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Debt recovery in the Romanian legal system

Management and recovery of debts is an essential aspect of commercial and economic relations. In Romania, debt recovery is mainly governed by the Civil Code and the Code of Civil Procedure, but there are other specific laws and requirements for different types of debts. This guide explains the essential steps you need to take to recover your claim against a debtor based in Romania.

1. Out-of-court procedures

Before taking legal action in court to recover a sum owed by their debtor, creditors may follow an out-of-court procedure. It is recommended for the creditor to notify the debtor regarding his claim and demand voluntary payment. The payment notice should be clear, precise, and firmly request that the debtor performs their contractual obligation within a reasonable timeframe. It must be sent to the debtor in writing, by any means of communication which ensures confirmation of receipt. Issuing and delivering a payment notice to the debtor is a mandatory prerequisite for some types of court proceedings (e.g. payment order procedure), and – in any case – interrupts the running of the statute of limitations by 6 months, if it is followed by the filing of a court claim against the debtor.

Mediation represents an efficient and beneficial out-of-court means of resolving disputes between creditors and debtors regarding debt collection or debt repayment.

The Romanian statute regarding mediation (Law no. 192/2006, with subsequent amendments and additions), regulates this procedure and provides involved parties with the opportunity to resolve disputes in a faster, less costly, and less stressful manner than through the judicial system. To follow this procedure, it is necessary for both parties (the creditor and the debtor) to agree to participate in a mediation session, during which the mediator attempts to facilitate constructive dialogue between the parties and helps them identify acceptable solutions. The process is confidential, and the mediator remains neutral. After each session, the mediator will draft minutes of the meeting, and partial agreements can be closed, even if at the end of mediation the parties will not reach an agreement regarding all aspects / claims.

2. Enforceability of claims and enforceable titles

To initiate an enforcement procedure, the creditor must have a valid document, such as a court judgment or a decision from an authority, which constitutes an enforceable title according to the law. Generally, if the creditor does not hold an enforceable title against the debtor, he will have to follow the court procedure to obtain a court judgment.

 

Enforceable titles are an essential aspect of the legal system in Romania, as they enable parties to obtain the forced execution of court judgments and other claims.

According to the Civil procedure code of Romania, enforceable titles are legal documents issued by courts or other competent authorities, which give the creditor a right to seek the forced execution of a court judgment or a claim. There are several types of enforceable titles, such as: 

  • Court Judgments: after a court issues a judgment in a civil or criminal case, it can become an enforceable title, meaning the successful party can request the forced execution of the judgment
  • Authentic Instruments: certain notarized documents can serve as enforceable titles. For example, an authentic contract can be used to seek the forced execution of the certain and determined contractual obligations stipulated therein.

  • Certain types of contracts: rent and loan contracts, for example, are enforceable titles, under certain conditions, in regard to the debtor’s obligation to pay the rent / repay the loan, even if these contracts are not notarized. In such cases, expressly stipulated by the law, private documents, signed between the parties, are enforceable titles.

  • Commercial papers / trade bills: certain documents used in commercial relations, such as the bill of exchange, the cheque, the promissory note, are enforceable titles.

  • Decisions of other authorities: other authorities, such as the Public Finance Administration or other state institutions with controlling powers, can issue decisions which may become enforceable titles.

3. Types of court procedures used for obtaining an enforceable title

The Romanian legal system provides various legal instruments to a creditor, as an effective remedy to recover his claim. The main types of court procedures used for obtaining an enforceable title according to Romanian legal provisions include:

Common court procedure

The common court procedure (Romanian: “acțiunea de drept comun”) involves filing a claim with the competent court, which must contain – among other information – the factual and legal basis for the claim. The trial procedure involves an initial written stage and then an oral stage, and in each stage ȚȚȚȚ the parties have rights and obligations which need to be addressed within certain time limits laid down by law. After the written phase, the court will then summon both parties to present their arguments and evidence before issuing a judgment.

The common procedure may take over a year or even longer depending on the complexity of the case and the evidence proposed to be submitted by the parties or ordered by the court. Also, after the case decided by the first instance, the decision may be reviewed by the higher courts if the parties decide to file an appeal, or in some cases, a recourse.

It is important to note that in this procedure the plaintiff have to pay court fee calculated based on the monetary value of the claim (generally between 1%-8%, depending on the claim, and even more, in case of low value claims), which will be paid again (reduced by 50%) in case of an appeal.

