Debt Collection in Eritrea

Debt collection in Eritrea should begin with a legal and practical assessment of the debtor, the debt documents and the connection of the dispute with Eritrea. At this stage, it is important to determine whether the debtor is registered, resident or commercially active in Eritrea, whether the debtor has assets, receivables, bank accounts, movable or immovable property in the country, whether there are pending court cases or enforcement proceedings, and whether the creditor’s claim can be proved by contracts, invoices, delivery documents, account statements, correspondence, acknowledgements of debt or other written evidence.

This preliminary assessment helps determine whether the creditor should start with out-of-court recovery, prepare an ordinary civil claim, use the special money debt collection procedure, rely on an existing foreign judgment, or proceed directly to enforcement-related steps where an enforceable title already exists. In cross-border matters, the analysis should also cover the place of performance of the contract, the debtor’s branch or business presence in Eritrea, the location of assets, the language and form of documents, and the practical ability to notify the debtor and enforce the result.

The out-of-court stage may include a formal demand for payment, documented communication with the debtor, negotiations with authorised decision makers and settlement proposals. Depending on the nature of the debt, settlement may involve full payment, a repayment schedule, return of goods, transfer of the debt to a third party, set-off, exchange of services or another commercially acceptable arrangement.

Communication with the debtor may be carried out by mail, email, telephone or instant messaging, depending on the available contact details and the evidence required for the file. The purpose of this stage is to record the creditor’s position, clarify whether the debtor admits or disputes the claim, identify the person authorised to negotiate, preserve evidence of the demand and assess whether voluntary payment is realistic.

If the debtor ignores the demand, disputes the debt without a sufficient documentary basis, avoids communication, breaches a settlement arrangement or shows signs of insolvency, the creditor should proceed to judicial debt collection in Eritrea or another appropriate legal mechanism.

Before initiating court proceedings, the creditor should assess the limitation period under Eritrean civil law. As a general rule, rights of action are prescribed by 20 years. A claim for performance of a contractual obligation to give or to do is prescribed by 5 years from the beginning of the day following the day on which the claim became due. For obligations with an indeterminate time for performance, the limitation period begins after the creditor gives notice of the intention to claim performance, subject to the long-stop rule provided by the Civil Code.

The court does not apply prescription on its own initiative; the debtor must raise it as a defence. Prescription may be interrupted by the institution of an action or another judicial recourse, by a written warning or written communication in which the creditor unequivocally reserves the right to performance, or by the debtor’s acknowledgement of the right. After interruption, a new limitation period begins, but the new period is equal to the original one and may not exceed 5 years, while prescription is not completed earlier than the original period would have expired without interruption.

Eritrean law provides for judicial debt collection through ordinary civil proceedings and through a special money debt collection procedure for certain documented monetary claims.

Ordinary civil proceedings begin with the filing of a statement of claim. If the claim complies with procedural requirements, the registrar enters it in the register of civil claims. The court then issues a summons requiring the defendant to appear and answer the claim on the date specified in the summons, and the summons is served together with the statement of claim and its annexes.

The summons may state that the case can be heard on the appointed day even if the defendant does not appear or appears without an answer. For the creditor, this makes the quality of the initial claim and annexes especially important, because the court record should clearly show the legal basis of the debt, the amount claimed, the due date, the debtor’s default and the evidence supporting the claim.

On the appointed day, if the defendant appears and files a defence denying the facts stated in the claim, the defence must address the merits of the creditor’s allegations. Evasive answers are procedurally weak. If the claim contains several factual allegations, a general denial is not sufficient. Each factual allegation in the statement of claim that is not specifically denied, implicitly denied or stated as not admitted may be treated as admitted.

At the first hearing, the court determines the material questions of fact or law on which the parties disagree and formulates the issues on which the outcome of the case depends. If the defendant has not filed an answer at the first hearing, this step may not be necessary. If the court finds that there is no real disagreement on questions of law or fact, it may immediately render a decision.

If the relevant issues cannot be properly formulated without examining a person who is not present or without inspecting a relevant document, the court may adjourn the framing of issues to another day. The court may also compel the attendance of a person or the production of a document by subpoena or another procedural measure.

When the issues have been framed and the court is satisfied that no further evidence or argument is required, the case may proceed on the basis of the materials immediately available to the parties. In a debt dispute, the creditor should therefore prepare the file so that the contract, invoices, delivery records, correspondence, account reconciliation, acknowledgement of debt, payment history and calculation of the outstanding amount can support the claim without unnecessary delay.

After the evidence has been considered and the disputed issues have been resolved, the court may deliver judgment immediately or at a separate hearing.

A special Money Debt Collection Procedure may be used for certain documented monetary claims. It may be brought ex parte by a creditor against a debtor where the claim is based on negotiable instruments, such as a bill of exchange, promissory note or cheque, on a bond or written contract for payment of a liquidated amount of money, or on a guarantee where the claim against the principal debtor concerns only a debt or liquidated amount.

