Debt collection in Bosnia and Herzegovina

The debt collection procedure in Bosnia and Herzegovina begins with a legal and practical assessment of the debtor, the debt evidence and the jurisdiction connected with the claim. At this stage, it is important to identify the debtor’s registered seat, business activity, corporate history, available assets, pending court cases, enforcement records and the quality of documentary evidence, including contracts, invoices, delivery documents, certificates of completion, guarantees, correspondence and settlement documents.

This assessment should also determine whether the debtor or the relevant assets are connected with the Federation of Bosnia and Herzegovina, Republika Srpska or Brčko District. Bosnia and Herzegovina has more than one procedural framework: in the Federation of Bosnia and Herzegovina, civil cases are handled through municipal courts, cantonal courts and the Supreme Court of the Federation of Bosnia and Herzegovina; in Republika Srpska, commercial and civil claims may involve basic courts, district courts, district commercial courts, the Higher Commercial Court and the Supreme Court of Republika Srpska; in Brčko District, the Basic Court and the Appellate Court form the court structure. As a result, the first practical step in debt recovery is to connect the claim with the debtor’s seat, the place of performance, the location of assets and the competent court.

If there are no current court proceedings or enforceable decisions against the debtor and the debtor continues to operate, pre-judicial debt collection may be used before filing a claim.

This stage is based on structured negotiations with the debtor in order to obtain payment, agree a repayment schedule, secure an acknowledgement of debt, arrange the return of goods, transfer the debt to a third party, set off mutual obligations or agree another lawful settlement solution.

The duration and usefulness of out-of-court collection depends on the debtor’s response, the quality of evidence, the amount and age of the debt, the limitation position, the debtor’s liquidity and whether the debtor is willing to provide a written settlement or security. Communication with the debtor should remain lawful, documented and proportionate, without misleading statements, threats, harassment or excessive pressure.

Before initiating legal action, the creditor should assess the applicable limitation periods. Under the Law on Obligations applied in the Federation of Bosnia and Herzegovina, the general limitation period is 5 years unless another period is prescribed by law. Mutual claims of legal entities arising from contracts for the sale and purchase of goods and services, including claims for reimbursement of expenses incurred in connection with these contracts, expire after 3 years. The limitation period runs separately for each delivery of goods, completed work or performed service.

The parties cannot change statutory limitation periods by agreement. Periodic claims that fall due annually or at shorter intervals, including interest as an ancillary periodic claim, are generally subject to a 3-year limitation period from the maturity of each individual payment. Claims established by a final court decision, a decision of another competent authority, a court settlement or a settlement before another competent authority are generally subject to a 10-year limitation period, even where the original claim would otherwise have had a shorter limitation period.

The running of the limitation period may be interrupted if the debtor acknowledges the debt through a direct statement to the creditor or indirectly, for example by partial payment, payment of interest or provision of security. Limitation is also interrupted by filing a claim or by another creditor’s action against the debtor before a court or another competent authority for the purpose of establishing, securing or enforcing the claim. The court applies the consequences of an expired limitation period only if the debtor invokes limitation as a defence.

The procedural route for debt collection through the court depends on the jurisdiction connected with the debtor and the assets. The court procedure described below concerns the Federation of Bosnia and Herzegovina, where the Civil Procedure Law provides the ordinary claim procedure and special rules for small-value disputes. Where the debtor is connected with Republika Srpska or Brčko District, the claim should be brought under the procedural rules and before the competent courts of that jurisdiction.

In the Federation of Bosnia and Herzegovina, the ordinary claim procedure begins by filing a statement of claim with the competent court. After receiving a correct and complete claim, the court starts preparation for the main hearing. This preparation includes preliminary examination of the claim, service of the claim with attachments on the defendant, the defendant’s written response, the preparatory hearing and scheduling of the main hearing.

Within 30 days after receiving a correct and complete claim, the court sends the claim with all attachments to the defendant and gives the defendant 30 days to provide a written response. The response should state whether the claim is accepted or disputed, identify procedural objections, set out the facts on which the defence is based and propose the evidence supporting that position. After receiving the response, or after the time limit for response expires, the court schedules a preparatory hearing.

