Debt collection in Georgia

Debt collection in Georgia should not start with a formal payment demand only, but with an assessment of which recovery route can produce a real result. At the first stage, it is necessary to evaluate the debtor’s financial capacity, field of activity, business history, contracts, invoices, delivery documents, correspondence and other evidence of the debt, as well as the existence of ongoing court cases, initiated enforcement procedures, assets available for enforcement and possible objections from the debtor.

For Georgia, it is especially important to verify the debtor’s registration details, legal and actual business address, contact details for service of notices, assets that may be seized during enforcement, and whether the debtor is included in the debtor register. These details directly affect the choice of strategy: negotiations, simplified recovery through the National Bureau of Enforcement, ordinary court proceedings, compulsory enforcement, or insolvency proceedings if the debtor shows signs of financial distress.

If there is no ongoing court dispute concerning the same claim, there are no obvious obstacles to filing the claim, and the debtor continues business activity or has assets, it is usually advisable to begin with amicable debt collection. However, even at this stage, it is necessary to understand whether, in case of non-payment, the creditor will be able to move quickly to court proceedings or to the recovery procedure through the National Bureau of Enforcement.

The amicable stage is based on negotiations with the debtor and proper recording of the creditor’s position. At this stage, the parties may agree on full payment, partial payment, a payment schedule, return of goods, set-off, or another settlement option, provided that such arrangement is documented and does not weaken the creditor’s position in further recovery.

Communication with the debtor usually begins after sending a written payment demand by post, e-mail, agreed communication channels, or through a local representative. For amicable debt collection in Georgia, it is important not only to obtain a response, but also to receive written acknowledgement of the debt, confirmation of the amount, a proposed payment schedule, or another document that may be relevant for later court proceedings, enforcement and limitation period analysis.

Once the debtor’s position has been documented, the key question is whether continued communication offers a realistic route to payment. A working period of up to 60 days may be allowed where negotiations remain productive, but this is a practical timeframe rather than a statutory waiting period. If the debtor avoids communication, disputes the debt without sufficient grounds, fails to comply with an agreed payment schedule or negotiations no longer offer a realistic prospect of payment, the matter may proceed earlier to a summary proceeding before the National Bureau of Enforcement or to judicial debt collection.

Before initiating court proceedings, it is necessary to check the limitation period. In Georgia, the general limitation period is 10 years; for contractual claims it is 3 years; and for contractual claims relating to immovable property it is 6 years. The law does not allow the parties to freely change these periods in their contract.

The limitation period is interrupted if the debtor acknowledges the creditor’s claim, including by partial payment, payment of interest, provision of security, or other conduct confirming the existence of the debt. After interruption, the limitation period starts running again.

In Georgia, there is a simplified procedure for the recovery of monetary debts through the National Bureau of Enforcement. This procedure does not apply to every dispute. It is used for documented monetary claims that are already due and payable. It is not available if the creditor’s claim depends on a counter-performance that the creditor has not yet fulfilled.

To start the procedure, the creditor submits an application for debt recovery and attaches documents proving the claim. The application should include the details of the parties, addresses, contact details, the applicant’s bank details, the amount of the claim, the list of evidence, additional costs, and information on whether the creditor requests seizure of the debtor’s property as a security measure.

After accepting the application, the National Bureau of Enforcement sends the debtor a notice on the commencement of the procedure. The debtor has 10 calendar days from receipt of the notice to pay the debt, acknowledge the claim in full or in part, submit a written objection, or propose a settlement. In this procedure, service on the debtor cannot be replaced by public notice, so the correct address of the debtor has practical importance.

If the debtor does not respond, fully acknowledges the claim, or breaches the terms of the settlement reached, the National Bureau of Enforcement may issue an order for debt recovery. If the debtor submits an objection, the simplified procedure ends with refusal to issue the recovery order, but the creditor retains the right to apply to court under the ordinary procedure.

Georgian law does not provide for a general mandatory pre-trial settlement procedure before filing an ordinary debt claim in court. However, a written payment demand, notice of default, payment proposal and the debtor’s response may help the creditor prove its position, the amount of the debt, the date of default and the debtor’s conduct before the court proceedings.

