Debtor outside of Estonia – The Practical Approach to Getting Your Money Back

Has your debtor moved to Spain with all their worldly possessions? Has a foreign business partner left an invoice unpaid? Has the bailiff seized the debtor’s accounts only to find them empty, while you know the debtor is receiving money into a Paysera, Revolut or Wise account? Nobody enjoys chasing a debt. Add a foreign element, and a creditor may feel the whole process is not worth the effort. In fact, debts can be recovered abroad too. Within the European Union it is much simpler than you might think.

Start with an enforceable court decision

No state will seize someone’s property merely on the strength of an unproven claim. Enforcement requires an enforceable title, which is usually a final court decision. So before enforcement can begin, the claim has to go through the courts. If the debtor is located or resides abroad, the first step is to determine jurisdiction and the applicable law. In other words, in which country’s courts can the claim be brought, and under which country’s law will the dispute be decided?

The answer depends on the nature of the claim and on what the parties have agreed. Freedom of contract has its limits here. Businesses have the widest freedom to agree where disputes will be resolved and which law will apply. Special rules apply, for example, to protect consumers and employees. Note also that jurisdiction and the applicable law often coincide, but not always. Our lawyers have handled disputes in which an Estonian court had to apply foreign law. In such cases, the content of the foreign law must be established in the proceedings.

The fact that the defendant is abroad does not significantly change the court proceedings themselves. In practice, however, issues relating to the service of documents often need to be resolved. If the debtor is located in another EU Member State, the European order for payment procedure is also available. It is broadly similar to the Estonian expedited payment order procedure: the court does not assess evidence, and the defendant may lodge a statement of opposition without giving reasons, after which the case continues under the ordinary procedure. The key difference is the claim limit. In the Estonian expedited procedure, the claim may not exceed EUR 8,000. The European order for payment procedure has no upper limit. For larger claims, the European order for payment may therefore be the sensible choice.

Enforcing a court decision abroad

Once you have a final court decision, the harder part is usually over. If the debtor has assets in Estonia, you turn to a bailiff. A bailiff’s power to seize and sell assets derives from Estonian law, which naturally does not apply abroad. If the debtor lives in another country or has assets there, enforcement proceedings must be initiated abroad. Assets include bank accounts, and an account is located where the bank or payment institution is located. This matters for debtors who use Paysera, Revolut or Wise accounts, for example, and have money paid into them off the books. An Estonian bailiff cannot seize these accounts. Paysera and Revolut are based in Lithuania, and Wise in Belgium. To seize such accounts, enforcement proceedings must be initiated in the relevant country.

Within the European Union, cross-border enforcement is simple. EU Member States treat judgments given in another Member State essentially in the same way as judgments of their own courts. Judgments in civil and commercial matters can therefore be enforced in another Member State without a separate recognition procedure and without new litigation. The debtor may apply to the courts of the country of enforcement to refuse enforcement, but only on limited grounds and only in exceptional cases. The merits of the case cannot be re-examined there. Any appeal against the judgment itself must be brought in the country where it was given, i.e. in Estonia. To enforce a judgment in another Member State, you generally need only a copy of the judgment and a certificate issued under the EU regulation, with a translation where required. The certificate is issued by the Estonian court fairly quickly, without additional proceedings and free of state fees.

What tends to surprise creditors are the practical differences between enforcement systems. The Estonian bailiff system is not the only model. In some countries, enforcement officers are civil servants. In others, enforcement is carried out through the courts. In some places, the enforcement officer’s fee must be paid in advance. An Estonian bailiff may also ask the creditor for an advance, but this is rare in practice. In some countries, an enforcement application can only be filed through a local lawyer. Our experience shows that starting enforcement in Estonia is much simpler and more convenient for the creditor than elsewhere, but other systems have their advantages too. In Lithuania, for example, the creditor must pay the enforcement fee in advance. On the other hand, Lithuanian bank accounts are seized without the voluntary compliance period familiar from Estonian practice, and the debtor is not even notified before the seizure. A debtor who hoped to empty their Revolut account at the first sign of trouble may be in for a nasty surprise.

So far, we have mainly discussed enforcement within the European Union. Outside the EU, the situation is more complex. That does not mean, however, that nothing can be done about a debtor based outside the EU. Every country has its own procedure for enforcing court decisions. The key is to establish which procedure applies in the country concerned and whether pursuing it is economically sensible, given the size of the claim and the debtor’s assets. As a rule, enforcing an Estonian judgment outside the EU requires proceedings to have the judgment recognised and declared enforceable.

Is your debtor, or are their assets, located outside of Estonia?

Lepmets & Nõges lawyers have practical experience in recovering debts in other countries and in dealing with foreign courts and enforcement officers. Our firm is also a member of Alfa International, an international network of law firms. This means we can quickly bring in a trusted local partner in the country where the debtor or their assets are located. Contact us and we will support you throughout the process: from assessing the prospects of your claim and representing you in court to arranging enforcement of the judgment abroad.