Debt collection and outstanding invoices

         I. Extra-judicial debt collection

A. General information

Even if it seems obvious the first step is to request payment from the debtor by sending an invoice.

Where the invoice relates to business between merchants the theory of the accepted invoice may apply. In short, between merchants, an invoice not challenged within a short period of term is considered to be accepted. The amount claimed is therefore due by the debtor (further information is available here).

In practice this mechanism is very useful regarding debt collection between professionals.

If, despite the submission of the invoice in due form and reminders, no payment is made, a formal notice is necessary. 

B. The formal notice

From a legal point of view, this step is not compulsory.

However, even if the formal notice is unsuccessful, it may constitute an helpful evidence to submit to the relevant court in case of further litigation (demonstrate
the debtor’s default or as the case may be her or his bad faith).

It will also demonstrate the measures taken by the creditor in order to recover the sums outstanding.

The most effective way of issuing a formal notice is by registered letter. This can be sent by the creditor himself or, to increase its impact, by a lawyer.

To be effective, the formal notice shall:

• clearly state (i) the amount claimed and (ii) its basis (i.e. the contract from which the invoice originates);
• include an order to pay the amount due;
• indicate a final deadline by which payment shall be made; and
• describe the legal procedures envisaged in the event of non-payment.

In case the debtor still fails to pay the sums claimed  the creditor will have to initiate legal proceedings.

In this respect a distinction shall be made between cases where the amount at stake is less than or equal to 15,000 Euros and cases where the amount at stake is greater than 15,000 Euros.

II. Judicial recovery in Luxembourg

A. Recovery of debts with a maximum value of 10,000 Euros: Proceedings before the Magistrate’s Court (Justice de paix)

For this kind of debt, two methods of recovery are available to the creditor. The first is the conditional payment order and the second is the opening of an action by way of summons before the Magistrate’s Court.

1. The conditionnal payment order (ordonnance conditionnelle de paiement)¹

This is a simplified procedure for the recovery of a sum of money not exceeding 15,000 Euros applicable where the debtor is domiciled or resident in Luxembourg.

This procedure takes place before Magistrate’s Court and in practice concerns straightforward cases.

In its first phase this procedure is unilateral in the sense that only the claimant is active. The debtor only participates at a later stage if he challenges the payment requested.

This mechanism is excluded for certain matters (employment relationship, residential lease).

Filing of the application: The creditor or her or his representative files an application for a conditional payment order at the clerk’s office of the territorially competent Magistrate’s court.

The application shall contain :

• the identification of the parties;
• the ground(s) and the amount of the claim;
• the request for a conditional payment order; and
• any documentation supporting the existence and the amount of the claim and establish its validity.

Decision of the Magistrate’s Court: The judge may reject the application if he considers the claim to be unjustified (this decision is not subject to appeal, the claimant may nevertheless take action by way of summons).

If the judge considers the claim justified he will issue a conditional payment order containing an order to pay the amount claimed into the hands of the creditor within 30 days. This order will be served on the debtor.

The debtor may choose to pay and the procedure ends.

A debtor who believes that the amount claimed is unjustified may make an objection (former contredit) against the order. This possibility exists as long as the order is not enforceable.

The objection: The objection is made by means of a written statement at the clerk’s office of the Magistrate’s Court (with an indication of the argumentation supporting the objection).

In this case, a hearing will be scheduled before the court during which each of the parties will be given the opportunity to provide their arguments to the judge.

Following the hearing, the Magistrate’s Court will render a decision on the merits

Enforcement: In the event of a judgement having condemned the debtor (the objection has been rejected), it is the judgement that will serve as a title to enforce the debtor’s condemnation.

If no objection has been lodged, and after the expiry of the thirty-day period allowed to the debtor, the creditor may request that the conditional payment order be made enforceable (he has six months to make this request, failing which the conditional payment order will be null and void).

The debtor still has the possibility to exercise legal remedies (appeal).

2. The summons

The summons is the act that initiates proceedings before the Magistrate’s Court. It is made by a bailiff’s writ sent by registered post.

The case will be pleaded orally (by the parties or through representatives). The Magistrate’s court will then render a decision on the merits.

The judgments of the Magistrate’s Court can be appealed if the amount at stake exceeds 2,000 Euros.

B. Recovery of debts over 15,000 Euros: Proceedings before the District Court (Tribunal d’arrondissement)

The creditor can choose between a petition for an interim order (ordonnance de provision)  and summary proceedings (référé provision). He may also act by way of a writ of summons on the merits.

1. The application for an interim order²

This procedure corresponds to the conditional payment order described above applicable to claims exceeding 15,000 Euros (the two procedures are very similar).

This procedure takes place before the District Court. This procedure is unilateral in its initial phase, with the debtor only intervening at a later stage if he refuses to pay.

Filing of the application: The creditor or her or his representative files an application at the clerk’s office of the territorially competent District Court.

