New recovery procedure for unchallenged claims

Companies are often confronted with debtors letting the agreed payment period expire without any statement of reasons. Such payment arrears are difficult to anticipate and are therefore all the more harmful for the company’s liquidity. Especially in times where the financial institutions are reluctant to provide external financing, such defaults can cause serious financial damage to companies.

In order to halt these practices and to assist the companies in the recovery of unchallenged monetary claims, article 10 of Directive 2011/7/EU on combating late payment in commercial transactions requires the European member states to provide for a simplified and expedited procedure specific in relation to such claims.

The Belgian legislator has decided to implement the above by installing a new administrative procedure in a B2B context conducted directly through the bailiff. This way the recovery of unchallenged monetary claims will be facilitated since the fees for the writ of summons and the costs of the procedure associated with the initiation of legal proceedings will be avoided, while the courts will simultaneously be relieved of tasks that do not belong to its core mission, i.e. the settling of real disputes.

The principles of this new administrative procedure were already enshrined in the articles 1394/20 up to and including 1394/27 of the Belgian Judicial Code by the entry into force of the Act of October, 19th, 2015 amending civil procedural law and containing various provisions on justice. However, it was only by the Royal Decree of June, 16th, 2016 that the aforementioned articles came into force.

Hence, as from July, 2nd, 2016, creditors confronted with unchallenged monetary claims are – under certain conditions (see below) – able to resort to a new simplified recovery procedure through the bailiff without first having to bring the matter before the court.

Which claims qualify for the administrative recovery procedure through the bailiff?

The claims qualifying for the new administrative procedure through the bailiff need to meet several conditions.

Firstly, the procedure can only be accessed if the creditor and the debtor are both merchants. In this respect, the subscription in the Crossroads Bank of Enterprises is perceived as the most objective criterion. Furthermore, the unpaid claims must relate to professional transactions (B2B).

Also the claims has to bear certain characteristics: it is required that the claims involves a sum of money, that it arises out of contractual obligations and that it is established and due on the date of the first reminder served by the bailiff in the framework of this procedure in accordance with article 1394/21 of the Belgian Judicial Code (see below). Extracontractual claims will only qualify insofar as an acknowledgement of debt can be provided or insofar these claims relate to debts resulting from joint ownership of property. Finally, the claim may not have, in any way, been challenged by the debtor. In this respect, also an unjustified contestation will suffice to impede the recovery through the new administrative procedure. Every dispute as to the content of the claim will have to be dealt with by court.

On the other hand, the amount of the claim is of no importance.

The Act provides for certain exceptions. Public authorities, as well as companies subject to proceedings of judicial reorganization or bankruptcy proceedings fall outside the personal scope of application of the simplified recovery procedure, irrespective of whether they act as a creditor or as a debtor.

In the framework of this new procedure it is important to note that the sum of the interests and penalties that can be added to the outstanding debt, may not exceed 10 % of the amount of the principal claim. In other words, the creditor will still have to pursue his claim through legal proceedings, if he wishes to recover the interests and contractual penalties that exceeds this threshold of 10 %.

Surcharges provided for by law, are not subject to any maximum threshold. Consequently, the fixed compensation of 40 euros for the costs of recovery as laid down in article 6, paragraph 1 of the Act of August, the 2nd, 2002 on combating late payment in commercial transactions will not be taken into account. On the other hand, the specific interest on trade payables as provided for in article 5 of the same law does not qualify as a legal surcharge and thus remains bound by the threshold of 10 %.

Also not restricted to any maximum threshold, are the recovery costs. However, the notion ‘recovery costs’ has been rather strictly interpreted by the legislator. Only the costs occasioned by the employment of a bailiff and linked to the recovery proceedings will be accepted in this respect.

How does the administrative recovery procedure go?

The authority to initiate the administrative recovery procedure for unchallenged monetary claims is exclusively reserved by law to lawyers. Therefore, it is impossible for the creditor, appealing to article 1394/20 et seq. of the Belgian Judicial Code, to address his request for recovery directly to the bailiff.

The legislator has awarded the lawyer the role of first judge. Relying on his expertise, the lawyer will have to verify whether the legal conditions for the recovery of the claim in accordance with the articles 1394/20 et seq. Belgian Judicial Code are met and, in particular, (i) whether the claim is clear, established and due and (ii) whether the threshold of 10 % with regard to the interests and penalties is not exceeded.

If all conditions are fulfilled, the lawyer will entrust the bailiff with the recovery order.

Before proceeding to the actual recovery of the claim, the bailiff will first serve a demand for payment on the debtor. The demand for payment will be accompanied by a copy of the supporting documents and by a standard response form. It will grant the debtor a time limit of one month in which he will be able to (i) settle his debt, (ii) notify his defense through the attached response form or (iii) request for a repayment plan.

The extrajudicial recovery procedure will be immediately terminated if the debtor either settles the debt or challenges the claim in a substantiated manner. In the first case, because the procedure will have no further object. In the second case, since the contestation would deprive the claim of its undisputed nature. Consequently, the conditions of application of the administrative recovery procedure are no longer met, since disputes still have to be subjected to court scrutiny.

