The Legal Framework of Commercial Debt Recovery
Recovery of debts between companies proceeds in two stages: first the claim matures into a due title — a court decision or a notarized agreement — and then the National Bureau of Enforcement switches on the mechanism of compulsory enforcement. The Law of Georgia on Enforcement Proceedings regulates this second stage, and its four central norms form the frame of the creditor's route: acts subject to enforcement in Article 2, the writ of enforcement in Article 20, the commencement of enforcement in Article 25, and the enforcement fee in Article 38.
Knowing the rules saves the creditor time and expense: the route from obtaining the writ to the levy is precisely established, and the correct placement of each step determines how fully the debt returns.
Which Acts Are Subject to Enforcement
Article 2 lists what is subject to enforcement under the procedure established by this law. Central for a commercial creditor are court decisions, rulings and orders on civil and administrative cases that have entered into legal force; but the list does not end there — subject to enforcement are also, for example, a conviction on a criminal case that has entered into legal force as to the imposition of a fine or deprivation of property, a decision rendered immediately enforceable, a court order on the return of a leased (leasing) object, an arbitral award and a decision of a foreign court whose enforcement is provided for by the legislation.
This list shows the creditor the routes: a debt may be recovered through a court decision, an order of simplified proceedings, arbitration or on the basis of a notarized agreement, and the choice of each route depends on the complexity of the dispute and the time budget.
The Writ of Enforcement and Its Issue
Under Article 20, enforcement proceedings are not allowed without a writ of enforcement. The writ is issued on the decision subject to enforcement under this law, and it is issued to the creditor — it is precisely the creditor who applies for it and then presents it to the Bureau. The law also names the exceptions where proceedings begin without the writ — including the enforcement of pledge and leasing certificates and the order for payment of a debt — but the basis for enforcing a court decision is always precisely the writ.
An exception is also a court ruling adopted in the course of enforcement proceedings: it is enforced without a writ, on the basis of a ruling that has entered into legal force or one subject to a private complaint. Suspension of enforcement without the writ is possible on the basis of a court decision that has entered into legal force.
Commencement of Enforcement and the Creditor's Application
Article 25 provides that the National Bureau of Enforcement commences proceedings on the basis of the creditor's written application for compulsory enforcement and the writ. In simplified proceedings, where enforcement of the order for payment of the debt was requested in advance, the creditor no longer submits an application demanding the commencement of enforcement — a step saved in time and effort.
The rule of naming the participants also matters: in the enforcement of a decision requiring a writ, enforcement may commence only if the persons in whose favor and against whom enforcement is to take place are concretely named in the writ. And where the creditor's claim is secured by a mortgage or registered pledge, compulsory enforcement proceeds even when the owner of the property used as security is not the debtor named in the writ — in that case the presumption that the owner stands as the debtor's legal successor operates until proven otherwise.
The day of commencement also has an important effect: in the enforcement of a decision contemplating the growth of the creditor's claim on the principal through interest and/or a surcharge, the accrual of interest and/or the surcharge on the principal ceases from the day the enforcement proceedings commence — except for a tax claim and the funded-pension surcharge. This means that delay in the proceedings for the creditor also functionally means the loss of interest, and a timely application is economically justified as well.
The Enforcement Fee
Article 38 regulates the enforcement fee — the mandatory payment for the service rendered by the Bureau, credited to the Bureau's account. The amount and the manner of payment of the fee are determined by an order of the Minister of Justice, and its payment is charged to the debtor; in cases of recovery of money the fee is collected together with the enforceable claim.
The economic parameters are in the law itself: in a case of recovery of money, the fee must not exceed 7% of the enforceable claim and must not be less than 50 GEL. For the enforcement of state duty, fines, damages and surcharges a separate scale operates: for an amount up to 100 GEL — 25% of the amount but not less than 20 GEL; from 100 to 200 GEL — at higher fixed values. For the creditor this means that the cost of enforcement is computable in advance and must be built into the economic model of debt recovery.
Frequently Asked Questions
On what basis does enforcement begin?
On the basis of the creditor's written application and the writ of enforcement — the writ is issued on the decision subject to enforcement, and to the creditor.
Are all decisions enforced through a writ?
As a rule yes; the exceptions are established by law — for example, the enforcement of pledge and leasing certificates and the payment order proceed without a writ.
What happens to interest?
The accrual of interest and/or the surcharge on the principal ceases from the day the enforcement proceedings commence — hence a timely application matters to the creditor.
How high is the enforcement fee?
In monetary cases — not more than 7% of the enforceable claim and not less than 50 GEL; for state duties and fines there is a separate scale — 25% on amounts up to 100 GEL, not less than 20 GEL. The fee is charged to the debtor.
How We Help on Legal.ge
The attorneys at Legal.ge offer the full cycle of commercial debt recovery: from the demand and the court stage, through obtaining the writ, to representing the creditor before the Bureau; we prepare the applications, monitor the levy measures and protect the creditor's interests in fee matters as well.
If your company has a debt to recover or enforcement is already under way, contact us at Legal.ge — we will assess the case and plan every step under the exact norms of the enforcement law.