Questions and answers concerning the cross-border collection of debts, and in particular the recognition and enforcement of foreign legal documents in Germany
By Rechtsanwalt Dr. Götz-Sebastian Hök
1. Does your country recognise decisions made by foreign courts, and does it permit the enforcement of such decisions?
a. The Federal Republic of Germany allows for the enforcement of foreign legal documents (court decisions). To the extent that it is expressly provided, other instruments, such as acts made by notary publics may be enforced equally (compare EU Regulation 44/2001, see below). On 12 December 2012, the EU institutions adopted a recast Brussels I Regulation on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters which replaced the 2001 regulation in January 2015. The European Parliament and the Council adopted Regulation (EC) 1215/2012 ("Recast Regulation") which replaces Regulation (EC) 44/2001 ("Brussels I Regulation") on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters and applies from 10th January 2015.
aa. In the event that no bilateral or multilateral recognition and enforcement agreement exists, foreign legal documents must be recognised and enforced pursuant to sections 721 and following of the German Civil Code (sections 721 et seq. ZPO) and section 328 of the German Civil Code (section 328 ZPO). Pursuant to article 1, section 1 of the Act Amending the Family Law (Art. 7 § 1 FamRÄndG), the judicial departments of the Federal Laender decide on the recognition of foreign decrees of divorce. The judicial departments can delegate this competence to the respective higher regional courts.
bb. According to the scope of the applicable bilateral or multilateral recognition and enforcement agreements, recognition and enforceability are subject to the principles laid down in such agreements.
b. The procedure is as follows:
aa. In case that no bilateral or multilateral recognition and enforcement agreement exists, foreign court decisions are only enforced if a court order for execution declares such decisions to be admissible. Unless any other procedure is explicitly required by law, the court order for execution must be passed within the framework of proceedings leading to a judgement. Character and length of such proceedings are identical with those of the normal proceedings leading to an enforceable legal document. Special procedures exist with Belgium, Greece, Great Britain, Italy, Austria and Switzerland.
bb. Most bilateral or multilateral recognition and enforcement agreements provide for optional or mandatory decree proceedings. Such decree proceedings are mandatory within the scope of the Brussels Civil Jurisdiction and Judgements Convention and of the Lugano Civil Jurisdiction and Judgements Convention now widely replaced by the EC Regulation n° 44/2001.
c. Germany generally recognises foreign judgments without checking the contents of the decision to be recognised (prohibition of the so called "revision au fond"), section 732, subsection 1 of the German Code of Civil Procedure (sction 723 Abs. 1 ZPO).
aa. Subject to special requirements which may be laid down in the applicable recognition and enforcement agreements, section 328 of the German Code of Civil Procedure (setcion 328 ZPO) sets forth the obstacles which prevent recognition of a foreign enforceable instrument:
||the foreign court must have had jurisdiction in accordance with German jurisdiction requirements|
||a defendant who did not appear in the proceedings must have received the document informing him or her of the commencement of the proceedings early enough in order to give him or her sufficient opportunity to defend himself or herself|
||the foreign court decision must not be incompatible with an earlier judgement which has been passed in Germany and become non-appealable in Germany|
||the ordre public must not be violated|
||the reciprocity (of recognition and enforcement) with the country from which the decision originates must be guaranteed.|
bb. Courts located in the territorial scope of the Brussels Civil Jurisdiction and Judgments Convention check whether the following conditions are fulfilled:
||a violation of the ordre public (of national law, no check of jurisdiction within the framework of the ordre public)|
||timely service of the document informing the defendant of the commencement of the proceedings in the case of decrees in absence or enforcement orders|
||the exhaustion of the right of action|
||the preliminary inquiry under international public law concerning marital status, legal capacity and capacity to act, property regime, law of succession|
||the existence of an earlier decision by a court of another country which is recognised in the country where the decision is to be enforced.|
A similar test is provided by Regulation EC/44/2001. The most inportant change in so far is, that under the Regulation objections can only be submitted when the instrument has already been registered. Pay first, argue later!
2. How does a creditor in Germany has to pursue the exequatur proceedings?
Which documents the creditor shall submit?
a. In the Act for the Execution of International Recognition and Enforcement Agreements in Civil and Commercial Cases of 19 february 2001, the Federal Republic of Germany has laid down the rules for exequatur proceedings in the scope of the Brussels Civil Jurisdiction and Judgements Convention and the EC Regulation n° 44/2001. Under this act, the enforcement of foreign legal documents is permitted on application. The written application must be filed with the Regional Court (having local jurisdiction), or must be recorded by a court registrar of this court. Representation by a lawyer is not mandatory, Section 6, subsection 3 of the Recognition and Enforcement Implementing Act (§ 6 para. 3 AVAG). The language to be used at court and for documents tp be produced at court is German. In the event that the application is written in any language other than German, the court can request the presentation of a translation of the application. The correctness of such translation must be confirmed by a person authorised for this purpose in the scope of the act or any other contracting state. The counterpart of the legal document to be provided with the enforcement clause and its translation must be submitted. Two copies should be attached. The applicant must name a person authorised to accept service. Such person authorised to accept service must have his or her residence in the court circuit. It is not necessary to name a person authorised to accept service if the applicant has commissioned a lawyer who is admitted to the Bar at a German court.