A preparatory hearing is usually held no later than 30 days from the date the defendant submits a written response to the claim, from expiry of the response period or, where applicable, from receipt of the response to a counterclaim. At this stage, the court clarifies disputed issues, determines the evidence to be presented and prepares the case for the main hearing.

At the preparatory hearing at the latest, the court may propose mediation if it considers this appropriate in view of the nature of the dispute and other circumstances. The parties may also jointly propose mediation until the conclusion of the main hearing. In addition, the parties may conclude a judicial settlement before the court during the proceedings. A judicial settlement is entered into the court record, becomes concluded when both parties sign the record and is enforceable. A judicial settlement may be challenged if it was concluded by mistake, under duress or by deceit.

At the preparatory hearing, the court determines the day and time of the main hearing, the issues to be discussed, the evidence to be presented and the persons to be summoned. As a rule, the main hearing is held no later than 30 days after the preparatory hearing. The court may also order the main hearing to be held immediately after the preparatory hearing.

After completion of the main hearing, the court declares the hearing closed, renders the judgment and prepares it in writing within 30 days. A party may appeal a first-instance judgment within 30 days from the day the judgment is rendered or, where the judgment is served under the rules on service, within 30 days from service of the judgment. In disputes involving bills of exchange and cheques, the appeal period is 15 days. A timely appeal prevents the judgment from becoming final in the part challenged by the appeal.

The appeal is filed through the court of first instance. The court of first instance serves a timely, complete and admissible appeal on the opposing party no later than 8 days from receipt of the appeal. The opposing party may submit a response to the appeal within 8 days from receipt. After receiving the response or after the response period expires, the first-instance court forwards the appeal, the response if filed and the case file to the second-instance court within 8 days.

The second-instance court decides on the appeal in a panel session or at a hearing. The panel session or hearing is held within 45 days from receipt of the case file from the first-instance court. The second-instance ruling is rendered within 30 days from the panel session or, if a hearing is held, within 30 days from the conclusion of that hearing. If the appellant fails to appear at the second-instance hearing, the hearing is not held and the decision is made on the basis of the appeal and the response to the appeal. If the appellee fails to appear, the hearing is held and the court renders a decision.

The parties may file a request for revision against a final second-instance judgment with the Supreme Court of the Federation of Bosnia and Herzegovina within 30 days from service of the second-instance judgment. Revision is generally not permitted if the value of the contested part of the final judgment does not exceed 10,000 KM, although the Supreme Court may allow revision where the legal issue is important for the application of law in other cases. Filing a revision does not stay enforcement of the final judgment.

In the Federation of Bosnia and Herzegovina, the small claims procedure applies to monetary claims not exceeding 3,000 KM. The case is considered under simplified procedural rules, while the basic structure of the claim, response, hearing and judgment remains connected with the general civil procedure. In a small claims case, the judgment is announced immediately after the end of the main hearing.

The appeal regime is narrower than in ordinary litigation. In small claims cases, the judgment or decision concluding the proceedings may be challenged only for serious violations of civil procedure rules or for incorrect application of substantive law. The judgment cannot be challenged on appeal solely because the facts were allegedly established incorrectly or incompletely.

The parties may file an appeal against a first-instance small claims judgment within 15 days. The appeal period is calculated from the date of publication of the judgment, and if the judgment was served on the party, from the date of service.

If, after the court decision has become final, the debtor does not voluntarily comply with it, the creditor may proceed to forced enforcement before the competent enforcement court. In the Federation of Bosnia and Herzegovina, enforcement is conducted by the courts on the basis of an enforceable document or, where the law allows it, a credible document. Claims established by a final court decision, a decision of another competent authority, a court settlement or a settlement before another competent authority are generally subject to a 10-year limitation period.

A motion for enforcement should identify the enforceable or credible document, the creditor, the debtor, the claim, the means of enforcement and the object of enforcement. Forced enforcement may be directed against the debtor’s bank accounts, monetary claims, movable property, immovable property, securities, shares or other property rights. As a rule, the court decides on a motion for enforcement within 8 days, while objections and appeals in enforcement proceedings are subject to the time limits established by the Enforcement Procedure Law.

