Debt collection in Estonia

The debt collection procedure in Estonia starts with an assessment of the debtor’s solvency, its field of activity, company history, availability of documentary evidence of the debt, current court cases and enforcement proceedings, as well as the possibility of disputing the debt. This assessment determines the strategy to be used on behalf of the client in the collection process.

If the debtor has no current court cases or outstanding court judgments for debt collection and is actively engaged in commercial activities, it is advisable to use the out-of-court debt recovery stage.

This stage involves active negotiations with the debtor to reach an agreement on payment of the creditor’s claims or other possible settlement options (e.g., return of goods, transfer of debt to a third party, exchange of services or goods). 

Engagement with the debtor begins immediately after the notice is sent by mail, email, telephone or messenger. This process involves intensive communication with the debtor in order to apply constant pressure. The main objective is to contact key decision makers to achieve the earliest possible recovery of the debt.

The average time for informal out-of-court recovery is up to 60 days (unless installment repayment is agreed). If this stage does not yield the expected results, or after initial analysis it becomes clear that it is not applicable, it is necessary to proceed to judicial recovery.

Before initiating judicial recovery, it is worth paying attention to the limitation period. The limitation period for claims based on transactions is 3 years. If it is established that the debtor has wilfully violated his obligations under the concluded transaction, the limitation period in such a case is 10 years. Legislation does not provide for the possibility to change these limitation periods by agreement of the parties. The expiry of the limitation period is not an obstacle to the application to court, since the consequences of the expiry of the limitation period apply only at the request of the defendant. The limitation period is considered to be interrupted when the debtor takes an action indicating recognition of the debt, such as partial payment of the debt, interest, provision of a guarantee or other similar action. After such an act, the limitation period is interrupted and starts counting again.

Depending on the complexity of the case and the value of the claim, Estonian law provides for the following options for judicial debt recovery: 

General action proceedings are carried out by filing a lawsuit with the court, after which the court decides to accept the lawsuit for consideration and makes preparations for court proceedings. Having accepted the claim for consideration, the court immediately sends the defendant a copy of the claim with annexes and sets a deadline for the defendant to respond to the claim. The deadline for filing a reply to the lawsuit must be at least 14 days from the date of service of the lawsuit (for a foreign defendant, at least 28 days). Upon receipt of the debtor’s reply or the expiry of the time limit for filing, the court shall schedule a hearing to consider the merits of the case. Depending on the circumstances of the case, before the court hearing, the court may appoint a preliminary hearing to carry out activities aimed at preparing for the main hearing.  As a result of the hearing on the merits, the court issues a judgment (“Kohtulahend”), which becomes final after the expiry of the time limit for appeal. 

An interested party who is not satisfied with the judgment of the court of first instance has the right to appeal against it within 30 days from the date of its receipt, but not later than five months from the date of public announcement of the judgment of the court of first instance. Once the appeal has been admitted to proceedings, the court shall oblige the defendant to respond to the appeal within the time limit set by the court. The time limit for filing a reply to the appeal shall be at least 14 days from the date of filing the appeal. The court may authorize the defendant and the other party to the proceedings to reply to the appeal orally in court if the court considers that a written reply is not necessary. If neither the plaintiff nor the defendant has requested a hearing, the court may hear the case and allow the appeal without hearing it in court. In this case, the court shall determine as soon as possible the time within which the parties to the proceedings may submit statements or positions to the court and the time of public announcement of the judgment, and shall inform the parties to the proceedings accordingly. If in the written proceedings the court determines that the case is to be resolved in a court hearing, it shall schedule a court hearing and invite the parties to attend the hearing. In case of failure to appear at the court hearing, the court shall hear the case without the parties or adjourn the hearing.  After hearing the case, the court adopts a judgment, which enters into force after the expiry of the term for cassation appeal.

The judgment of the court of appeal may be appealed against by filing a cassation appeal with the Supreme Court of Estonia within 30 days from the date of receipt thereof, but not later than five months from the date of public announcement of the second instance court’s judgment. Upon receipt of a cassation appeal, the Supreme Court shall immediately notify the other parties to the proceedings and serve them with a copy of the cassation appeal with annexes, and inform the parties of their obligation to submit a reply and state their positions.  The Supreme Court shall, within a reasonable time after the expiry of the time limit given to the defendant and third parties to respond to the cassation appeal and state their position, decide whether to accept the cassation appeal for proceedings or to reject it. If the cassation appeal is accepted, the court shall proceed to the preparation for examination of the case.  The court may consider and resolve the case without examining the cassation appeal in a court hearing if it does not consider it necessary to hold a hearing. In this case, the court shall, as soon as possible, determine the period within which the parties to the proceedings may submit statements or opinions to the court and the time of public announcement of the judgment, and shall inform the parties to the proceedings thereof. If the case is heard in a court session, the Supreme Court shall notify the parties to the proceedings of the time and place of the court session. In the event of a party’s non-appearance at a Supreme Court hearing, the Supreme Court may decide the appeal without the party’s participation or postpone the consideration of the case if, in the Supreme Court’s opinion, the party’s presence is necessary for the case’s consideration. After reviewing the appeal, the court makes a decision that is not subject to further appeal and becomes legally binding from the moment it is pronounced.

The written procedure (“Kirjalik menetlus”) is applicable to cases in which the parties to the proceedings ask the court to hear the case without a court hearing. If the creditor has not indicated in the statement of claim that he/she agrees to hear the case in written proceedings, it is considered by default that the case will be heard in the general procedure with a court hearing. The Code of Civil Procedure provides for the judge’s discretion to hear the case in writing if the value of the main claim does not exceed EUR 4,500 and together with secondary claims up to EUR 8,000. Also, in such a case, the court has the right to cancel the written procedure if, in its opinion, the personal presence of a party to clarify the circumstances underlying the claim is unavoidable or if, at the request of a party, the claim must be heard regardless of the appointment of a written procedure. The procedure for appealing against a judgment is similar to the general procedure.

