Debt recovery in Romania
For many foreign companies trading in Romania, the risk of unpaid invoices or breached contractual agreements is a reality. Debt recovery is not always a matter of money – it is a matter of safeguarding commercial relationships and maintaining cash flow. Romanian law provides an advanced system of law to follow through in pursuing claims, both amicably and in court, but creditors have to navigate elaborate procedures and requirements to succeed.
Overseas companies normally have extra difficulties, i.e., jurisdictional problems, foreign judgment enforcement, and compliance with EU regulation. The available remedies and the jurisdiction of the Romanian courts must be known before action can be taken.
Amicable debt recovery
It is in most cases that debt collection begins with out-of-court action. Creditors ought to attempt a friendly settlement, typically through the utilization of a formal demand letter sent to the Romanian debtor. The letter shall specify the sum payable, the reasons for enforcement, and a payment term.
While not mandatory under ordinary civil proceedings, such pre-litigation steps are recommended. Courts may consider them when allocating legal costs, and a well-documented letter of demand can serve as valuable evidence. For certain procedures, such as the payment ordinance, specific requirements regarding prior notice must be observed. In practice, many creditors also use negotiation or mediation to preserve business relationships while protecting their financial interests.
Judicial debt recovery procedures
If amicable settlement is not possible, the case is brought before the courts of Romania. The most common debt recovery processes are:
- Ordinary civil proceedings – used if the debtor opposes the claim or has involved defences. Proceedings are long but allow for a detailed examination of evidence.
- Payment ordinance procedure – an expedited court process that may be applied to uncontested claims and can lead to a rapid enforcement order.
- Small claims procedure – is applicable for cross-border cases in the EU where the claim does not exceed €5,000, offering a faster and simplified procedure.
The above procedures are governed by the Romanian Civil Procedure Code and, in the case of cross-border cases, by certain EU regulations such as Regulation (EC) No. 1896/2006 (European Order for Payment) and Regulation (EC) No. 861/2007 (European Small Claims Procedure).
Foreign judgments enforcement in Romania
One of the most important issues for foreign creditors is the assurance that a foreign judgment may be enforced in Romania. In the European Union, the Brussels I bis Regulation (EU Regulation No. 1215/2012) offers an efficient mechanism: judgments rendered in one EU member state are usually recognised and enforceable in any other without extra procedures.
For the recognition and enforcement of judgments of non-EU countries, Romanian domestic law applies under the Civil Procedure Code and, as the case may be, bilateral or multilateral treaties. Filing by the creditor is necessary for the use of recognition (exequatur), and the Romanian court will decide whether the foreign judgment qualifies with such requirements as finality, due process, and reciprocity.
Practical measures for foreign creditors
Foreign businesses wanting to pursue debts in Romania must be clever in the process. The first thing is to find out whether the debtor is solvent and identify assets that can be pursued in enforcement. It is extremely advisable to engage local counsel because the courts and enforcement officers will require filings and supporting documents to be written in Romanian.
The creditors should also note time limits. Most contractual debt claims are subject to the normal three-year statute of limitations provided in Romanian law. That period can be interrupted by particular behavior, such as serving a formal notice or issuing a lawsuit.
Enforcement is done through judicial enforcement officers (bailiffs), which are authorized to freeze bank accounts, garnish wages, or sell property of the debtor at public auction. Foreign creditors must be prepared to wait for this, based on how complicated the case is and how cooperative the debtor proves to be.
Improving debt recovery in Romania
In Romania, debt recovery requires persistence and knowledge of the legal system. For foreign companies, the best approach is a mix of preventive strategy – e.g., drafting proper contracts and monitoring payment history – and timely court action in the event of non-paid debts.
With EU mechanisms facilitating transborder enforcement and Romanian courts offering specialized proceedings for payment claims, there are a number of tools available to creditors. Nevertheless, success is conditional on the employment of experienced local attorneys knowledgeable about the nuances of Romanian law, adept at representing the creditor’s interests before a court, and able to maximize the efficiency of enforcement measures.
By embracing a well-planned strategy and reacting in a timely manner, foreign businesses can protect their economic interests and reduce the risks of operating in Romania.