Debt Collection for Unpaid Invoices in International Transport: EU and Beyond

12.5.2026 | ARROWS law firm

Debt collection for unpaid invoices in international transport is a complex legal area where different legal systems, Incoterms and tax regimes intersect. Companies face issues with unpaid invoices due to distance, language barriers and differences in law. This article analyses the legal framework, practical risks and available tools for effective debt recovery within the EU as well as other contracting states to international conventions.

The photo shows an expert providing advice on the recovery of unpaid invoices.

Legal framework and basic principles of international commercial transport
Legal remedies for recovering unpaid invoices within the EU
Insurance and allocation of risks in transport
Practical risks and security measures
New changes in the legal framework
Overview of key risks and solutions

Legal framework and basic principles of international commercial transport

International road transport of goods between European countries is governed by the Convention on the Contract for the International Carriage of Goods by Road, concluded in Geneva on 19 May 1956, commonly referred to as the CMR. This Convention forms the core legal framework for almost all road carriage of goods between the states that have ratified it, including the Czech Republic. The main objective of the CMR was to harmonise national rules and create a unified framework enabling the smooth cross-border flow of goods without legal uncertainty.

Under Article 17(1) of the CMR, the carrier is liable for damage, destruction, or total or partial loss of the consignment during the period from taking it over until it is delivered to the consignee. This liability is not absolute—the carrier may be released from liability if it proves that the damage arose from causes for which it is not responsible, and the burden of proof lies with the carrier. Where the parties dispute the burden of proof and the scope of the carrier’s liability under the CMR, it is often appropriate to rely on experience in commercial and litigation disputes.

In practice, this means that if goods are damaged or lost during transport and the consignee or consignor asserts a claim, the carrier must provide evidence that the damage occurred outside its control—for example due to force majeure, the consignor’s packing errors, or other circumstances beyond the carrier’s control.

The limits of the carrier’s liability are clearly defined in the CMR. Under Article 23 of the CMR, the carrier is liable for damaged or lost goods up to a maximum of 8.33 Special Drawing Rights (SDR).

Converted into Czech crowns, this is roughly CZK 250 to 280 per kilogram (depending on the current SDR exchange rate), which for a typical 24-tonne load means a maximum insured amount of around CZK 6.5 million. For the consignor, this represents a significant risk if the value of the goods is higher—for example, if goods worth CZK 10 million are being transported, the insurer or the carrier will not pay the full amount, but only the limit set by the CMR.

Article 24 of the CMR and options for additional insurance

However, the CMR itself provides a way out of this limit. Article 24 of the CMR allows the consignor or consignee to agree on increased carrier liability based on a special arrangement recorded directly in the consignment note (the CMR form). When setting up similar arrangements in international transport relationships, it can also be useful to consider contractual practice abroad, for example in the article General Terms and Conditions for Germany: How to set them up to stand up under German law.

If the parties agree that the carriage will be governed by Article 24, this arrangement must be clearly entered in the CMR document before the goods are loaded and must include the declared value of the cargo. In such a case, the carrier undertakes to be liable for damage up to the declared value, and not merely up to the limit set out in Article 23.

This arrangement is not free of charge—the carrier charges a surcharge for accepting increased liability. According to information available from practice, such a surcharge is typically in the order of thousands of Czech crowns in addition to standard carrier liability insurance.

This forms part of the road carrier’s liability insurance and must be expressly agreed in the contract of carriage. For the consignor, however, it is often a sensible solution when transporting high-value goods and seeking full coverage of potential damage.

An alternative is to take out separate cargo insurance, which is usually significantly more expensive, but insures the owner of the goods directly against the risk of loss or damage, regardless of the CMR limits on the carrier’s liability. In that case, the claim under the insurance contract is governed by the terms of that insurance contract and the Czech Civil Code, while the carrier’s liability remains governed by the CMR.

Incoterms and risk allocation in an international sales contract

Closely related to the issue of liability in transport are the Incoterms trade terms, which define how costs, risks, and obligations associated with the carriage of goods are allocated between the seller and the buyer. Incoterms are a set of eleven standard rules developed by the International Chamber of Commerce (ICC) that serve as a uniform interpretative key for international commercial transactions. Because Incoterms typically function only as part of broader contractual documentation, it makes sense to address them within international law together with the choice of governing law and the setting of liability limits. Their purpose is to prevent misunderstandings and disputes over who is responsible for what at particular stages of transport.