b. In the event that the enforcement of the underlying legal document is subject to certain conditions, these conditions and/or their existence must be substantiated by documents. Although other forms of evidence are permitted also, these would then require a (cost-increasing) hearing.
c. The following documents must be submitted under the Brussels and the Lugano Convention:
||the counterpart of the decision which qualifies as evidence (this refers to the proof of authenticity of the decision - such as the "expédition" in France and Belgium)|
||in the case of a decree in absence or enforcement order, proof of service of the document informing the defendant of the commencement of the proceedings|
||enforcement clause of the country or origin|
||proof of service - if necessary, in the form of a "proof of delivery note" pursuant to article 6 of the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters; service of the decision by a German bailiff is generally sufficient (Düsseldorf Higher Regional Court RIW 1995, p. 324)|
||if applicable, proof of legal-costs assistance in Germany|
||translations of the documents into the official language of the country of the court of enforcement if requested by the court.|
||Legalisation of the documents to be submitted is not required, article 49 of the Brussels Civil Jurisdiction and Judgements Convention / Lugano Civil Jurisdiction and Judgements Convention.|
Since the EC Regulation n° 44/2001 has comme into force things have become easier. The applicant has to present:
the court decision (as mentioned above)
the certificate according to annex 5 of the regulation (art. 54 Regulation n° 44/2001)
a translation of the curt decision, if required
Bewar also that the Hague Convention on the Service abroad of judicial and textrajudicial documents in civil and comemrcial matters has been replaced by Regulation EC/1348/2000.
Other enforceable instruments, such as an European Enforcement Order under the Regulation (EC) No 805/2004 of the European Parliament and of the Council of 21 April 2004 creating a European Enforcement Order for uncontested claims, or those falling under the Regulation (EC) No 861/2007 of the European Parliament and of the Council of 11 July 2007 establishing a European Small Claims Procedure or finally those falling under Regulation (EC) No 1896/2006 of the European Parliament and of the Council of 12 December 2006 creating a European order for payment procedure, follow particular rules.
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 and without any possibility of opposing its recognition.
A European order for payment which has become enforceable in the Member State of origin shall be recognised and enforced in the other Member States without the need for a declaration of enforceability and without any possibility of opposing its recognition.
The German legislator has enacted additional and complementary rules for the handling of small claims procedures, the European Enforcement Order and the European Order for Payment (compare Sections 1079 et seq.)
3. How high are court costs and attorney's fees for principal proceedings and enforcement proceedings in your country?
a. Attorney's fees in Germany are laid down in binding laws. Attorney's fees depend on the value of the matter in controversy. Different rates are charged, depending on the type of activity.
b. Court costs are determined by law and also depend on the value of the matter in controversy.
According to the scope of the Brussels Civil Jurisdiction and Judgements Convention and the Regulation n° 44/2001, the court charges a fixed fee of currently 200 € (KV 1510 GKG).
4. Who pays the attorney's fees and court costs in principal proceedings? Is the party that loses the case obliged to pay the costs?
In principal proceedings before German courts, the party that looses the case bears the costs of the complete proceddings (court fees and attorney's fees). If necessary, the parties share in the costs on a pro-rata basis depending on the extent to which they have won or lost. The court officially decides on the distribution of costs. In subsequent so-called cost-taxing proceedings, the winning party can obtain a legal document for the costs and subsequently enforce the allocatur. With regard to the court costs, however, all the parties are jointly and severally liable so that the winning party bears the risk of insolvency of the losing party.
5. Who pays the enforcement costs?
Enforcement costs (court costs and attorney's fees) shall be borne by the debtor. The creditor can obtain an enforceable legal document for recovery of any such costs in separate cost-fixing proceedings, or can enforce payment of such costs in accordance with the framework by means of the corresponding enforcement proceedings (attachment of movables by a bailiff or third party debt order etc.).
6. How long do the principal proceedings take?
Depending on the value of the matter in controversy, Local Courts receive applications in payment cases with a value of up to € 5.000, whilst the Regional Courts are responsible for higher values. Principal proceedings in payment cases take between three to six months before Local Courts. A shorter time for the proceedings is possible also. A similar time span can also be expected for simple proceedings before Regional Courts. Complex cases that require a chamber decision (three judges) may take well up to two years, all the more so in cases where expert appraisal is demanded. Proceedings at Higher Regional Courts (appeals against decisions by Regional Courts) regularly take more than one year.
