Debt collection from a debtor who has fled abroad

In today’s globalized environment, cases where debtors leave the country in an attempt to avoid responsibility are becoming more and more common. This situation may create certain difficulties in the process of debt collection, but it does not make it impossible.

Creditors, faced with such a problem, need a clear understanding of the step-by-step plan of action and possible legal means to return their money. This material will be useful for creditors who have already received a court decision on debt collection from an individual or are planning to receive one.

The first step in the process of debt collection from a debtor located abroad is to establish the jurisdiction in which this collection will be carried out. This depends on a number of factors: where the debtor actually lives and where his foreign assets are located.

After establishing jurisdiction, the next important step is to apply to a foreign court with an application for recognition of the court decision in the debtor’s country and its enforcement. Here it is necessary to take into account that in order to file such a petition it is necessary to confirm the fact of the debtor’s residence in the given country or the presence of assets on its territory, which must be documented at the time of filing the application.

If the creditor only has information about the country of residence of the debtor or the location of his assets, but does not have official confirmation, at this stage it is necessary to involve competent specialists to collect evidence. It is important to understand that the list, content and format of the necessary evidence may vary from country to country. For example, in a number of countries access to property registers may be limited, and to obtain information it will be necessary to know the local identification data of the debtor, such as his tax number or the exact address of his foreign assets.

In England, for example, evidence may include newspaper articles, publications on social networks, information from Internet resources, as well as reports of private detectives.

If the collection of such evidence was successful, the creditor needs to determine the legal route for recognizing and enforcing the judgment abroad. The main route may arise from an international convention, a regional regime, a bilateral treaty or the national law of the state where recognition and enforcement are sought. For civil and commercial judgments, one of the relevant modern instruments is the 2019 Hague Judgments Convention, but it applies only where the Convention is in force between the relevant states and the judgment falls within its scope.

For judgments between EU Member States, recognition and enforcement are generally governed by the Brussels I Regulation (recast). In such cases, a judgment given in one EU Member State is normally recognized in another EU Member State without a separate exequatur procedure, and the creditor may proceed to enforcement by providing the required certificate and a copy of the judgment to the competent enforcement authority.

If no applicable convention, regional regime or treaty exists, recognition may be available under the national law of the requested state. In some jurisdictions this may involve reciprocity, meaning that the foreign court may consider whether courts in the creditor’s country recognize judgments from the requested state. This issue affects both the admissibility of the recognition application and the amount of evidence that must be prepared before filing.

Once the creditor’s court decision has been recognized and permission for its execution has been received, it is necessary to initiate enforcement proceedings. Within the framework of this stage, standard measures can be applied, such as the seizure of the debtor’s bank accounts and property, with subsequent forced sale.

In EU-related cases, the European Account Preservation Order may also be relevant as a preservation tool. It is designed for cross-border civil and commercial claims and allows funds held in a bank account in another EU country to be frozen before the money is transferred or dissipated. This instrument applies in EU Member States except Denmark and is used only in cross-border situations, for example when the court dealing with the procedure or the creditor’s domicile is in a different Member State from the state where the debtor’s account is maintained.

In many cases, the measures described are sufficient for effective debt collection. But there are cases with additional nuances. For example, if the debtors are former owners of companies who were held liable in the creditor’s country for the debts of their company as joint debtors. In order to avoid paying the debts for their company, they leave the country and open a business in another country.

If such a state provides for attachment or enforcement against shares, corporate interests, dividends or other distributions, and the debtor withdraws profits or dividends to accounts in local banks, the creditor may use the recognized judgment to target those ass International debt collection against a debtor who has moved abroad.ets through local enforcement mechanisms. However, if the country in which the debtor does business does not provide for the procedure for foreclosure on corporate rights and at the same time the debtor withdraws profits or dividends from the company to bank accounts opened in other countries (For example, such banks as WISE (Belgium), Revolut, Zen, Bankera, Paysera, Genome (all registered in Lithuania), as well as Bunq (Netherlands) are publicly available and allow you to open an account without being in their country and without visiting a local branch), then this will entail the need to recognize the decision of the national court of the creditor not only in the country in which the debtor does business, but also in the states where these bank accounts are registered and, after successful recognition, to freeze such bank accounts. To do this, it is necessary to provide evidence that the debtor actually owns accounts in these banks. Collecting such evidence can be a difficult task, but this does not mean that it is impossible.

It is also important to consider that before a debtor leaves his country, he often tries to sell or transfer his assets in order to avoid their confiscation in favor of creditors. In such a situation, it is important to check what assets the debtor had at the time the obligations to the creditor arose.

If the property really existed, it is worth analyzing the transactions related to its alienation. Depending on the applicable jurisdiction, transactions made to put assets beyond the reach of creditors may be challenged as actio pauliana claims, voidable transactions, transactions at undervalue or fraudulent transfers. If the court sets aside such a transaction or restores the asset to the debtor’s estate, the creditor may then seek enforcement against that property under the relevant enforcement procedure.

Our company has extensive experience in international debt collection. We cooperate with international legal organizations and have a network of partner lawyers around the world. This allows us to provide a full range of debt recovery services, including securing a claim abroad, searching for the debtor’s assets, recognizing national court decisions and enforcing them abroad. 

If you require assistance in such a situation or have any questions, please contact us to discuss your case.

18.01.2025

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