The most common term in practice is EXW (Ex Works), under which the buyer bears almost all risks and costs associated with transport from the moment it has access to the goods at the seller’s premises. The practical implications of when an order is sufficient and when it is advisable to have a detailed contract (including delivery terms such as EXW) are also discussed in Commercial contract vs. order: When an order is enough and when a company risks a problem.In this case, the seller fulfils its obligation by making the goods available to the buyer; all other costs and risks, including loading the goods onto the vehicle, fall on the buyer.

At the opposite end of the spectrum is DDP (Delivered Duty Paid), where the seller assumes almost all obligations—bearing all transport costs, arranging both export and import customs clearance, and the risk transfers to the buyer only when the goods are ready for unloading at the agreed address.

In the middle of the Incoterms spectrum are terms such as CPT (Carriage Paid To), CIP (Carriage and Insurance Paid To), CFR (Cost and Freight) and CIF (Cost, Insurance and Freight). Under CPT and CIP, the seller bears the transport costs, but the risk transfers to the buyer already at the moment the goods are handed over to the first carrier in the country of origin. If the contract states CPT, but the invoice suggests CIP or DDP, this may lead to delays in cargo clearance and legal uncertainty.

For the purposes of collecting unpaid invoices, it is important that Incoterms determine who owns the goods at a given moment and who bears the risk of their loss. If the contract stipulates CPT and the buyer does not pay the invoice, the seller can no longer prevent the buyer from using the goods without taking further legal steps, because the risk and ownership have already transferred. This is closely related to the following question—when and how to collect an invoice that has not been paid, and what legal remedies are available.

VAT, tax regimes, and specifics of cross-border trade in the EU

Trading in goods within the European Union is subject to a specific tax regime known as the reverse charge regime. This regime, governed by the EU Council Directive on the common system of VAT and transposed into the Czech Value Added Tax Act, changes the traditionally understood roles of supplier and customer as to who is responsible for paying VAT.

The basic principle is: taxation in the country of consumption—if a seller from one EU Member State sells goods to a professional (a business) in another EU Member State, VAT is paid under the law of the state where the goods are consumed, not under the law of the seller’s state.

In practical terms, this means that if a Czech company issues an invoice to a German trading company that is a VAT payer, the Czech company issues the invoice without VAT and the German party (the buyer) calculates the VAT and reports it in its tax return. The Czech company therefore does not collect VAT and does not remit it to the Czech tax authority.

Instead, it submits a so-called recapitulative statement each month, in which it reports all such transactions. The German customer, in turn, reports the calculated VAT as its tax liability and, if the statutory conditions are met, simultaneously deducts it within its VAT liability in Germany.

However, this arrangement creates a specific risk for the creditor—the seller. If the buyer refuses to pay the invoice, the seller cannot rely on VAT to compensate for its shortfall in any way.

Under the reverse charge regime, VAT is never actually received by the creditor, because it was not collected, and the buyer does not pay it to the seller. The seller therefore has to collect the invoice amount without VAT—i.e., the price of the goods excluding tax—which very often means a lower monetary claim than would correspond to the usual commercial price of the goods including VAT in the Czech Republic.

Exports outside the EU and the VAT exemption regime

If a Czech company sells goods outside the European Union—for example to Brazil, the United States, or other third countries—the VAT exemption regime for exports applies. The Czech company does not state VAT on the invoice because the export of goods is VAT-exempt. This may look advantageous, but it has important practical consequences: the seller must prove that the goods actually left the EU. Proof is typically provided by a customs declaration or another related document.

Without such proof, the Czech tax authority would not recognize the export and could require the company to pay VAT retroactively. For debt collection in this scenario, the product is sold without VAT, and the claim therefore corresponds to the price excluding tax.

The seller must include all invoices to third countries in its VAT return to demonstrate that these revenues form part of its tax obligations in the Czech Republic (even though they are VAT-exempt). If the seller neglected this obligation, it would face sanctions or fines from the Czech tax authority, which would further worsen the situation if the receivable were not paid.

