Debt Collection in Palestine

The process of debt collection in Palestine begins with a legal and factual assessment of the debtor, the evidence and the connection of the dispute with Palestinian jurisdiction. At this stage, it is important to determine whether the debtor is a Palestinian company, trader, individual, foreign entity with a branch or representative in Palestine, or a non-resident debtor whose obligation arose, was performed or should be performed in Palestine.

The initial analysis should also cover the debtor’s solvency, line of business, corporate history, available assets, movable property, receivables, bank accounts, immovable property, ongoing court cases, existing judgments, enforcement proceedings and possible objections to the claim. This assessment determines whether the creditor should start with out-of-court negotiations, ordinary court proceedings, simplified proceedings, direct execution of a qualifying debt instrument, conservatory attachment, enforcement of a foreign judgment, or bankruptcy-related recovery measures.

Before selecting the recovery route, the creditor should collect and organize the documents proving the debt. In commercial cases, these may include the contract, invoices, delivery documents, correspondence, account statements, payment history, written acknowledgement of debt, cheques, bills of exchange, promissory notes, security documents, guarantees, information about the debtor’s address and information about assets or third parties owing money to the debtor.

If the debtor has no ongoing court cases or outstanding judgments on debt collection, and is actively engaged in commercial activities, the creditor may begin with out-of-court debt collection. This stage is based on documented negotiations with the debtor and its decision makers in order to reach a lawful settlement of the creditor’s claim, which may include payment of the debt, a repayment schedule, return of goods, assignment of the debt to a third party, set-off, exchange of services or goods, or another commercially reasonable settlement option.

Interaction with the debtor usually begins after sending a formal notice by mail, email, phone, messengers or another available communication channel. All communications should be documented because they may later help confirm the debtor’s position, identify the decision makers, record partial acknowledgement of the debt, support a settlement, or prepare the case for judicial recovery. If the out-of-court stage does not bring the expected result, or if the initial analysis shows that voluntary recovery is unsuitable, the creditor should proceed to collection through the courts or another legally available recovery route.

Before initiating judicial debt collection, the creditor should determine the applicable limitation period. In commercial matters, if a shorter period is not established by law, the right to bring a claim is barred after 10 years. The right to rely on judgments that have acquired res judicata effect is subject to a 15-year period.

Special rules apply to commercial paper. Claims arising from a bill of exchange against the acceptor are barred after 5 years from maturity. Claims of the holder against the drawer or endorsers are barred after 2 years from the date of a timely protest or from maturity where the bill contains a no-protest clause. Claims between endorsers, or against the drawer, are barred after 1 year from the date on which the endorser paid the bill or from the date when proceedings were brought against him.

For cheques, the claim of the cheque holder against the drawee bank is barred after 5 years from the expiry of the period for presenting the cheque for payment. Recourse claims of the holder against endorsers, the drawer and other liable parties are barred after 6 months from the expiry of the presentation period, and recourse claims between cheque obligors are barred after 6 months from the date of payment or from the date when proceedings were brought. Filing a case, obtaining a judgment, written acknowledgement of the debt, partial payment or filing a qualifying enforcement request may affect the calculation of the limitation period according to the nature of the claim and the instrument used.

Palestinian law provides for judicial debt collection in ordinary proceedings and simplified proceedings. The correct procedure depends on the amount of the claim, the nature of the evidence, the debtor’s position, the need for interim protection and whether the creditor holds a document that can be used directly in enforcement.

Cases whose value does not exceed 10,000 Jordanian dinars or their equivalent in legal currency are generally heard by the Magistrates’ Courts. Cases outside the jurisdiction of the Magistrates’ Courts are heard by the Courts of First Instance. If the claim is connected with a foreign or non-resident debtor, jurisdiction should be assessed through the statutory connecting factors, including domicile, selected domicile, assets in Palestine, obligations created, performed or to be performed in Palestine, bankruptcy declared in Palestine, or the presence of another defendant with domicile or residence in Palestine.

The ordinary judicial process begins with the filing of a statement of claim. The claim should identify the court, the parties, their addresses and representatives, the subject matter, the value of the claim where possible, the facts and legal grounds, the date when the claim arose and the relief requested. Copies of the claim and supporting documents should be filed for the defendant, and the claim is registered after payment of the court fee. Claims before the Courts of First Instance, Courts of Appeal and the Supreme Court / Court of Cassation require the participation of a practicing lawyer.

The defendant must file a written response with the court registry within fifteen days from the date of service of the claim, enclosing documents supporting the defense or identifying documents that can be obtained later. If the defendant fails to file a response after proper service, the trial may proceed according to the service rules. The court may also allow the defendant to file a written response if he appears at the first hearing of the case.

On the day appointed for the hearing of the case, if the defendant fails to appear and the claim has been properly served on him, the court may decide the case unilaterally. If the defendant has attended one of the court hearings and is then absent without good cause, the decision made against him is treated as made in his presence and remains subject to appeal.

At the first hearing after the exchange of written statements, the court should determine the points of agreement and disagreement, record them in the minutes and require each party to identify the evidence it intends to present on the disputed issues. The court may set hearings to examine evidence and may postpone the case where justified, but repeated postponement for the same reason requires the court to be satisfied that it is necessary. After examining the evidence and hearing the parties, the court may issue its decision immediately or at a subsequent hearing.