After obtaining an enforceable decision (usually the decision issued by the court which solves the appeals phase), the successful party can initiate the enforcement procedure.

Payment order procedure
(art. 1014-1025 Civil Procedure Code)

This applies in situations where the obligation to pay a sum of money arises from a contract or other document concluded with the debtor or acknowledged by the debtor.

A prerequisite for this procedure is to send a written payment notice to the debtor, which must be delivered under confirmation of receipt, and by which payment must be demanded in a term of 15 days after delivery if the notice.

If the debtor does not pay, the creditor can file a claim through this special procedure, which is processed faster by the court. If during the court investigation, it is found that the creditor`s claim is justified, the court will issue a payment order stating the amount of the sum that the debtor is obliged to pay and the deadline for payment. In this case, the time limit for payment may not be less than 10 days and may not exceed 30 days.

Compared to the standard procedure, this procedure is more advantageous because it is an accelerated one and the payment order issued by the first court is enforceable. Both parties have a period of 10 days within which to lodge an appeal, calculated from the date of communication of the first instance judgment, but this does not prevent the creditor from starting a forced execution procedure.

Also, the court tax for such a procedure is of 200 RON (approximately 40 EUR), regardless of the value of the claim.

Procedure for small claims
(art. 1026-1033 of the Code of Civil Procedure)

If the creditor has a claim worth less than 10.000 RON (approximately 2000 EUR), without taking into account the legal or contractual interest rate, it can be processed through another special procedure, which may be carried out only in writing, without court appearances. A court appearance can, however, be ordered by the judge, if deemed necessary.

According to this procedure, after receiving all the necessary information and clarifications, the court will pronounce the judgment within 30 days (this timeframe is sometimes surpassed, however). Similar to the payment order procedure, the first instance court judgement is enforceable, but the time limit for appeal is 30 days from the moment of communication of the judgment as in the standard procedure.

Court fees are lower than in the standard procedure, and the amount of the court fee is fixed and not variable as according to the standard procedure (may be of 50 RON or 200 RON, depending on the value of the claim).

It is also important to note that – in both the payment order procedure, as well as the small claims procedure – if the creditor decides to initiate the enforcement procedure based on the first-instance court judgment, and subsequently, the judgement is annulled by the higher court, the creditor will be responsible for the enforcement costs and he will have to pay back the debtor and compensate for any damages caused by the enforcement procedure.

4. Interim measures – temporary remedies to secure chances for claim recovery until obtaining an enforceable title

The interim measures refer to temporary legal actions or orders that a court can issue to provide immediate relief or protection to parties involved in a legal dispute or pending a final decision. These measures are often taken to prevent harm, maintain the status quo, or ensure that the rights and assets of the parties are safeguarded until a final judgment or decision is reached.

Interim measures can include various types of orders, such as injunctions (both prohibitory and mandatory), freezing orders (to preserve assets), and sequestration orders. The purpose of these measures is – generally – to prevent any party from suffering irreparable harm or having their rights undermined while the legal proceedings are ongoing.

For example, if one party believes that the other is about to sell off assets that might be needed to satisfy a judgment, they can seek an interim freezing order to prevent the sale until the case is resolved.

Interim measures are an important aspect of the Romanian legal system, necessery to ensure that the administration of justice is fair and equitable, and they serve as a means to protect the interests of the parties involved (generally, the interests of the creditor).

The court will examine the creditor’s application in an emergency procedure and decide whether there are good grounds for ordering any interim measures. If the application is justified and meets the legal requirements, the court may issue an order imposing these measures on the debtor’s money or properties.

Sequestration

Sequestration, also known as conservatory or provisional attachment, is a legal measure taken to prevent a debtor from disposing of or alienating their assets while a trial is pending. The purpose of sequestration is to secure the creditor’s claim, ensuring that if they win the case, there will be assets available for execution.

Sequestration can be ordered by a court if certain conditions are met. These conditions include the existence of a valid claim, the risk that the debtor may dispose of assets to evade execution, and the posting of a security deposit by the creditor to cover potential damages to the debtor. It can be applied to various types of assets, including bank accounts, real estate, vehicles, and personal property and it is typically temporary and remains in effect until a final judgment is issued. If the creditor loses the case, they may be liable for damages suffered by the debtor as a result of the sequestration.