Legal remedies for collecting unpaid invoices within the EU

The process of collecting an unpaid invoice in a cross-border situation usually begins out of court. In the Czech Republic, legal regulations concerning debt collection are continuously being adopted, including the introduction of electronic tools and stricter rules.

The law now clearly stipulates (inter alia, for the purpose of claiming reimbursement of legal costs) that a pre-action demand letter must contain an exact description of how the claim arose—for example, the contract number, the invoice number, and its date. It must also include the total amount due and a payment deadline, which should be at least 7 days. In practice, however, a longer deadline is recommended so that the creditor can demonstrate good faith and give the debtor a real chance to settle.

Critically, the limitation period for a claim in the Czech Republic is three years from the moment the claim was due to be paid—objectively, then, ten years from its creation. This means that if the creditor waits too long to enforce the claim, it becomes legally unenforceable regardless of its factual existence.

So if a business finds itself in a situation where a partner does not pay an invoice and it discovers this, for example, after a year, it still has two years to initiate legal steps. After three years from the due date, it is effectively too late.

One way to extend the limitation period is to conclude an agreement acknowledging the debt. If the creditor and debtor agree that the debtor acknowledges the debt and undertakes to pay it—perhaps even in instalments—this agreement extends the limitation period to ten years.

This is why it is advisable for the creditor, even in these out-of-court negotiations, to seek at least some written confirmation that the debtor acknowledges the debt and will repay it. A notarial deed with consent to enforceability may serve as a form of agreement that can later be enforced directly without the need to go through lengthy court proceedings.

Electronic payment order and expedited court proceedings

If out-of-court negotiations fail and the debtor does not pay even after the deadline stated in the pre-action demand letter, the creditor may file an application for an electronic payment order. In the Czech Republic, this instrument is used in the vast majority of debt collection cases and is highly effective. The court to which the application for an electronic payment order is submitted usually decides without a hearing—it is sufficient that the application shows the legitimacy of the claim, typically supported by invoices and the relevant communication between the parties.

The court fee for an electronic payment order is 4% of the claimed principal, whereas for a standard action it is 5%. If the creditor succeeds and the court issues a payment order, the debtor usually has to reimburse the court fee if the creditor is successful. An electronic order may be issued within days or weeks, which is significantly faster than standard court proceedings that may take months.

If the debtor files an objection against the decision (the electronic payment order), the dispute moves to standard proceedings before the court of first instance. In that case, the creditor must be prepared for a longer process in which they will have to prove everything – that the contract was in fact concluded, that the goods or services were provided, and that the debtor failed to pay the invoice by the agreed due date.

European legal instruments for cross-border enforcement

For a creditor whose claim has been awarded by a Czech court and who needs to enforce it in another EU Member State, special procedures are available. One of them is the European Payment Order, which applies in cases of uncontested civil and commercial claims, for example where the claim has already been dealt with by a court or acknowledged by the debtor.

The creditor completes Form A and submits it to the competent court; the court assesses whether the case meets the specified conditions and, if so, issues a European Payment Order within 30 days. This order is automatically enforceable and can be enforced in other EU countries without the need for a further declaration of enforceability.

For claims up to EUR 5,000, the legal framework also offers the European Small Claims Procedure. This procedure is essentially conducted in writing and is intended for smaller claims where standard court proceedings would be disproportionately expensive.

The creditor completes Form A, attaches documents evidencing the claim, and the court reviews it. Importantly, the decision in this procedure is automatically recognised in other EU countries and can be enforced directly.

In situations where a creditor needs to prevent a debtor from moving or concealing funds, there is an instrument called the European Account Preservation Order. Under this order, a court may instruct that the debtor’s funds in their bank account be frozen without the debtor being informed in advance.

In this way, the debtor is prevented from transferring or spending the money before the creditor has time to apply for its recovery. This order applies in all EU Member States except Denmark and is designed to speed up and simplify the enforcement of claims with a cross-border element.

Foreign insolvency proceedings and claims of foreign creditors

A very critical situation arises when the debtor becomes insolvent or enters insolvency proceedings. In such a case, creditors cannot pursue their claims in the traditional way, but must file them in the insolvency proceedings.

Foreign creditors – i.e., those from EU Member States – face a number of challenges, including language and administrative barriers. If the debtor is established in the Czech Republic and insolvency proceedings are conducted against them, the insolvency court must inform foreign creditors by means of individual notices.

