Debt collection in Montenegro

The procedure for debt collection in Montenegro begins with an assessment of the debtor, the legal basis of the debt and the practical possibility of recovery within Montenegro. At this stage, it is important to determine whether the debtor is a company, entrepreneur or individual, whether the debtor has a registered seat, bank accounts, receivables, movable or immovable property in Montenegro, whether there are pending court cases, enforcement proceedings or signs of insolvency, and whether the debt can be proved by documents suitable for court or enforcement proceedings.

For corporate debtors, the recovery strategy should include a review of the debtor’s business status, available company information, contractual documents, invoices, delivery records, correspondence, acknowledgements of debt, partial payments, securities, guarantees and any jurisdiction or applicable law clauses. In cross-border cases, it is also important to determine whether the creditor should start proceedings in Montenegro, rely on an existing foreign judgment, or first secure evidence and information about assets located in Montenegro. This preliminary analysis forms the basis for choosing between amicable collection, mediation, a payment order, ordinary court proceedings, enforcement or insolvency-related recovery.

If the debtor is still operating, has not already been subject to an effective enforcement measure and there is a realistic possibility of voluntary payment or settlement, it is usually advisable to proceed first with informal amicable debt collection.

This stage involves active negotiations with the debtor in order to obtain voluntary payment, agree on a repayment schedule or reach another commercially reasonable settlement, such as the return of goods, transfer of debt to a third party, set-off, exchange of services or restructuring of payment terms.

Interaction with the debtor should begin with a properly documented demand or notification sent through available communication channels, including post, email, telephone or other business contacts. Communication should remain lawful, proportionate and evidence-based. The main task is to identify the persons who can make payment decisions, clarify whether the debtor admits or disputes the debt, record any objections and determine whether voluntary repayment is realistically possible before formal proceedings are started.

If the debtor refuses to cooperate, disputes the debt without sufficient grounds, ignores the demand, transfers assets, suspends payments or shows signs of insolvency, the creditor should move from informal collection to a formal recovery route. The appropriate route may include mediation, a payment order, ordinary court proceedings, enforcement based on an enforceable document, or bankruptcy and reorganization proceedings where the statutory grounds are present.

In Montenegro, alternative debt collection methods may be relevant before or during court proceedings. Under the system of alternative dispute resolution, certain categories of disputes may require an approach to the Centre for Alternative Dispute Resolution and attendance at the first meeting with a mediator before the case proceeds in court. This is especially important for small value claims and other disputes for which mediation or another alternative dispute resolution step is prescribed by law. A settlement reached through mediation may also become an enforceable document when the statutory conditions are met.

Before initiating legal action, the creditor should assess the applicable limitation periods. Under Montenegrin obligations law, the general limitation period is 10 years unless a shorter period is prescribed by law. This general rule should not be treated as a universal deadline for every debt claim. In practice, business and commercial claims, periodic payment claims, contractual claims and specific categories of obligations may be subject to shorter limitation periods.

For commercial debts between legal persons arising from business contracts, a three-year limitation period may apply, calculated separately for each supply of goods, work performed or service provided. Periodic claims, such as interest or other recurring payments, may also be subject to a shorter period. Contractual claims may require a separate analysis of the due date, the first missed payment, partial payments, written acknowledgements, security provided by the debtor and any other conduct that may affect the calculation or interruption of limitation.

The limitation period may be interrupted if the debtor acknowledges the debt directly or indirectly, for example by making a partial payment, paying interest, giving security or otherwise confirming the obligation. The consequences of expiry of the limitation period are applied by the court only if the debtor relies on limitation as a defence.

Montenegrin law provides several types of judicial debt collection depending on the amount of the claim, the quality of evidence and whether the debt is disputed. In debt recovery matters, the main court routes are the issuance of a payment order, ordinary civil proceedings and the small claims procedure.

The payment order procedure is designed for due monetary claims supported by authentic documents submitted with the claim in the original or as a certified copy. Authentic documents include public documents, private documents on which the debtor’s or obligor’s signature has been certified by the competent certification authority, bills of exchange and checks with protest and return accounts where necessary, extracts from certified business books, invoices and documents that have the effect of public documents under special rules.

The court may issue a payment order even if the plaintiff did not expressly request it, provided that all statutory conditions for issuing the payment order are met. If enforcement can be requested on the basis of an authentic document under the rules governing enforcement proceedings, the court issues a payment order only where the plaintiff makes the existence of a legal interest for such an order probable. If the plaintiff does not make the legal interest probable, the claim is rejected in that part.