It is, however, essential that the debtor substantiates his contestation. The bailiff will treat contestations without indication of reason as if no reason at all is given. Such contestations will thus not be able to halt the continuation of the administrative recovery proceedings. On the other hand, it is not required that the stated reason has to be well-founded. After all, it is not up to the bailiff to conduct a substantive examination of the grounds on which the contestation by the debtor relies. From the moment the claim is challenged on any ground whatsoever, the bailiff will have to discontinue the proceedings and the creditor will have to refer the matter to court if he wants to continue the recovery of his monetary claim. If later before court it may be found that the contestation on the part of the debtor was manifestly unfounded and only of a merely dilatory nature, the creditor will be protected by the provisions of article 780bis of the Belgian Judicial Code that allows the judge to condemn the debtor to pay (to the state) a civil fine of 15 to 2.500 euros and (to the creditor) an additional compensation for vexatious legal proceedings.

As a third possibility, the creditor and the debtor can agree on a repayment plan. In such case, the recovery proceedings will be suspended until the repayment plan has been fully executed or until the debtor would no longer act in accordance with it.

All contestations and requests for repayment plans have to be submitted through the attached response form. It will have to be send to the acting bailiff against an acknowledgement of receipt or directly be handed over to him at his office address.

If the agreed repayment plan is not being respected or if the debt is still outstanding after the expiration of the period of one month and no substantiated contestation has been submitted, the bailiff will continue the recovery proceedings.

In such case, at least 8 days after the expiry of the aforementioned response period, the acting bailiff will issue an official report of non-contestation in which the necessary observations and an updated financial overview will be laid down. The additional period of 8 days aims to leave room for the parties to reach an amicable settlement and, eventually, to cover the period between the payment order and the crediting of the creditor’s account.

After the expiration of this period of 8 days, the bailiff will send over the official report of non-contestation to the magistrate sitting in the management and monitoring committee (‘beheers- en toezichtscomité’) set up within the central register of reports of attachment, delegation, cession, collective debt settlement and protest (‘centraal register van berichten van beslag, delegatie, overdracht, collectieve schuldenregeling en protest’ or ‘CBB’), who will marginally verify whether the statutory conditions are met. If so, the magistrate will attach a clause of legal force (‘formulier van tenuitvoerlegging’) to the official report of non-contestation. Together with this clause, the official report can be enforced in accordance with the ordinary provisions of the Belgian Judicial Code.

At this stage of the recovery proceedings, the debtor will only be able to appeal against the official report of non-contestation by taking legal action, either before the court hearing the substance of the case in the event of a dispute regarding the merits, or before the attachment judge in the event of a dispute relating to the formal aspects of the enforcement. Proceedings regarding the merits of the case will have to be initiated by a simple inter partes application in accordance with article 1034bis et seq. of the Belgian Judicial Code. Every copy of the application will have to hold a copy of the official report of non-contestation on penalty of nullity. The law does not impose a mandatory time limit in which the appeal has to be lodged. However, when an appeal is lodged, the extrajudicial proceedings will in any case be suspended pending a final judgment.

Eventually, a fully executed recovery will have the same legal effect as a settlement (‘dading’) for the entire claim, including all eventual surcharges provided by law, interests and penalties.

Finally, it has to be noted that the introduction of the administrative recovery procedure for unchallenged claims does not undermine the possibility for the creditor to seek the recovery of his claim through ordinary legal proceedings, through the order of payment procedure (‘summiere rechtspleging om betaling te bevelen’) in accordance with article 1338 et seq. of the Belgian Judicial Code (open to established monetary claims with a maximum value of 1.800 euros) or through the European Payment Order (‘Europees betalingsbevel’). The creditor thus has the choice through which procedure he wishes to recover his claim, of course provided that the conditions of application of the respective procedures are met.

No registration duties on the deeds relating to the administrative recovery procedure

In accordance with article 162 of the Belgian Registration Duties Code, writs and official reports issued by the bailiff in relation with the recovery of unchallenged monetary claims referred to in the articles 1394/20 up to and including 1394/27 of the Belgian Judicial Code, are exempted from the duty of registration. Consequently, no fixed registration duty of 50 euros is due on these deeds.

This way the legislator wishes to render the new administrative recovery procedure more attractive.

Central register for the recovery of unchallenged monetary claims

Within the National Chamber of Bailiffs a ‘Central register for the recovery of unchallenged monetary claims’ will be installed.

The Central register is a computerized database organized and managed by the National Chamber of Bailiffs in which data is gathered that is essential for monitoring the proper conduct of the recovery proceedings with regard to unchallenged monetary claims and for the attachment of the clause of legal force to the bailiff’s official report of non-contestation.

By means of an electronic procedure, the acting bailiff will send a copy of all writs, notifications, messages, repayment plans, official reports or other documents served in the framework of the administrative recovery proceedings to the Central register within a time limit of three working days.

The data stored in the Central register will be kept for at least 10 years.

The bailiffs are exclusively authorized for the registration and the consultation of data in the Central register.