The foreign creditor then has a two-month forfeiture period to file its claim, which starts running from the publication of the insolvency decision in the Insolvency Register.

If the foreign creditor misses this deadline, its claim is not admitted to the insolvency proceedings and the creditor effectively loses any hope of recovery. However, an exception exists – if the existence of the foreign creditor only becomes apparent after the deadline has expired, the court will send the creditor a notice and the time limit starts running from its delivery. Here, correct contact details and language skills are essential – without them, a foreign creditor may not even become aware of its rights.

Insurance and allocation of risks in transport

As indicated above, a carrier’s liability in international road transport is strictly limited by the CMR. Many companies trading abroad are not aware of this limitation and naively assume that the carrier or the insurer will pay the full value of the goods in the event of an accident.

In reality, it is very often different. If the CMR consignment note records that the goods have a value of CZK 1 million, but the CMR limit based on weight is only CZK 500,000, the carrier’s insurer will pay only CZK 500,000, even if the carrier has insurance arranged up to CZK 1 million. Carriers are generally not obliged to have insurance in place – the CMR only imposes on them the obligation to compensate for the damage they cause. Insurance is a matter of their commercial judgement.

However, if they do have insurance, its amount usually corresponds to their standard liability under the CMR, not to the actual value of the cargo. This is a key risk for the consignor: unless they arrange cargo insurance themselves or record increased liability under Article 24 in the CMR consignment note, they risk receiving only a fraction of the cargo’s actual value in the event of damage.

Cargo insurance and liability insurance

To mitigate this risk, consignors arrange separate cargo insurance. There are two basic options: road carrier’s liability insurance (which covers the carrier’s CMR liability) and cargo insurance (which insures the owner of the goods directly). Road carrier’s liability insurance is governed by the CMR and covers the limits set by the CMR – i.e., approximately CZK 250–280 per kilogram. Cargo insurance is more expensive, but covers the goods at full value regardless of the CMR limits.

In the carriage of goods by sea, the Hague–Visby Rules (for maritime transport) are used instead of the CMR and set a different scale of liability – 666.67 SDR per package or 2 SDR per kilogram, whichever is higher. In air transport, the Montreal Convention applies, which limits liability to 19 SDR per kilogram.

Each mode of transport therefore has its specific regulation and limits. If goods are lost or damaged during transport, at least with an awareness of these limits the consignor can understand what they can realistically expect from the insurer.

The most common risks associated with the transport of goods are damage (goods get scratched, dented or damp), loss (goods are lost in transit or stolen) and exceeding the delivery deadline. In the event of damage, it is essential that the consignee records without delay in the transport document (e.g., the consignment note or bill of lading) that visible damage has occurred.

Otherwise, it is difficult to prove later that the damage occurred during transport rather than afterwards. Thorough documentation (photos, detailed description) is key to successfully asserting a claim against the carrier or the insurer.

Practical risks and security measures

Many disputes between business partners in transport and invoicing arise from unclear or incomplete contracts. Ambiguities arise, for example, as to which Incoterms the parties agreed or whether they were in fact agreed more specifically than what follows from the invoice.

If the contract states EXW but the invoice contains CIP, there is room for a dispute. For example, the buyer may claim that they agreed on CIP, and that the seller should therefore bear the insurance costs. The seller, on the other hand, claims that the contract was EXW, and therefore the costs fell on the buyer.

Another typical problem is the absence of a clear choice-of-law and jurisdiction clause. If the business relationship is entirely tied to the Czech Republic, this is usually not an issue – it will be governed by Czech law and decided by Czech courts.

However, if you are trading with a partner, for example in Brazil, the situation is significantly more complex. The Brazilian legal system requires that contracts to be enforced before Brazilian authorities be in Portuguese and accompanied by a certified translation; otherwise, they are not enforceable at all.

Choosing Czech law and Czech courts in such a case may later lead to a situation where a Czech decision cannot be enforced in Brazil, because it must first be recognised by the Brazilian Supreme Court, a process that can take several years.

Another critical mistake is failing to agree payment terms in line with the applicable legal framework. Under EU Directive 2011/7/EU on combating late payment, which applies in all Member States, if no different period is agreed, payment must be made within 30 calendar days of receipt of the invoice or acceptance of the goods or services.