The application shall contain :

• the identification of the parties;
• the ground(s) and the amount of the claim; and
• any documentation supporting the existence and the amount of the claim and establish its validity.

Decision of the court: The judge may reject the application if he considers the claim to be unjustified (this decision is not subject to appeal, but the claimant may take action by way of a writ).

If the judge considers the claim justified he will issue an order to pay the amount claimed into the hands of the creditor within 30 days. This order will be served on the debtor.

The debtor may choose to pay and the procedure ends.

A debtor who believes that the amount claimed is unjustified make an objection (former contredit) against the order.

The objection: The objection is made by means of a written statement at the clerk’s office of the District Court (with an indication of the argumentation supporting the objection).

In this case, a hearing will be scheduled before the court during which each of the parties will be given the opportunity to provide their arguments to the judge.

Following the hearing, the judge will render a decision on the merits.

Enforcement: In the event of an order having condemned the debtor (the objection has been rejected), the order will serve as a title to enforce the debtor’s sentence.

If no objection has been lodged, and after the expiry of the thirty-day period allowed to the debtor, the creditor may request that the order be made enforceable.

The debtor still has the possibility to exercise legal remedies (appeal or opposition as the case may be).

2.The summons for summary proceedings

The request is made by way of a writ of summons, served by a bailiff at the debtor’s address.

The case will be pleaded orally (by the parties or through representatives). The judge will then render a decision on the merits.

As this is a summary procedure, the existence of the claim must not be seriously disputed.

This type of order is enforceable and may be appealed within 15 days of service where it has been made adversarial between the parties. In the case of an order made by default, there is an 8-day period for opposition.

3. The writ of summons on the merits

The claim is made by way of a writ of summons served by a bailiff at the debtor’s address.

When the dispute is of a civil nature, the debtor has 15 days to be represented by a lawyer in court. In commercial matters, representation by a lawyer is not required (although it is recommended in practice) and the time limit for appearance is also 15 days.

This procedure allows to obtain a judgment on the merits. This usually concerns relatively complex disputes requiring further examination.

III. Community procedures

In order to ensure efficient debt collection, the European institutions have set up two specific procedures. They apply to cross-border disputes, i.e. disputes in which at least one of the parties is resident, domiciled or has its registered office in a Member State other than the one of the relevant court.

A. The European order for payment procedure (procédure européenne d’injonction de payer)³

The procedure can be used in civil and commercial matters in disputes concerning the recovery of a sum of money, including employment law.

If the claim exceeds 15,000 euros, the district court will be competent, below this amount, the Magistrate’s Court will be competent.

The applicable regime is similar to the one existing in the internal order for the conditional payment order.

However, the following differences should be mentioned:

• the judge has the right to request for additional information before issuing the initial order;
• in case of objection, the procedure varies in comparison to that followed in the context of a conditional payment order; and
• in the absence of objection the competent court declares the order for payment enforceable on its own initiative.

A the end of the procedure a European enforcement order is awarded. Its enforcement is possible throughout the European Union without any exequatur formality (with rare exceptions).

B. European small claims procedure (procédure européenne de règlement des petits litiges)⁴

This procedure applies to civil and commercial matters and covers a wide range of situations. It applies both to the recovery of sums of money and to other types of disputes.

Some matters are excluded such as the status and legal capacity of natural persons, matrimonial relationships, labour law and property leases.

The amount of the claim shall not exceed 5,000 Euros at the time the application is filed.

This procedure falls under the jurisdiction of the Magistrate’s Court.

In the first phase, the claimant sends the court her or his file with supporting documents.

The parties then exchange arguments in writing (the exchanges take place under the direction of the court). This method of communication makes a public hearing exceptional.

This procedure results in a European enforcement order. In this sense, its enforcement is possible throughout the European Union without the need for an exequatur formality (with rare exceptions).

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1 See Articles 129 and followings of the new Civil Procedure Code : Nouveau Code de procédure civile – Legilux (public.lu);

2 See Articles 919 and followings of the new Civil Procedure Code : Nouveau Code de procédure civile – Legilux (public.lu);

3 applicable regime derives from (i) Regulation (EC) No 1896/2006 of the European Parliament and of the Council of 12 December 2006 creating a European order for payment procedure, as amended by Regulation (EU) No 2015/2421 of the European Parliament and of the Council of 16 December 2015 and (ii) Articles 49 to 49-6 of the New Code of Civil Procedure. Available at L_2015341EN.01000101.xml (europa.eu);

4 Applicable regime derives from (i) Regulation (EC) No 861/2007 of the European Parliament and of the Council of 11 July 2007 establishing a European Small Claims Procedure, as amended by Regulation (EU) No 2015/2421 of the European Parliament and of the Council of 16 December 2015 and (ii) Articles 143-1 and 143-2 of the New Code of Civil Procedure. Available at L_2015341EN.01000101.xml (europa.eu).

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