The simplified procedure (“Lihtmenetlus”) is applicable for the main claim not exceeding EUR 3,500 and together with secondary claims up to EUR 7,000. The court shall consider the claim under the simplified procedure at its own discretion, guided only by general procedural principles, and shall set time limits for consideration that differ from those provided for by law. Under this procedure, at the request of a party, the court may hear the party’s position without a court hearing. The procedure for appealing against a judgment is similar to the general procedure.

The documentary procedure (“Dokumendimenetlus”) is applicable to claims for the recovery of money arising from promissory notes and cheques, provided that all the circumstances proving the claim can be established on the basis of the attached documents. The application of this procedure also requires a petition of the creditor to this effect. Only documents submitted by the parties and explanations given by the parties under oath shall be considered as evidence in documentary proceedings. Only the circumstances justifying the debt and the authenticity or falsification of the document can be proved. No other evidence shall be admissible and no objection shall be considered. In a documentary action, if the plaintiff fails to prove his claim by evidence admissible in a documentary action, the claim is abandoned. In this case, the claim may be resubmitted in the usual manner. If the court grants the claim in documentary order, it issues a judgment with a reservation, in which it reserves the right of the defendant to defend his or her rights in the future. The judgment with reservation is considered a final judgment from the point of view of appeal and enforcement. If a judgment with reservation is issued with respect to the rights of the defendant in documentary proceedings, the dispute shall continue in ordinary proceedings.

The accelerated payment order procedure (“Maksekäsu kiirmenetluse”) is applicable to claims for payment of a certain sum of money arising from private law relations. The claim must be supported by a contractual document or a debt document and must not exceed EUR 8,000. The application for accelerated issuance of a payment order shall be submitted electronically and digitally signed. The court shall consider the application within 10 days. If the court rejects the application, the creditor has the right to apply to the court in general procedure. If the court grants the application, it issues a payment order which orders the debtor to pay the debt within 15 days of receipt of the application (30 days if the debtor is abroad) or to submit an objection within the same period. If the debtor fails to lodge an objection, the payment order becomes a final judgment and is issued in the form of a collection order. If an objection is filed, the payment order is subject to the general procedure.

Once the final judgment has been obtained, it must be submitted to the bailiff for enforcement. The court judgment may be submitted for enforcement within ten years from the date of entry into legal force. If the law or the court decision does not set a term for voluntary execution of the court judgment, it shall be determined by the bailiff. The term may not be less than 30 days. With the consent of the claimant, the bailiff may set a period for voluntary execution of a court judgment of more than 30 days. The Code of Enforcement Proceedings establishes that the debtor is obliged to inform the bailiff of information about his property, including property that the debtor donated two years before the opening of enforcement proceedings and property that the debtor transferred for a fee to close persons one year before the opening of enforcement proceedings. Within the framework of enforcement of the decision, the creditor’s claims may be satisfied by writing off funds from the debtor’s accounts, seizure of the debtor’s movable and immovable property with their subsequent sale, obtaining income from the debtor’s property management, seizure of the debtor’s property and money held by third parties, recovery of the debtor’s share in the company’s authorized capital. Also at this stage, the debtor has the right to file a lawsuit against the debtor and the other party to the transaction and demand that the court recognise the transaction as having caused harm to the interests of the debtor and return to the debtor the asset lost as a result of such a transaction. The court will recognise as invalid a transaction made by the debtor within three years prior to the claim for invalidation a transaction that was knowingly made to the detriment of the interests of the claimant, if the other party knew or should have known about it at the time of the transaction. By default, it is presumed that the other party knew or should have known that the transaction was detrimental to the interests of the creditor if the other party is a close person to the debtor or if the transaction was made six months prior to the commencement of enforcement proceedings.

If the debtor has signs of insolvency (when a legal entity is unable to satisfy a creditor’s claim and this inability is not temporary due to the debtor’s economic situation), the option of bankruptcy proceedings should be considered. A creditor may use this procedure if within three months the debtor fails to satisfy the creditor’s claims at the stage of enforcement proceedings or if earlier than three months in the enforcement proceedings it is established that the debtor has insufficient assets to fulfill all obligations.

Under this procedure, provided there are no assets of the debtor or their insufficiency, there is a possibility of canceling transactions of the debtor, which were aimed at withdrawal of assets in order to avoid satisfaction of creditor’s claims. Such transactions, for example, include transactions made within five years prior to the appointment of a temporary administrator or trustee, if the debtor knowingly caused harm to the creditor’s interests by the transaction and the other party to the transaction was a close person who knew or should have known about it. If the party to the transaction is not a close person, then such a transaction may be challenged if it was made within three years prior to the appointment of a temporary administrator or trustee in bankruptcy proceedings. As a result of cancellation of such transactions it is possible to return to the debtor what he was deprived of from such transactions and at the expense of this to increase the liquidation mass to satisfy the claims of creditors and cover the costs of implementation of bankruptcy proceedings.

As an alternative option for debt collection, you should consider the option of bringing the debtor to criminal liability under Article 176 of the Estonian Criminal Code for wilful non-execution of a court judgment, which provides for liability in the form of a fine, arrest or imprisonment for up to five years.  

If you have any questions or need support with international debt collection in Estonia, our company is ready to provide its expert assistance to effectively resolve your financial issue. Please contact us for more information and professional support from specialists of the leading debt collection agency.

# DEBT COLLECTION AGENCY ESTONIA

25.06.2024

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