Where the due monetary claim does not exceed 500 euros, the court may issue a payment order even without authentic documents attached to the claim, provided that the claim sets out the basis and amount of the debt and indicates evidence by which the truth of the allegations can be verified. This simplified possibility applies only against the principal debtor.

A payment order is issued without a court hearing. The order states that the defendant must, within eight days, or within three days in bill of exchange and check disputes, satisfy the claim together with the costs assessed by the court or file objections to the payment order within the same period. The defendant receives the payment order together with a copy of the claim and attachments.

A payment order may be challenged only by objection. The part of the payment order that is not challenged becomes final. If timely objections are filed, the court assesses whether a preliminary hearing should be scheduled or whether the main hearing can be scheduled immediately. During the preliminary hearing, the parties may present new facts and propose new evidence, and the defendant may raise new objections to the disputed part of the payment order. In the final decision on the merits, the court determines whether the payment order remains fully or partially in force or is cancelled.

The ordinary court procedure begins with the filing of a statement of claim. After receiving a complete claim, the court prepares the case for the main hearing. This preparation includes the preliminary examination of the claim, service of the claim and attachments on the defendant for a mandatory response, the holding of a preliminary hearing and the scheduling of the main hearing.

Within 30 days after receiving a correct and complete claim, the court serves the claim with attachments on the defendant. The defendant is then given 30 days to submit a written response. If the defendant submits a response, the court proceeds to schedule a preliminary hearing. If the defendant does not respond and the conditions for a default-type decision are not met, the court schedules the preliminary hearing after the response period expires.

At the preliminary hearing, the court determines the issues to be discussed, the evidence to be presented, the persons to be summoned and the date and time of the main hearing. The main hearing may be scheduled after the preliminary hearing, and in appropriate cases the court may order the main hearing to be held immediately after the preliminary hearing. After the main hearing is completed, the court closes the hearing and issues its decision within the statutory procedural framework.

A first instance decision becomes final if no appeal is filed within the applicable appeal period. In ordinary civil disputes, the appeal is filed through the first instance court. The first instance court serves the appeal on the opposing party, which may submit a response within eight days, and in commercial disputes within three days. After receiving the response or after the response period expires, the first instance court forwards the appeal, the response and the case file to the second instance court.

The second instance court decides on the appeal in a panel session or, where the conditions are met, after a hearing. The failure of the parties to appear at the second instance hearing does not automatically prevent the court from deciding on the appeal. The appeal court may dismiss the appeal, reject it as unfounded, confirm the first instance decision, amend it or set it aside and return the case for further proceedings.

After a second instance judgment becomes final, a party may seek revision before the Supreme Court of Montenegro only where the statutory conditions are met. Revision is an extraordinary legal remedy and should not be treated as an ordinary appeal. In property disputes involving monetary claims, delivery of things or performance of another obligation, revision is generally not allowed where the value of the disputed part of the final judgment does not exceed 20,000 euros. In commercial disputes, revision is generally not allowed where the value of the disputed part of the final judgment does not exceed 40,000 euros.

Even where ordinary revision is not available, revision may be allowed in specific cases where the legal question is important for legal certainty or the uniform application of law, subject to the statutory thresholds and procedural requirements. The Supreme Court decides within the limits of the permitted grounds for revision, including substantial procedural violations and misapplication of substantive law, and its decision is final within that route.

The small claims procedure applies to monetary claims not exceeding 1,000 euros, while in commercial disputes the small claims threshold is 7,000 euros. The case is considered under simplified procedural rules, while the general rules of civil procedure apply unless special small claims provisions provide otherwise.

Before starting certain small value disputes, the claimant may need to approach the Centre for Alternative Dispute Resolution and attend the first meeting with a mediator where this requirement applies. This does not mean that the creditor must accept settlement, but it may be a procedural step before the court continues with the case.

In small claims proceedings, the court may limit unnecessary procedural complexity and focus on documents, party statements and evidence proportionate to the value of the dispute. The judgment is announced immediately after the end of the main hearing. A judgment or ruling that terminates small claims proceedings may be appealed only for substantial violation of civil procedure rules or misapplication of substantive law. The parties may file an appeal against the first instance judgment within eight days, calculated from publication of the decision or, where the decision is served on the party, from the date of service.

If the debtor does not voluntarily comply with an enforceable court decision or another enforceable document, the creditor may initiate forced enforcement before the competent public enforcement officer. The enforcement route should be chosen according to the debtor’s assets, the type of enforceable document and the practical likelihood of recovery.

