Debt Recovery in Serbia: A Legal Guide for Czech Companies

Debt recovery in Serbia differs significantly from procedures within the EU, as Serbia is not a member state. Czech companies cannot utilize the European Payment Order and must instead proceed according to specific international treaties. This guide explains the concrete legal steps under Serbian law, the risks of statutes of limitations, and the necessity of proper recognition of a Czech judgment by Serbian courts.

Quick Summary

• Serbia is not in the EU; therefore, debt recovery is governed by a bilateral treaty from 1964, not EU regulations.
• The process has two phases: first, obtaining a judgment from a Czech court, and then ensuring its recognition by a Serbian court.
• Time is critical, as the statute of limitations for commercial relations in Serbia is only three years.
• Procedures differ at every step, and formal errors in service of process can lead to a rejection of recognition in Serbia.

Basic Legal Framework: Czech-Serbian Relations

The relationship between the Czech and Serbian legal systems regarding debt collection is primarily governed by the Treaty on the Regulation of Legal Relations in Civil, Family, and Criminal Matters. This treaty, which remains in force and applies to Serbia as the legal successor to Yugoslavia, sets the rules for the recognition and enforcement of foreign court decisions between our states.

Unlike EU member states, which are governed by the Brussels I bis Regulation, no such simplification applies to Serbia, and a Czech company must proceed according to the rules of the bilateral treaty. This complexity means that every step requires careful preparation and knowledge of both Czech and Serbian private international law.

Attorneys from the ARROWS law firm in Prague, thanks to regular contact with Serbian partners and knowledge of international treaties, effectively resolve cross-border disputes. If you have a claim against a Serbian partner, it is important to realize that the process requires fulfillment of specific formal requirements under Czech and Serbian law.

What are your options if the debtor is based in Serbia?

Most often, Czech companies proceed by first initiating proceedings before a Czech court. This is a logical step if you have agreed on the jurisdiction of Czech courts in your contract, or if the performance took place in the Czech Republic. The Czech court will issue a judgment that is enforceable in the Czech Republic. However, to target the debtor's assets in Serbia, this decision must be recognized by a Serbian court.

The process of recognizing a decision in Serbia involves the Czech company submitting a motion for recognition of the Czech judgment to a Serbian court. The Serbian court does not re-examine the merits of the case but verifies whether the conditions for recognition under the bilateral treaty are met. These conditions include:

1. Finality and enforceability of the judgment.
2. Proper jurisdiction of the court.
3. Compliance with procedural guarantees (right to defense).
4. Absence of obstacles such as litispendence and res judicata.
5. Compliance with public policy.
6. Reciprocity (which is presumed).

Lawsuit in a Serbian Court

Alternatively, you can file a lawsuit directly with a Serbian court having jurisdiction based on the debtor's registered office. This is suitable if there are doubts about the jurisdiction of the Czech court or if you wish to speed up subsequent execution. In such a case, however, you will face court proceedings in a foreign language and according to Serbian procedural rules.

Once you obtain a judgment from a Serbian court, it is directly enforceable in Serbia without further recognition proceedings.

Risks and Sanctions	How ARROWS Assists (office@arws.cz)
Incorrect Choice of Court: Filing a lawsuit in a court without international jurisdiction will lead to non-recognition of the judgment in Serbia.	Legal analysis of jurisdiction and strategy. ARROWS attorneys will determine whether it is safer to sue in the Czech Republic or in Serbia.
Defects in Service: If the debtor in Serbia did not receive the lawsuit in accordance with international treaties, the court will not recognize the judgment.	ARROWS ensures that service of process is formally correct. We oversee delivery through international legal assistance authorities.
Non-compliance with exceptions for invalid judgments: If the Czech judgment contains formal defects in its operative part, execution in Serbia will not be possible.	We formulate the prayer for relief so that it complies with the requirements for the certainty of an enforcement title in Serbia.
Statute of Limitations: Commercial claims in Serbia generally expire within a 3-year period.	ARROWS ensures timely filing of the lawsuit or debt recognition. This interrupts the running of the limitation period.
Language Barrier and Incorrect Translations: An incorrect translation of a Czech judgment into Serbian can lead to the rejection of the motion for recognition.	We provide certified translations of all documents that Serbian courts accept.

Legal proceedings before a Czech court

If you decide to take the route of a Czech court, it is necessary to know that Czech court proceedings have their specifics and require careful preparation for the purposes of international recovery.