7. Is there a possibility for shortened - summary - proceedings for debt collection?
Payment cases can be handled in court by judgement note. The proceedings are standardised and require the use of specific forms which must be bought. Some court districts have introduced automated (data-based) judgement note proceedings. Jurisdiction always rests with the Local Courts (no matter how high the value of the matter in dispute is). The court responsible where the judgement note proceedings are carried out does not check the claim raised itself, but only the technicalities. The court issues a summary notice to pay which is served upon the debtor. Within two weeks after service, the debtor can lodge a protest whereupon the proceedings - after advance payment on account of the court costs - are transferred to the litigation court where the claim must be substantiated. In the event that the debtor fails to lodge a protest, or in the event that the debtor's protest is received too late, an enforcement notice is issued on application and also served upon the debtor. In the event that the debtor fails to lodge a protest, the enforcement notice becomes unappealable, and enforcement can begin. Proceedings regularly take between six and eight weeks and can also be pursued across borders. The court costs charged for enforcement proceedings are lower than for other types of proceedings. The lawyer earns one full fee for pursuing the proceedings and half a fee for the application for issuing the enforcement notice.
8. How long do recognition/exequatur proceedings take?
If all the documents are available, proceedings pursuant to the Brussels Civil Jurisdiction and Judgements Convention usually take a few weeks. It is advisable to submit all the documents as translations right at the beginning.
9. Which enforcement methods exist? Which enforcement procedure should be given preference?
a. In Germany, the following enforcement options generally exist in payment cases:
||attachment and transfer of the debtor's receivables from third parties (e.g. banking accounts, receivables from business partners, claims for tax refunds from the internal revenue service, wages and salaries due), which is similar to garnishee order or a third party debt order|
||attachment and sale of furniture|
||enforcement by attachment of real property which can include a charge against the land and the administration of the estate by a legal adminstrator and the sell of the estate by the execution court followed by the distribution of the price to the creditor|
b. Attachment of claims and receivables is regarded as the best and fastest enforcement route. The Local Court at the debtor's place of residence has jurisdiction for these proceedings. It decides on the attachment application. The creditor just has to state that the debtor has a claim against a third party. The court responsible for attachment does not check whether such claims really exist. It is even possible to attach a claim against a third party being domiciled in a foreign country.
Attachment and sale of furniture is often not very successful. Although furniture is in most cases attached, the sales proceeds often fall short of expectations. Enforcement by attachment of real property is either carried out in the form of a mortgage which then must be disposed of, or by way of immediate auction or sequestration. Disposing of real property is often a lengthy and costly process; special knowledge is helpful and sometimes even indispensable, particularly with a view to assessing which way of foreclosure makes the most sense.
10. How long do the enforcement proceedings take?
a. Enforcement by way of attachment of claims and receivables is a relatively quick process. The creditor can, initially by way of service effected by the creditor himself, serve a preliminary garnishment order upon the garnishee and subsequently obtain an garnishment order from the court having jurisdiction for the enforcement proceedings. The possibility of obtaining a preliminary garnishment order (with attachment effect) exists even before service of the enforceable legal document to the debtor and ensures the "surprise effect". Given a formally correct application, the order is regularly issued within fourteen days to three weeks after the filing of the application.
b. Bailiffs are responsible for attachment of furniture. Bailiffs are chronically overburdened with work and often not very rigid, so that enforcement often comes to nothing.
c. Courts are responsible for attachment of real property. Given a formally correct application, prompt processing is quite likely. In the territory of the new east German Laender (Saxony, Saxony-Anhalt, Mecklenburg-West Pommerania, Brandenburg and Thuringia), however, real property register courts are heavily overburdened with work and understaffed, so that delays are quite probable. Final disposal of real property takes very long, so that proceeds should not be expected until after one to two years.
11. What can the creditor do if enforcement remains fruitless?
In principle, creditors can make use of all available enforcement options, even parallel. In the event that enforcement remains fruitless, the creditor can request that the debtor swears an oath of disclosure of the debtor's assets. The creditor then receives an official record from the court of the debtor's statement. This record often helps identifying new ways of enforcement because the debtor must, for instance, disclose (new) jobs. Enforcement can be repeated as many times as necessary until payment was effected. It is advisable to repeat enforcement measures every two to three or so years.
However interests on the amount due, of which the exact amount is not yet included in the enforceable instrument should be recovered separately because otherwise the limitation rules will apply.LAW OFFICE Dr. Hök, Stieglmeier & Kollegen
For further information please contact:
Contact: Advocate Dr.Götz-Sebastian Hök
Tel.: 00 49 (0) 30 3000 760-0
Fax: 00 49 (0) 30 513 03 819
WARNING: the material contained in these notes is a simplified guide to some of the major topics in German construction law. It is not intended as a substitute for legal advice on individual transactions, and does not necessarily stand on its own. Whilst the contents are believed to be correct, the author cannot accept any responsibility for errors or omissions.