A practical distinction is important for commercial creditors. Under the Federation enforcement rules, enforcement may be ordered only on the basis of an enforceable document or a credible document. A credible document for monetary enforcement includes bills of exchange and cheques with protest and return account, where required, as well as invoices or excerpts from business books for the price of communal services such as water supply, heating energy and waste removal. Ordinary commercial invoices for goods or business services do not automatically fall within this limited statutory list, so many business debt cases still require an ordinary court judgment or another enforceable title before enforcement can begin.

If enforcement on the selected means or property cannot be carried out, the creditor may propose another means or object of enforcement for the same claim within 15 days from receiving the court notice that enforcement could not be carried out on the previously proposed means or property. This rule makes the initial selection of assets and enforcement route important, especially where the debtor has several accounts, movable assets, real estate or participations in companies.

Where the creditor already has a foreign court judgment, the practical route is different from filing a new claim on the original debt. A foreign court judgment generally has legal effect in Bosnia and Herzegovina only after recognition by the competent domestic court. Recognition requires the foreign judgment and a certificate from the competent foreign court or authority confirming finality under the law of the state where the judgment was issued. For enforcement, a certificate of enforceability under the law of the state of origin is also required. Recognition may be refused on grounds such as lack of proper participation of the defendant in the foreign proceedings, exclusive domestic jurisdiction, an existing final decision on the same matter, conflict with the constitutional order or lack of reciprocity. If the case also involves a debtor who has left the creditor’s jurisdiction or moved assets abroad, the recognition and enforcement strategy should be coordinated with asset tracing and the location of enforceable property.

An alternative route for recovery against companies is bankruptcy or restructuring. In the Federation of Bosnia and Herzegovina, the Bankruptcy Law regulates pre-bankruptcy proceedings, bankruptcy proceedings, the effects of opening those proceedings, reorganization through a bankruptcy plan and international bankruptcy issues. Pre-bankruptcy proceedings are aimed at financial and operational restructuring of the debtor, while bankruptcy proceedings are aimed at collective and proportionate satisfaction of creditors through the debtor’s estate.

Bankruptcy may be opened if the court establishes a statutory bankruptcy reason. The relevant reasons include payment inability, threatened payment inability, failure to comply with an adopted reorganization plan, or a reorganization plan obtained by fraud or in an unlawful manner. Threatened payment inability exists where, according to the maturity schedule of monetary obligations, the debtor will not be able to meet payment obligations as they fall due in the next 12 months and is up to 60 days late in meeting accepted monetary obligations. A debtor is considered payment unable if it cannot meet due and claimed payment obligations, including where it has not continuously paid due monetary obligations for 60 days or where its account has been continuously blocked for 60 days. A petition based on threatened payment inability may be filed only by the debtor.

For a creditor, bankruptcy may be relevant where ordinary enforcement has not produced payment. In the Federation of Bosnia and Herzegovina, bankruptcy proceedings may be opened directly if the petition is filed by a creditor that holds a final enforcement order and the claim remains unpaid for 90 days. After a bankruptcy case is opened, individual enforcement is generally replaced by collective satisfaction through the bankruptcy estate, and the creditor must protect its position through timely filing and participation in the bankruptcy process.

Transactions made before bankruptcy may also be challenged where they harm creditors. The Bankruptcy Law provides different challenge periods depending on the type of transaction. Certain preferential legal actions may be challenged if made in the last 12 months before the bankruptcy filing or after the filing. Unusual security or satisfaction may be challenged where the statutory 90-day or 6-month conditions are met. Gratuitous or undervalued transactions may generally be challenged if made within 5 years before the filing. Intentional harm to creditors may be challenged for actions taken in the last 5 years before the filing or after it, where the other party knew of the debtor’s intent. A claim to challenge legal actions may generally be filed within 2 years from the opening of bankruptcy proceedings.

Our company provides support with international debt collection in Bosnia and Herzegovina, including debtor assessment, evidence review, limitation analysis, selection of the competent jurisdiction, preparation of a court recovery strategy, enforcement of court decisions, recognition of foreign judgments and recovery actions connected with bankruptcy or restructuring. We assist creditors at different stages of the recovery process, from pre-judicial negotiations to court proceedings, forced enforcement and insolvency-related recovery.

12.04.2024

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