Attachment of Property

Attachment of property, commonly known as “poprire,” is a legal procedure used to recover a debt by seizing the debtor’s assets. It can be applied to various types of property, including bank accounts, real estate, salaries, pensions, and personal property. This measure consists in the very fact that the sums of money or other securities owed to the debtor by a third party are frozen. It is applied in those situations where there is a well-founded fear that the debtor will not or will not be able to comply with the court judgment or agreement

 

Both sequestration and attachment of property are important tools for creditors to secure their claims and enforce judgments. In such cases, it is important to note that the court may request the creditor to provide a security deposit, calculated based on the value of the claim.

 

However, these measures are distinct legal mechanisms with specific conditions and procedures outlined in the Romanian Civil Procedure Code. It is essential for both creditors and debtors to be aware of their rights and obligations under these procedures, and seeking legal advice is often advisable to navigate these complex processes effectively.

5. Enforcement procedure

After going through the procedure before the court, the creditor will obtain the enforceable title which is the court decision. According to the enforceable title, which is the official document confirming the existence of the debt as well as the fact that the debt is owed by the debtor, the creditor may initiate enforcement procedure.

 

On the other hand, if the creditor holds another enforceable title, he is not required to follow the court procedure, so the debtor`s enforcement procedure can be initiated directly, without any other prior steps.

 

Thus, the first step in recovering the debt owed according to the enforcement procedure is to register a request for enforcement with the bailiff, accompanied by the enforceable title. The request for enforcement must contain details of the amount owed, the reason for enforcement and the way in which recovery is sought.

The bailiff will be able to use various methods to recover the debt, including seizure of assets, attachment of earnings, seizure of the debtor’s movable or immovable property, and the debtor will be compelled to perform his obligations.

In the Romanian legal system, there are two main methods of enforcement: direct enforcement and indirect enforcement. These two approaches aim at recovering claims or court judgments and can be applied depending on the specific circumstances of each case.

 

Direct enforcement is an approach that involves the debtor’s voluntary intervention to satisfy the claim. In this case, the debtor may agree to pay the owed amount or provide guarantees for the satisfaction of the claim without the need for forced intervention by the judicial executor.

In direct enforcement, the debtor may take the initiative to negotiate with the creditor and establish the methods of payment or fulfillment of the court judgment. This approach may be preferred to avoid the costs and delays associated with direct enforcement.

Indirect enforcement involves actions taken by the judicial executor or other competent authorities to recover claims or enforce court judgments. This is a method used when the debtor does not cooperate voluntarily and does not fulfill their obligations.

The procedure may include freezing the debtor’s bank accounts, seizing their assets, or selling them to satisfy the creditor’s claim. The judicial executor is responsible for implementing these measures and ensuring the recovery of the claim.

In both cases, the goal of enforcement is to ensure that the creditor’s claim is legally and efficiently recovered. The exact procedures and methods may vary depending on the nature of the claim, the court judgment, and the specific circumstances of each case.

In the end, if the debt is paid in full, the bailiff will terminate the enforcement proceedings, and if the debtor fails to meet his obligations, the enforcement proceedings may continue until the debt is satisfied in full.

Contestation of Execution According to the Romanian Civil Procedure Code

Contestation of execution is an important legal mechanism in the Romanian legal system, providing parties with the means to challenge or object to the enforcement of a court judgment or other enforceable titles. This process is governed by the Romanian Civil Procedure Code and plays a significant role in protecting the rights and interests of both debtors and creditors.

It is a legal procedure that allows a party, typically the debtor, to challenge the enforcement of a court judgment or other enforceable titles. It serves as a safeguard against potential abuses or errors in the execution process.

The Romanian Civil Procedure Code provides specific grounds on which a party can contest the execution such as : procedural errors or irregularities in the enforcement process, circumstances that render the execution unjust or impossible, sufficient payment or satisfaction of the claim.

It is important to note that the contestation of execution must be filed within a specific timeframe set by law. This timeframe is typically 15 days from the date of notification of the enforcement proceedings. It is essential to adhere to this deadline, as late submissions may be rejected. Also, it must include a clear statement of the grounds for contestation and any supporting evidence and, after that, it will be submitted to the court.

The court will hold a hearing to examine the contestation. During the hearing, both parties, the creditor and the debtor, have the opportunity to present their arguments and evidence. The court will assess the validity of the contestation and make a decision. Based on the evidence and arguments presented, the court will issue a decision either upholding the execution or halting it. If the court finds in favor of the party contesting the execution, it may annul or modify the enforcement measures. Judgements regarding contestation of execution can be appealed to a higher court instance if one party disagrees with the outcome.