Pre-action Demand Letter

The Czech Code of Civil Procedure encourages the creditor to first attempt to recover the debt out of court. This involves sending a pre-action demand letter to the debtor, notifying them of the existence of the debt and requesting payment within an additional period.

Why is this important? If you do not send the pre-action demand to the debtor's last known address, the court will not award you compensation for the costs of the proceedings, even if you win the dispute. In international disputes, where legal representation and translation costs are high, this would be a significant loss.

Related Questions Regarding the Pre-action Demand

1. Is it mandatory to write a pre-action demand to the debtor?
It is not a prerequisite for filing a lawsuit, but it is a condition for obtaining reimbursement of costs from the debtor. Without it, you will pay for your "victory" yourself.

2. How to deliver the demand to Serbia?
By registered mail with an acknowledgment of receipt to the address of the company's registered office according to the Serbian commercial register. The acknowledgment of receipt serves as evidence for the Czech court.

3. What if the debtor does not respond?
After the deadline in the demand expires, we proceed to file the lawsuit.

Selecting the Correct Court and Filing the Lawsuit

If the debtor does not pay, a lawsuit is filed. If you are suing a Serbian company, you must be certain that the Czech court has so-called international jurisdiction. This is usually established if you have a choice of Czech court clause in your contract, or if the place of performance of the obligation was in the Czech Republic.

Czech civil proceedings are governed by the principle of concentration of proceedings. This means that you must submit all relevant facts and evidence to the court in a timely manner, usually already in the lawsuit or by the end of the first hearing. The court may not accept evidence proposed later.

 

Electronic Payment Orders and their limits

The electronic payment order is a popular tool under Czech law. Although the CZK 1 million limit for its issuance has been abolished, we often encounter service of process issues with defendants located in Serbia. For a payment order to be effective, it must be served personally into the hands of the defendant.

Therefore, when dealing with Serbian debtors, our Prague-based attorneys often opt for a standard lawsuit or a petition for a payment order with careful supervision of the service process via international legal assistance.

Duration and costs of Czech proceedings

Standard court proceedings in the first instance in the Czech Republic typically last between 6 and 18 months. Legal representation costs are governed by the Czech attorney tariff, and the court fee amounts to 5% of the disputed amount. In the event of success, these costs are borne by the defendant.

Recognition of a Czech judgment in Serbia

Once you have a final and binding judgment, we must transfer it into the Serbian jurisdiction.

According to the bilateral treaty and Serbian law, the following must be attached to the petition:

1. The original Czech judgment or a certified copy thereof.
2. A certificate of finality and enforceability (legal force).
3. Proof of service of the initial petition to the debtor.
4. A court-certified translation of all documents into the Serbian language.

The recognition process in Serbia

Subject-matter jurisdiction in Serbia lies with the Higher Courts (Viši sud) or, in commercial matters, the Economic Courts (Privredni sud). Territorial jurisdiction is determined by the debtor's registered office.

The court examines formal requirements. If everything is in order, it issues a decision on recognition. The debtor has the right to appeal this decision, which may delay the process. The entire recognition process usually takes 3 to 9 months.

Related FAQs on the recognition of decisions in Serbia

1. How much does the recognition process in Serbia cost?
Court fees are based on the Serbian court fee schedule and may depend on the value of the dispute or be set as a fixed amount per petition. While these are not exorbitant sums, it is necessary to account for the costs of local Serbian counsel.

2. What if the Serbian court does not recognize the judgment?
If the court dismisses the petition, the Czech judgment cannot be enforced in Serbia. It would then be necessary to litigate again directly in Serbia, provided that statutes of limitations and the principle of res judicata allow for it.

Enforcement of decisions in Serbia

After the judgment is recognized, it carries the same weight in Serbia as a domestic decision. Forced enforcement follows.

The execution process

Recovery is governed by the Law on Enforcement and Security. The creditor files a motion for enforcement. In Serbia, executions are primarily carried out by public enforcement officers (Javni izvršitelji), who are the counterparts to Czech court bailiffs.

The enforcement officer can seize:

• Bank accounts.
• Movable property.
• Real estate.
• The debtor's receivables.
• Business interests/shares.

Timeline and costs of execution

Success and speed depend on the debtor's financial situation. Enforcement officers in Serbia work on a fee-and-expense reimbursement basis. The creditor must usually pay a deposit toward the costs of execution.