In monetary debt cases, enforcement may include seizure and transfer of funds from the debtor’s bank accounts, enforcement against receivables owed to the debtor, seizure and sale of movable property, enforcement against immovable property, enforcement against securities, shares or other property rights. Where enforcement is directed against bank accounts, the public enforcement officer may request account data from the bank, and enforcement against funds in the debtor’s account is implemented through a ban and payment.

Enforcement does not automatically guarantee recovery. Some assets may be exempt or partially exempt from enforcement, and the practical result depends on whether the debtor has identifiable assets in Montenegro, whether other creditors already have priority, whether insolvency proceedings have been opened and whether the chosen enforcement measure is proportionate to the value of the claim.

If the debtor shows signs of insolvency or over-indebtedness, the creditor may consider bankruptcy or reorganization as an alternative recovery route. Under Montenegrin bankruptcy law, bankruptcy proceedings may be opened where the debtor is permanently unable to pay or is over-indebted. A debtor is considered permanently unable to pay if it cannot meet its financial obligations within 45 days from the due date and has completely suspended all payments for 30 continuous days. A debtor is over-indebted if its assets are less than its liabilities, unless the circumstances show that continued business activity can reasonably be expected to satisfy obligations as they fall due.

Bankruptcy proceedings in Montenegro are conducted before the Commercial Court of Montenegro. Bankruptcy may lead to collective settlement of creditors through sale of the debtor’s assets or sale of the debtor as a legal entity. Reorganization may also be used where an adopted reorganization plan allows the debtor’s legal and financial position to be regulated while maintaining business activity and arranging satisfaction of creditors under the plan.

Bankruptcy can also be relevant where the debtor has transferred assets, preferred certain creditors or entered into transactions that harmed the bankruptcy estate. Legal transactions and other legal actions made before the opening of bankruptcy proceedings may be challenged if they disturb equal satisfaction of creditors, damage creditors or place individual creditors in a more favourable position.

In particular, transactions made with the intention of damaging creditors may be challenged if they were concluded or undertaken within five years before the bankruptcy filing, or after the filing, and the counterparty knew of the debtor’s intention. Transactions without compensation or for disproportionately small compensation may also be challenged if they were undertaken within five years before the filing. If such challenge is successful, the returned value may increase the bankruptcy estate available for satisfaction of creditors and payment of bankruptcy costs.

In cross-border cases, the creditor may already have a foreign court judgment or a court settlement that must be used against assets located in Montenegro. A foreign judgment produces legal effect in Montenegro only after recognition by a Montenegrin court. Once recognized, it may be used as a basis for enforcement in Montenegro, provided that the conditions for recognition and enforceability are met.

The application for recognition or declaration of enforceability should be supported by the original foreign judgment or its certified transcript, a certified translation by a court interpreter, a certificate that the judgment is final under the law of the state where it was issued and, where enforcement is requested, a certificate that the judgment is enforceable in that state. A foreign court settlement may also be treated as a foreign judgment where it has such effect under the applicable rules.

Recognition may be refused where the defendant was unable to participate in the foreign proceedings because of procedural irregularities, including lack of proper service or insufficient time to prepare a defence. Recognition may also be refused where the matter falls within exclusive jurisdiction of Montenegro, where the foreign court used jurisdictional grounds not recognized by Montenegrin law for the same type of dispute, where there is already a final Montenegrin judgment or a recognized foreign judgment between the same parties and on the same cause of action, or where recognition would be manifestly contrary to the public order of Montenegro.

For foreign creditors, a separate practical issue is security for costs. If a foreign national or stateless person without domicile in Montenegro starts civil proceedings before a Montenegrin court, the defendant may request security for the costs of proceedings, unless a statutory exception applies. The security is usually provided in money, and failure to deposit it within the court-set deadline may lead to the claim being deemed withdrawn. This risk should be assessed when planning litigation in Montenegro, especially where the creditor is not domiciled in Montenegro and no exemption applies.

If you need support with international debt collection in Montenegro, our team can assist at all key stages of the recovery process: analysis of the debtor and evidence, amicable negotiations, mediation strategy, preparation for court proceedings, payment order assessment, enforcement planning, recognition of foreign judgments and bankruptcy-related recovery options. The most effective route depends on the documents, limitation period, debtor’s assets, solvency and cross-border elements of the case, so each recovery strategy should be built on a legal and practical assessment of the specific debt.

# DEBT COLLECTION AGENCY MONTENEGRO

12.04.2024

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