Judicial debt collection in Georgia may take place under the ordinary procedure and, in specific cases, under a special procedure for claims based on a bill of exchange or a cheque.

The ordinary procedure starts with filing a statement of claim with the competent court. As a general rule, a civil case should be considered within two months after the claim is received by the court. In particularly complex cases, this period may be extended, but not for more than five months. The actual duration depends on the complexity of the dispute, service on the debtor, the volume of evidence, the conduct of the parties and possible appeals.

The court must notify the debtor of the hearing in the manner prescribed by law. If the debtor, being duly notified, fails to appear without a valid reason and the claimant requests a default judgment, the court may grant the claim if the facts and legal grounds support the creditor’s position.

The special procedure applies to claims based on a bill of exchange or a cheque. It is not a universal fast-track mechanism for every debt and may be used only when the claim actually arises from the relevant payment document.

A party to the proceedings may appeal the decision of the court of first instance to the court of appeal within 14 days. In a property dispute, an appeal is admissible if the value of the subject of appeal exceeds 2,000 Georgian lari. This value does not necessarily coincide with the full amount of the debt, but relates to the part of the decision that the party seeks to challenge.

The decision of the appellate court may be appealed to the Supreme Court of Georgia within 21 days after it is served on the party. A cassation appeal is not an automatic third review of the dispute on the merits. The applicant must justify the admissibility of the cassation appeal, for example by showing an important legal issue, divergence from Supreme Court practice, a substantial violation of substantive or procedural law, or another ground provided by procedural law.

If the cassation appeal is admitted, the entry into force of the appealed decision is suspended in the relevant part. The overall period for deciding on admissibility and adopting a decision in a civil case is six months. The decision of the Supreme Court is final within the national court system.

The court decision enters into force after the expiry of the appeal period or after the completion of the relevant appeal stage. The parties may also provide in the contract that the judgment may be enforced after the decision of the court of first instance, if such a clause is compatible with the applicable law and the nature of the dispute.

After the court decision enters into force, the creditor should receive an enforcement document and present it to the enforcement bureau. For the opening of enforcement proceedings, a state fee is charged in the amount of 2% of the amount of the debt, which is returned to the creditor at the end of the execution. The period for presenting an enforcement document for execution is 5 years.

Foreign creditors should take into account that at the stage of enforcement, the debt is collected only in the national currency – Georgian lari. Therefore, a foreign creditor should open an account in a Georgian bank or authorize a local representative to receive the collected amounts from the enforcement bureau. Otherwise, the opening of the enforcement procedure will be denied.

If the creditor already has a court decision issued outside Georgia and wants to recover the debt from assets located in Georgia, it may be necessary to obtain recognition and enforcement of a foreign court decision. The recognition of a foreign court decision is examined by the Supreme Court of Georgia. The main risks for the creditor include exclusive jurisdiction of Georgian courts, improper notification of the debtor in the foreign proceedings, the existence of a final decision on the same dispute, lack of jurisdiction of the foreign court from the perspective of Georgian law, absence of reciprocity in recognition of judgments, or conflict with the fundamental legal principles of Georgia.

If the debt arises from a contract containing an arbitration clause, the creditor should separately assess the recognition and enforcement of an arbitral award. The applicant should submit a duly certified original or copy of the arbitral award, as well as the arbitration agreement. If the award or the arbitration agreement is not in Georgian, a duly certified Georgian translation must be attached. After recognition and issuance of the enforcement document, further recovery is carried out through the National Bureau of Enforcement.

For an international creditor, practical importance is attached not only to the judgment or arbitral award itself, but also to the preliminary verification of the debtor’s assets in Georgia, address for service, bank details, pending enforcement proceedings and the possibility of timely measures against assets.

If within 2 years from the date of commencement of enforcement proceedings for the recovery of a monetary debt the creditor’s claim cannot be satisfied due to the debtor’s lack of property from which collection can be made, the enforcement document or enforceable decision is returned to the creditor. This does not mean that the debt is written off or that the court decision loses effect, but it shows that at this stage the enforcement authority has not identified assets from which recovery can actually be made.