Also, filing a valid contestation can lead to the suspension of the execution process until the court resolves the matter. This suspension is intended to prevent further actions that may harm the party contesting the execution and the court may request the creditor to provide a security deposit, calculated based on the value of the debt.

To sum up, the contestation of execution is an essential legal remedy that ensures the fairness and legality of the enforcement process in Romania. It provides a means for parties to address errors, unfairness, or changed circumstances that may arise during the execution of court judgments or other enforceable titles. Parties involved in execution proceedings should be aware of their rights and obligations under the Romanian Civil Procedure Code and seek legal advice when necessary to navigate the process effectively.

6. Statutes of limitation under Romanian law, in civil and commercial matters:

Also, it is important to note that, in Romania, there are limitation periods for debts, which means that, after a certain period of time, the creditor can no longer seek recovery of the amount owed in court. Limitation periods can vary depending on the type of debt and the applicable law.

Limitation periods for enforcement vary according to the nature and type of debt. According to the Romanian Code of Civil Procedure, limitation periods are as follows:

a.)The general limitation period is 3 years. It applies in most cases and is calculated from the date on which the creditor became aware that the debtor breached the payment obligation.

b.)The limitation period for tax claims is 5 years. This period applies to the recovery of debts owed to the State, such as unpaid taxes, duties or social security contributions.

c.)The limitation period for claims secured by mortgage is 10 years. It applies to debts secured by mortgage on immovable property.

Once the limitation period has expired, the creditor is no longer entitled to initiate enforcement procedure. This means that the debt becomes unenforceable, and the debtor is no longer obliged to pay the amount due. However, the creditor’s right to obtain a court judgment or an enforceable title for the time-barred debt is not affected. The debtor could therefore be obliged to pay the debt if he is sued for another claim.

7. The special situation of debt recovery when the debtor in insolvent. Liability of company managers

Insolvency is a financial condition of a company that is unable to meet its financial obligations and debt recovery proceedings are carried out in accordance with the provisions of Law No 85/2014 on insolvency proceedings. The main steps that a creditor have to follow to recover his debt from debtor company in insolvency are:

 

Establishment of claims: creditors who have to collect claims from the insolvent company must file an application for registration of claims with the insolvency administrator or liquidator, as provided by law. In this application, creditors must provide proof of their claims, such as invoices, contracts or other supporting documents.

 

Supervision of proceedings: Insolvency proceedings are monitored by the court and the insolvency administrator or liquidator must submit regular reports on the state of the proceedings and the evolution of the company’s assets and debts.

 

Reorganisation or liquidation: In the event of insolvency, a reorganisation plan may be adopted if the debtor company has a chance of financial recovery. The reorganisation plan may set out how claims are to be repaid, depending on the availability of funds and the company’s resources. If there is no prospect of recovery, the company may be liquidated and the claims will be divided according to the priority provided by law.

 

Recovery of claims after the end of the proceedings: If the company is reorganised and returns to business or if the assets are liquidated, creditors will be repaid in accordance with the reorganisation plan or in the order provided for by law.

 

Liability of the administrator: In a company, the administrator is responsible for managing the company’s affairs in a responsible manner and in the best interests of the company. However, in certain circumstances, the director may be held liable for the company’s liabilities, i.e. the company’s unpaid or unfulfilled financial obligations. This may occur if the director has acted negligently, unlawfully or failed to discharge his duties as the company’s legal representative. In order to incur the liability of the administrator, the creditor must follow a procedure that will take place in court. The trial will begin with the presentation of arguments and the submission of evidence of the administrator’s guilt before the court. The involved parties will have the opportunity to support their cases and present arguments. After evaluating all the evidence and arguments, the court will issue a judgment. This judgment may either establish or reject the administrator’s liability. If liability is established, the court can determine specific measures for the recovery of damages. If the court orders the administrator to pay damages or undertake other actions, the creditor will need to pursue the execution of the judgment to obtain compensation.

 

To sum up, the recovery of debts in the case of a debtor company in insolvency implies compliance with the legal procedures specific to this situation. Insolvency proceedings offer creditors the opportunity to recover their debts, depending on the reorganisation or liquidation, but this requires patience and involvement during the insolvency process.

To sum up, the recovery of debts in the case of a debtor company in insolvency implies compliance with the legal procedures specific to this situation. Insolvency proceedings offer creditors the opportunity to recover their debts, depending on the reorganisation or liquidation, but this requires patience and involvement during the insolvency process.