Conclusion

Although the new administrative procedure for the recovery of unchallenged monetary claims has been established by the legislator with honest intentions with a view to assist companies confronted with defaults of payment without any statement of reason, practical experience has shown us that the new so-called simplified and expedited proceedings will not deliver the promised benefits, as well in terms of costs, as in terms of timing.

In legal proceedings, if the debtor is solvent, the costs of summons (‘dagvaardingskosten’), the payable register fees (‘rolrechten’) and the costs of service and enforcement will always be entirely recoverable from the debtor. The representation costs will again be compensated by the procedural cost indemnity (‘rechtsplegingsvergoeding’) which will be payable by the debtor in accordance with article 1022 of the Belgian Judicial Code in case the claim would be declared well-founded. Given the fact that a lawyer will only have to make limited efforts to obtain a judgment by default (‘verstekvonnis’) or a consent order (‘akkoordvonnis’) granting a repayment plan to the debtor, and considering the progressive nature of the procedural cost indemnity, the procedural cost indemnity granted for the recovery of claims with a substantial value will be higher than the actual expenses. In such circumstances, the administrative procedure would not be beneficial to the creditor, it would even be detrimental to him.

Also in measures of time, the new administrative recovery procedure is in fact no improvement. Within this procedure, it first takes up to at least one month and eight days from the date the bailiff has been entrusted with the recovery order, before the official report of non-contestation can be issued. This official report will subsequently have to be transmitted to the competent magistrate with a view to the attachment of the clause of legal force. It is only from the moment this clause has been delivered, that the bailiff will be able to proceed to the enforcement of the claim. The time limit in which the magistrate will have to attach the aforementioned clause to the official report of the bailiff, is, however, not determined by law. If we would consider that this process would only take about a week – which certainly is an optimistic estimation – the time span between the submission of the recovery order with the bailiff and the actual enforcement on the basis of an enforceable title will already take one month and a half. In this most optimistic scenario, no time savings are generated in comparison with ordinary legal proceedings. After all, if the same unchallenged monetary claim would be recovered through legal proceedings, first a time limit for issuing a summons of 8 days should be taken into account. Subsequently, a case with an unchallenged monetary claim as its object can, because of its nature, be immediately adjudicated upon at the introductory hearings in accordance with article 735 of the Belgian Judicial Code. Next, the court will have to issue a judgment within a time limit of one month. Consequently, in such circumstances both the administrative and the legal proceedings will take approximately one month and a half. Nevertheless, it has to be noted that a judgement by default will often be issued sooner than one month after the closing of the debates, resulting in a time saving on the part of the legal proceedings.

The new administrative procedure for the recovery of unchallenged monetary claims will thus only provide an added value if the monetary claim only has a limited value. In such circumstances, the representation costs within the legal proceedings will not be fully covered by the procedural cost indemnity. The flip side, however, is that for smaller monetary claims the chances are more likely that the interests and the value of the contractual penalties exceed the threshold of 10 % of the value of the principal amount. In such case, also for smaller unchallenged monetary claims, it would be more opportune to seek its recovery through legal proceedings.

The explanatory memorandum accompanying the draft law amending civil procedural law and containing various provisions on justice and the article of bailiffs P. Lombardi and B. Nelissen emphasize the privileged position of the bailiff to assess the debtor’s solvency. After all, the bailiff has access to the central register of reports of attachment, can already be familiar with the debtor and/or can already notice the (in)solvency of the debtor at the moment he serves the demand for payment. This way, further unnecessary costs can be avoided.

Such observations have, however, to be nuanced. After all, also the lawyer has direct access to the reports of attachment and can additionally check these reports with the annual reports the debtor will have to submit with the National Bank of Belgium in accordance with article 98 of the Belgian Company Code. Besides, it is the legislator himself who appoints the lawyer as the first judge within this new administrative procedure. In this respect, it is more opportune that the lawyer would conduct the solvency study, before transmitting the case to the bailiff for recovery. This way, unnecessary costs can be avoided from the very beginning. Therefore, also this argument in favor of the new administrative procedure is only partially valid.

Finally, one will also have to bear in mind that a dispute arising during the administrative procedure will lead to the discontinuation of this procedure, after which the creditor will nonetheless be forced to summon the debtor to appear in court. In such an event, the creditor will have to pay twice, once for the administrative proceedings and once for the legal proceedings. This risk can of course be avoided if the creditor would immediately turn to court to seek recovery of his claim.

So, although, at first sight, it seems that the advantages of the new administrative recovery procedure for unchallenged monetary claims appear to be self-evident, after a closer analysis one nevertheless has to ascertain that in most cases the existing legal recovery proceedings still are the most efficient. Therefore, the chance is real that the new administrative recovery procedure will eventually remain the same dead letter as the order of payment procedure (‘summiere rechtspleging om betaling te bevelen’).

Lars Truyens

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#193
In 2015 stonden we een mediamaatschappij bij met betrekking tot de uitwerking en implementatie van een strategie met betrekking tot een gepersonaliseerde klantenrelatie.