To use this procedure, the creditor files an application that meets the requirements of a statement of claim in ordinary proceedings and states that it is a Money Debt Collection Procedure. The court examines the application and the submitted documents. If the application is admissible and well founded, the court issues a money debt collection judgment against the debtor and determines the amount due to the creditor.

After service of the money debt collection judgment, the debtor is notified either to pay the sum fixed in the order within a reasonable time or to enter an objection within 15 days after service. If the debtor does not object within the allowed time, the judgment is not subject to appeal, has final and binding effect, and becomes enforceable in the same way as a judgment in ordinary proceedings. If the debtor files an objection in time, the case continues as an ordinary civil procedure and the application is treated as the statement of claim.

A court decision may be appealed within the appellate structure provided by the Civil Procedure Code. A first appeal may be brought from a Community Court to the Regional Court, from a Regional Court to the High Court, and from the High Court to the Supreme Court. A second appeal is limited to the ground that the first court of appeal made an error, and the Supreme Court also has special appellate jurisdiction in cases involving constitutional issues or significant legal principles.

A notice of appeal must be filed in writing within 15 days of the judgment with the registry of the court that gave the judgment under appeal. After a copy of the judgment is served on the appellant or the appellant’s representative, the memorandum of appeal must be filed within 60 days of receipt of that copy.

Recognition and enforcement of foreign judgments in Eritrea is important where the creditor already has a court decision from another country and the debtor or enforceable assets are located in Eritrea. Unless an international convention provides otherwise, a foreign judgment may be executed in Eritrea only through the procedure set out in the Civil Procedure Code. The application is made to the division of the High Court situated in the region where enforcement is to take place.

The application for execution of a foreign judgment must be in writing and accompanied by a certified copy of the judgment and a certificate signed by the president or registrar of the court that issued the judgment confirming that the judgment is final and enforceable. Permission to execute a foreign judgment depends on several conditions, including reciprocity, proper establishment of the foreign court, the debtor’s opportunity to appear and present a defence, finality and enforceability of the judgment, and compatibility with public order or morals.

Eritrea is not a contracting state to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, so it is better to avoid arbitration clauses in contracts with a debtor from Eritrea. An arbitration clause may be considered only if the debtor has assets in a jurisdiction that is a contracting state to the New York Convention and the future arbitral award can realistically be enforced against those assets.

Once the judgment has become enforceable, the creditor may initiate enforcement proceedings. Under the Civil Code, the power to execute a judicial or arbitral decision is generally prescribed by 20 years from the beginning of the day following the decision or, where execution depends on conditions, from the beginning of the day following the fulfilment of those conditions. At the same time, the Civil Procedure Code provides that no application for execution may be submitted after the expiration of 10 years from the date of the judgment sought to be executed or, where the judgment or subsequent order directs payment or delivery at a certain date or recurring periods, from the date of default in the payment or delivery for which execution is sought.

After receiving an application for execution, the court verifies whether the procedural requirements have been met. If the application is admitted, the court issues an order of execution and sends a copy to the judgment debtor. The judgment debtor may submit objections after receiving the execution order, and the court considers the application and the objections as it deems appropriate.

As part of compulsory enforcement, the creditor’s claims may be satisfied through measures directed at the debtor’s assets, including funds, movable and immovable property, shares, salary or other attachable rights and property held by third parties, subject to the procedural rules and exemptions applicable to execution. For a creditor, the practical value of enforcement depends on identifying assets in Eritrea before or during the proceedings and preparing the evidence needed to link those assets to the debtor.

One of the alternative ways to recover a debt from a company or entrepreneur is to initiate bankruptcy proceedings against the debtor. Under Eritrean commercial legislation, this option may be relevant where the debtor is unable to meet its obligations with available assets and the creditor’s claim is clearly defined, liquid and enforceable. For a creditor, bankruptcy may be useful where ordinary enforcement against individual assets is unlikely to produce a practical result, where several creditors compete for limited assets, or where the debtor has transferred assets before or during financial distress.

If the debtor’s assets are insufficient to satisfy creditors in full, bankruptcy-related recovery may include challenging transactions that reduced the debtor’s estate or gave an unjustified advantage to selected parties. These transactions may include gratuitous transfers of property, contracts where the debtor’s obligations significantly exceed the obligations of the other party, payment of debts before maturity, payment of debts in a manner different from the contractual payment procedure, and the granting of security over assets for old debts.

The cancellation of such transactions can return property or value to the debtor’s estate and improve the pool of assets available for creditors and for the costs of the bankruptcy process. This makes the timing of transactions, the debtor’s financial position, the nature of consideration, the identity of related parties and the creditor’s knowledge of the debtor’s financial distress important factors when assessing a bankruptcy-related recovery strategy.

If you need support with international debt collection in Eritrea, Grandliga can assist at all key stages of the recovery process: analysis of the debtor and documents, preparation of a demand strategy, out-of-court negotiations, assessment of the ordinary court route or the Money Debt Collection Procedure, support with recognition and enforcement of foreign judgments, enforcement planning, and bankruptcy-related recovery where the debtor’s financial position requires this approach.

# DEBT COLLECTION AGENCY ERITREA

14.11.2024

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