicial proceedings and provided said conduct can be considered a tacit acknowledgement of the debt or of the facts relied on by the creditor pursuant to the law of the original Member State; or
4. If the debtor has expressly acknowledged the debt in a certified deed.

This regulation allows seeking from the registry of a Court in a European Member State a European enforcement right allowing the creditor to dispense with recourse to the exequatur procedure.

ii. Regulation (EC) No. 1896/2006 of the European Parliament and Counsel of 12 December establishing a European procedure for granting an injunction and order for payment;

This Community regulation applies to cross-border civil and commercial disputes irrespective of the nature of the jurisdiction. Specifically, it excludes taxation; customs and administrative matters and State liability for acts or omissions committed in the exercise of public powers ("acta jure imperii") and has been in force since 12 December 2008.

It established a truly European procedure for obtaining an injunction and order to pay for the recovery of liquid, due pecuniary debts allowing proceeding against a debtor domiciled in a Member State, without recourse to the exequatur procedure.

iii. Regulation (EC) No. 861/2007 of the European Parliament and Counsel of 11 July 2007 instigating a European procedure for settling minor disputes

This Community regulation applies to civil and commercial matters in cross-border disputes irrespective of the nature of the jurisdiction if the amount of the claim does not exceed 2000 EUROS at the time of receipt of the application form by the competent Court, excluding interests, costs and disbursements.

It entered into force on 1 January 2009.