Obstacles to execution

The greatest risk is the debtor's insolvency. If the debtor has no assets or is in liquidation or bankruptcy, the execution will be stayed. The attorneys at ARROWS therefore recommend performing an asset search on the debtor before initiating costly litigation in Czech courts.

Statutes of limitations and their impact

Limitation periods are a crucial legal concept. If you miss the deadline and the debtor raises a statute of limitations defense, the court will dismiss the lawsuit.

Statute of limitations in the Czech Republic

In the Czech Republic, the general limitation period is 3 years. If a claim has been awarded by a final court decision or acknowledged by the debtor in writing regarding both the reason and the amount, the limitation period is 10 years under Czech law.

Statute of limitations in Serbia

In Serbia, a 3-year limitation period applies to mutual claims of legal entities arising from commercial contracts.

Note the difference: in Serbia, a written acknowledgment of debt or partial payment only interrupts the limitation period, which then starts running anew from the beginning. The ten-year period in Serbia only applies to claims finally awarded by a court (actio iudicati).

Critical mistakes by companies

Waiting for "voluntary" payment for more than 3 years from the invoice due date is fatal. In international trade, we recommend not leaving matters to the last minute and filing a lawsuit well in advance.

Recovery strategy

If the debtor is communicating, try to obtain a written acknowledgment of the debt. This extends the limitation period in the Czech Republic to 10 years (interrupts it in Serbia) and, crucially, shifts the burden of proof.

Sending a demand letter on our law firm's letterhead often has a stronger psychological effect than a reminder from an accounting department. Many debtors pay to avoid the Czech legal system.

If settlement fails, it is necessary to litigate quickly. The strategy of choosing between a Czech and a Serbian court depends on the quality of the contractual documentation and the debtor's registered office.

Practical aspects: Language barriers

All documents for Serbian authorities must be translated into Serbian by a sworn translator. In Serbia, Cyrillic is used officially, while Latin script is also used in business dealings, but court translations follow specific rules.

ARROWS ensures coordination with translators to ensure documents carry the necessary official weight.

International arbitration as an alternative

If you are currently drafting a contract, consider including an arbitration clause. Both Serbia and the Czech Republic are signatories to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

Advantages of arbitration:

1. Enforceability (arbitral awards are often easier to enforce in Serbia).
2. Speed (single-instance proceedings).
3. Expertise of the arbitrators.

Conclusion

Debt recovery in Serbia requires a combination of knowledge of Czech law, international treaties, and Serbian enforcement practice. Errors in service of process, formal requirements, or statutes of limitations can be irreversible.

ARROWS law firm in Prague is insured for damages up to CZK 400,000,000 and maintains a network of international partners through ARROWS International, including contacts in Serbia. This allows our Czech legal team to resolve cases efficiently while minimizing risks for the client.

If you want to avoid risks, contact us at office@arws.cz. We will assess your case, perform a debtor background check, and propose the best course of action under the relevant legal framework.

FAQ – Frequently asked legal questions regarding debt recovery in Serbia

1. Can I file a lawsuit in a Czech court even if the debtor is in Serbia?
Yes, if the jurisdiction of Czech courts is established (e.g., based on the place of performance or choice of law). However, if this link is missing, it is necessary to sue in Serbia. Assessing jurisdiction is a critical first step.

2. How much does debt recovery cost?
Costs include court fees, translation costs, and legal fees. In the event of success, the majority of these costs are typically borne by the debtor.

3. How long does it take to receive the funds?
The entire process (Czech court proceedings + recognition + enforcement) can take 1 to 3 years. Out-of-court settlement is significantly faster.

4. What if the debtor denies the debt?
The creditor bears the burden of proof. You must present purchase orders, delivery notes, invoices, and relevant communication.

5. Can I freeze the debtor's assets in advance?
Yes, Serbian law provides for interim measures (privremena mera) to secure a claim if you can prove that the debtor is frustrating the satisfaction of the creditor.

6. Will Serbia recognize a Czech electronic payment order?
Theoretically yes, but in practice, it is very difficult due to strict requirements for personal service of process to the debtor abroad. It is often safer to opt for a standard judgment from a Czech court.

Disclaimer: The information contained in this article is for general informative purposes only and serves as a basic guide to the issue. Although we strive for maximum accuracy, legal regulations and their interpretation evolve over time. To verify the current wording of regulations and their application to your specific situation, it is essential to contact our Prague-based law firm, ARROWS, directly (office@arws.cz). 

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