A longer maturity, typically up to 60 days, is possible by express agreement of the contracting parties. A payment term longer than 60 days is permitted only in exceptional cases and must be set out in the contract, and it must not be grossly unfair to the creditor. This means that if the parties agree nothing or agree an unfavourable period, the statutory 30-day period applies, and if payment is not made within 30 days, the debtor will be in default.

Creditors and their rights in the event of late payment

Under the above-mentioned EU Directive 2011/7/EU, creditors have specific rights in the event of late payment. The most important of these is that creditors are entitled to statutory default interest and also to reimbursement of recovery costs, including out-of-court recovery.

In addition to a flat-rate compensation for recovery costs of at least EUR 40 for each unpaid invoice (unless the Czech legal system provides for a higher amount), the creditor is entitled to reimbursement of reasonably incurred costs associated with recovery, such as legal fees or the costs of a debt collection agency.

The creditor may claim these costs from the debtor, and in court proceedings they will usually be awarded. A reminder or similar payment demand is no longer an обязатель obligation of the creditor in practice; however, it is useful as it demonstrates the creditor’s good-faith effort to obtain payment amicably.

However, once the due date has passed and the invoice has not been paid, the creditor no longer needs to worry about sending reminders and may refer the matter to a lawyer or a debt collection service. The Directive also provides that payment terms are subject to an upper limit of 60 days, with the stated aim of speeding up invoice payments.

New changes in the legal framework

In the Czech Republic, significant reforms are underway in the legal framework for debt recovery, with some of them taking effect in 2026. One of the key elements is the digitalisation of wage garnishments – a court bailiff can now exchange information more efficiently with the wage payer, which means that funds flow more smoothly and the bailiff has more options to reach the debtor.

Key enforcement tools continue to include, with enhanced efficiency thanks to digitalisation, attachment of a bank account (assignment of a claim from an account), sale of movable assets, creation of a judicial lien over real estate, and blocking of business income. These mechanisms are now supported by more efficient electronic communication and digital processes.

For creditors, this means that even if the debtor currently has no money in their account, the court bailiff has more tools to access their assets. If, for example, the debtor rents out an apartment and receives rent, the bailiff can seize that rent.

If the debtor owns real estate, the bailiff can establish a judicial lien over it and later sell it. These are all mechanisms that lead to higher efficiency of enforcement.

Assignment of receivables

Another important element of the current legislative changes is an emphasis on transparency and fairness in the assignment of receivables. Although the general rules of the Civil Code on the assignment of receivables remain in force, the legislation seeks to prevent abuse in certain contexts, especially in consumer credit.

Nevertheless, in business relationships it remains the case that the assignment of receivables (e.g., factoring) is a common and effective tool for cash flow management. The creditor has the option to assign its receivable to a third party (for example, a factoring company) for an agreed price, which may differ from its nominal value.

Insolvency proceedings and preventive restructuring

If the debtor is in insolvency proceedings or is on the verge of insolvency, the creditor’s claim is shared among all creditors and the creditor usually receives only a fraction of its claim. In such a situation, the creditor must act without delay and file its claim in the insolvency proceedings within the prescribed time limit. If it misses the deadline, the claim is not taken into account at all.

Since 2023, there has been a procedure known as preventive restructuring, which a debtor in temporary financial difficulties may initiate. Instead of having to enter full insolvency, the debtor may approach the insolvency court with a plan to address the situation – e.g., gradual repayment or adjustment of interest – without formal insolvency proceedings.

This can be potentially more favourable for creditors, as the debtor is not effectively destroyed and can still meet its obligations, albeit in an adjusted form. In this case, the creditor has the opportunity to work with the debtor and reach a pragmatic solution.