Before the expiry of this 2-year period, the creditor may apply to the National Bureau of Enforcement for extension of the enforcement proceedings for 1 year and pay the required amount of 200 Georgian lari. When the enforcement document is returned, the enforcement measures already taken are cancelled, and the limitation period for enforcement of the decision is suspended until new enforcement proceedings are initiated in connection with the same case.

If the debtor is a business entity or another organisation to which Georgian insolvency law applies and there are signs of financial distress, the creditor should consider not only individual recovery but also insolvency proceedings. Georgian law provides two main regimes: rehabilitation and bankruptcy. Their purpose is the collective satisfaction of creditors’ claims, where possible through continuation of the debtor’s activity and, where this is not possible, through the sale of assets and distribution of proceeds.

A debtor is considered insolvent if it is unable to meet matured obligations. The law also recognises expected insolvency, where there are reasonable grounds to believe that the debtor will become insolvent. For the purpose of filing an application, the debtor may be presumed insolvent in several situations, including where its liabilities exceed its assets, where matured liabilities exceed liquid assets by at least 20 percent, where the debtor is included in the debtor register or was included in it during the 12 months preceding the application, where the debtor has ceased activity, where measures for recovery of tax debt have been applied for at least 30 days, or where the sale of assets has started and may endanger satisfaction of creditors’ claims.

Insolvency cases are heard by Tbilisi City Court and Kutaisi City Court. Tbilisi City Court has jurisdiction for Eastern Georgia, while Kutaisi City Court has jurisdiction for Western Georgia. If the debtor’s registered address is outside Georgia, the centre of its main interests in Georgia becomes relevant.

A creditor may file an insolvency application if it substantiates its interest in opening the bankruptcy regime and confirms that the application and attached documents have been served on the debtor. After receiving the court notice, the creditor must serve it on the debtor by post, through a court courier, by another method agreed by the parties, or by e-mail. E-mail service is deemed completed if the debtor confirms receipt electronically.

After the rehabilitation or bankruptcy regime is opened, creditors submit their claims under the prescribed procedure. If the creditor’s claim differs from the amount recognised by the debtor, the creditor may submit the claim to the manager or supervisor within 30 days after receiving the notice on opening the procedure. A creditor who did not receive such notice may submit the claim within 30 days after becoming aware of the procedure, but not later than 1 year after the ruling opening the rehabilitation or bankruptcy regime, provided that the limitation period under the Civil Code has not expired.

Within the procedure, transactions and actions of the debtor may be challenged if they reduced the estate, transferred or concealed assets, gave one creditor an advantage over others, or disposed of property below market value. Such an action may be challenged if it was performed within 1 year before the commencement of insolvency proceedings; if the other party is related to the debtor, the relevant period is 2 years. An action performed with the intention of harming a creditor may be challenged if it was performed within 3 years before the insolvency application was declared admissible. If the challenge is successful, the property is returned to the debtor, and security arising from the cancelled action is annulled.

Depending on the circumstances of the case, an additional element of the strategy may be an assessment of grounds for criminal liability of the debtor’s officers or the debtor personally. This risk does not arise from the mere fact of non-payment, but from the debtor’s conduct after enforcement has started or after a court act has been adopted.

In particular, Article 377 of the Criminal Code of Georgia concerns unlawful actions in relation to inventoried, seized or confiscable property; Article 377¹ concerns failure by the debtor to submit a list of property to the National Bureau of Enforcement or to a private enforcement officer; and Article 381 concerns non-execution or obstruction of execution of a final court decision or another judicial act. Therefore, the criminal-law element should not replace civil recovery, but may be assessed as an additional response tool where the debtor’s conduct obstructs enforcement or preservation of assets.

If you need debt collection in Georgia, it is important to determine the correct procedure in advance: amicable settlement, simplified recovery through the National Bureau of Enforcement, court proceedings, recognition of a foreign decision, enforcement proceedings, or insolvency of the debtor. Our company assists creditors with document analysis, assessment of recovery prospects, selection of legal strategy and handling of international debt recovery cases related to Georgia, taking into account the applicable procedures and practical risks.

06.02.2022

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