Enhanced debt recovery in Romania

Debt recovery in Romania has caused problems for foreign investors over many years.  I would estimate that questions concerning debt recovery are the third most common request that we receive.  Recoveries of debts in Central Europe including Romania were a byword for Byzantium thinking.  One hears of cases that have been running for at least ten years now being settled.

In the early 1990’s many companies wrote off their debts as it was considered that the cost and management time in recovering a debt was not worthwhile.  Romanian businesses gained a reputation for being untrustworthy and bad payers, and only if you received a guarantee or some other security was it worth doing business with Romanian companies.  The only solution often was to try and liquidate the Company and then everyone lost out, except the debtor who would open up another company the next day and continue as before.  Fortunately, with the expansion of business the picture has now changed.

The advent of EU regulations covering recovery of debts and the ability to enforce foreign judgements has helped the process.  We are often asked to enforce foreign judgments to recover monies.  Romanian businesses are realizing that when they make a commitment then they have to abide by it, even to foreigners.  People do care and money recovery is important.

This has been recognized by both the Parliament and the judiciary in the implementation of the new Civil Procedure Code.  The summary judgement where the debt is certain, due and there is no defense has been speeded up and the time limits enforced.  Enforcement can be obtained within 45 days.  Even the normal procedure where there can be a defense has been speeded up.  The issuing of normal proceedings now required that before the court will issue the file the court fees have to be paid.  In the past the issuing of the proceedings was used as a means of putting pressure on the defendant and no fee was paid and the file just sat in the system.  Now that the plaintiffs, if they want to issue proceedings have to pay the court fee before the court will issue the proceedings will cause them to think about the costs and time involved.  This it is hoped will reduce the number of frivolous and weak claims.  The claim file once issued cannot have added to it additional claims by the Plaintiff.  You will have to know the grounds before issuing the proceedings.  This again should speed up the administration of justice as the defendant will know what is being claimed and can prepare their defense accordingly.

Cross border enforcement of claims will also increase for the reasons mentioned above.  The use of EU regulations has made the Romanian businesses realize that they are now part of a larger business community and that they have responsibilities to other countries other than Romania.

It is hoped that these simple changes will over a period of time assist the governance of companies and further improve business attitudes in Romania.  Certainly, there is a marked improvement from business attitudes and ethics now from what it was back in the “good old days” of early 1990’s.

About Nicholas S Hammond

Nicholas is an English solicitor who has been practising in Romania since 1990. He has been a partner in a number of law firms in Romania as the principal partner. Hammond and Associates trading as Hammond Partnership is the culmination of many years experiance.

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