Overview of key risks and solutions

Potential issues	How ARROWS can help (office@arws.cz)
Unclear Incoterms or discrepancies between the contract and the invoice – it is unclear who bears responsibility for transport, customs duties, or damage to the goods	We will help you set up contractual documentation and the correct use of Incoterms so that each party’s responsibilities are clearly defined
Exceeding the carrier’s liability limits (CMR limit ~CZK 250–280/kg) – if goods worth CZK 10 million are damaged, you will receive only a fraction	We will arrange a review of transport contracts, set a higher contractual liability for the carrier, and ensure alignment with insurance coverage
Unpaid invoice without clear evidence (missing contract, invoices, correspondence) – the court will not uphold your claim	We will help you set up proper contractual and evidentiary documentation, prepare materials for recovery, and represent you in resolving the dispute
Receivable overdue for more than 3 years – the claim becomes legally unenforceable	We will monitor limitation periods, prepare acknowledgements of debt or pre-action demand letters and set a strategy for effective recovery
The debtor is insolvent and the claim is not filed in time – the creditor receives little or nothing	We will ensure monitoring of insolvency proceedings, prepare the timely filing of the claim, and represent you in insolvency proceedings

Final summary

Recovering unpaid invoices in international transport is a complex process that involves the legal systems of multiple countries, trade terms governed by Incoterms, tax regimes, and international conventions. Companies operating in this environment face several layers of risk: from unclear contractual terms and limited carrier liability to procedural pitfalls in recovery.

The key success factors are preparation and prevention – clear contracts, the right Incoterms, adequate insurance, and timely legal action in the event of delay. Contact the experts at ARROWS, a Prague-based law firm, for thorough preparation - office@arws.cz.

Reforms to the legal framework in the Czech Republic, including those effective in 2026, provide creditors with new and more effective enforcement tools, including digitalised enforcement proceedings and preventive restructuring procedures. At the same time, the rules continue to make it clear that time is a major threat to creditors – the limitation period expires after three years, and if a creditor decides to pursue the claim only later, they may find there is nothing left to do.

For maximum security and efficiency, it is therefore essential that business partners agree in advance on all relevant terms, and if a dispute arises, that the creditor immediately initiates the appropriate legal steps.

FAQ - Most common questions on international transport, CMR and debt recovery

1. What is the difference between the carrier’s liability limit under the CMR and insurance? The carrier’s liability limit under the CMR (approx. CZK 250–280/kg) is a statutory limit from which the carrier cannot be released. The carrier’s insurance usually corresponds to this limit, not to the actual value of the cargo. If the goods are expensive, you must arrange increased liability under Article 24 of the CMR or take out separate cargo insurance.

2. Do I have to take out cargo insurance if I transport valuable items? The law does not require you to take out insurance, but in practice it is strongly recommended, especially if you transport goods whose value exceeds the CMR limit. Cargo insurance is more expensive, but it protects you against loss in the event of damage.

3. Which Incoterm should I choose to have maximum protection as a seller? It depends on the situation, but DDP (Delivered Duty Paid) gives the seller the greatest control – they bear all costs and risks until delivery at the agreed place. However, buyers often do not accept such an Incoterm, as it places all risks on them. A compromise may be CIF, where the seller bears the insurance.

4. What should I do if a business partner in the EU does not pay an invoice? First, send a pre-action demand letter (recommended at least 7 days before filing a claim). If that does not work, file an application for an electronic payment order, which is handled without a hearing and is significantly faster. If you have a decision of a Czech court, you can enforce it in other EU countries without any additional declaration of enforceability.

5. How long do I have to wait for a claim to become time-barred? In the Czech Republic, a claim becomes time-barred 3 years from its due date. If you agree with the debtor on a debt acknowledgement agreement, the period is extended to 10 years. If 3 years pass without action, the claim becomes legally unenforceable.

6. What if my partner is in Brazil and does not pay an invoice? Recovery in third countries is significantly more complicated. If the contract stipulates Czech law and Czech courts, this will be an advantage for you in the Czech Republic, but in Brazil the Czech decision will have to be recognised by the Brazilian Supreme Court, which takes years. The contract should include an arbitration clause and be in Portuguese.

Notice: The information contained in this article is of a general informational nature only and serves as a basic guide to the issue based on the legal framework as of 2026. Although we take utmost care to ensure accuracy, legal regulations and their interpretation evolve over time. We are ARROWS, a Prague-based law firm, an entity registered with the Czech Bar Association (our supervisory authority), and for maximum client protection we maintain professional liability insurance with a limit of CZK 400,000,000. To verify the current wording of regulations and their application to your specific situation, it is necessary to contact ARROWS directly (office@arws.cz). We accept no liability for any damages arising from the independent use of the information in this article without prior individual legal consultation.

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