A useful court strategy in debt cases may be conservatory attachment. A creditor may request attachment of the debtor’s assets before filing the claim, at the time of filing or during the proceedings, where the request is supported by documents and the debt is known, due and unconditional. The court may require security to protect the debtor from damage if the attachment later proves unjustified. If the attachment is ordered before the claim is filed, the creditor must file the claim within eight days from the attachment decision; otherwise, the attachment decision is treated as ineffective.

The simplified proceedings route is available where the creditor’s right is proven in writing and the request is limited to recovery of a determined and due debt, or to a specific movable asset identified by type and amount. The statement of claim should be marked as simplified proceedings. The plaintiff must notify the defendant to perform the claimed right fifteen days before filing the claim, and this notice must be attached to the statement of claim.

The court sets a hearing for the simplified claim within fifteen days from the filing date and notifies the parties. If the defendant fails to appear despite notification, the plaintiff is required to prove the claim and the court may decide the case. If the court finds that the claim cannot be granted at that stage, it sets another hearing and notifies the defendant. If the defendant appears and admits part of the claim, the court may immediately rule on the admitted part with enforceability and then examine the evidence on the remaining part according to the ordinary procedure.

The decision of the Magistrates’ Court may be appealed to the Court of First Instance, and the decision of the Court of First Instance may be appealed to the Court of Appeal. The period for filing an appeal is thirty days unless the law provides otherwise. Filing an appeal generally suspends execution of the appealed judgment or decision until the appeal is decided, except where expedited execution is provided by law or ordered in the judgment or decision. The appellate court may also take conservatory measures based on the appealed judgment or decision.

The decision of the Court of Appeal may be challenged before the Supreme Court / Court of Cassation. The period for filing a cassation appeal is forty days. Filing a cassation appeal does not suspend enforcement of the contested decision unless the court orders otherwise, with or without security, at the request of the cassation appellant. Decisions of the Supreme Court / Court of Cassation are final and are not subject to further appeal.

A separate practical route may be available where the creditor holds a due and quantified monetary debt confirmed by a private deed, a notarized deed or negotiable commercial paper capable of endorsement. In this situation, the creditor may use direct execution by submitting the original debt instrument to the Enforcement Department.

The Enforcement Department notifies the debtor and requires payment or objections within seven days from service. If the debtor objects to a debt based on a private deed, the creditor must bring simplified proceedings before the competent court to prove the disputed debt, and execution is suspended unless the court orders continuation. If the debt is based on a notarized deed or negotiable commercial paper capable of endorsement, the objection does not automatically prevent execution, unless the competent court orders a stay. This route is especially important where the creditor holds a cheque, bill of exchange, promissory note or notarized acknowledgement of debt and wants to avoid a full ordinary lawsuit at the first stage.

For international creditors, recognition and enforcement of foreign judgments may become the central recovery route if the creditor already has a final judgment, decision or order issued outside Palestine and the debtor or enforceable assets are located in Palestine. A foreign judgment may be enforced through a claim before the Court of First Instance in the district where enforcement is sought, provided that the judgment is duly certified and the statutory enforcement conditions are met.

The Palestinian court examines reciprocity, the jurisdiction of the foreign court according to its rules of international jurisdiction, finality of the foreign judgment, absence of an earlier conflicting Palestinian judgment, and compliance with Palestinian law, public order and public morals. Foreign arbitral awards may also be enforced under the same framework for foreign judgments, provided that the award concerns a matter that may be resolved by arbitration under Palestinian arbitration law.

Once the judgment or another enforceable title has entered into force, the creditor must initiate enforcement proceedings through the competent Enforcement Department. Enforcement is carried out by the Enforcement Department under the supervision and direction of the enforcement judge. In commercial matters, the right to rely on judgments that have acquired res judicata effect is subject to a 15-year period.

Compulsory enforcement is generally preceded by service of a copy of the enforceable title on the debtor together with a payment notice. The debtor is required to perform the obligation within seven days from service, or within one day where the enforceable title concerns delivery of items that may deteriorate or be lost. Where there is a risk of disposal, concealment, dissipation or reduction of the assets, the enforcement judge may order attachment of movable or immovable property before expiry of the notice period.

Territorial jurisdiction of the Enforcement Department depends on the asset and enforcement measure. It may be connected with the location of movable property, the location of the third party holding assets or owing money to the debtor, or the location of immovable property to be attached or sold. Enforcement usually begins with the debtor’s cash and rights held by third parties; if these are insufficient, enforcement may proceed against movable and immovable property.

The creditor’s claims may be satisfied by attaching money, receivables, bank funds, movable property, immovable property, securities, company shares and other enforceable assets of the debtor. Palestinian enforcement law also protects certain exempt assets, including basic household items, necessary food for the debtor and family, the debtor’s family home and land to the extent necessary for living, and tools, books, equipment, livestock, seeds and fertilizers needed for the debtor’s profession or farming activity within the statutory limits.

An additional option for collecting debt from companies and merchants is bankruptcy. Under the Palestinian Commercial Law, a trader is considered bankrupt if he stops paying commercial debts or maintains financial credit only by means that are clearly unlawful. Bankruptcy is declared by a judgment of the Court of First Instance where the main centre of the commercial enterprise is located, and the case may be filed by the debtor, by one or more creditors, or in certain situations initiated by the court.

A debtor who has stopped payment must file for bankruptcy within twenty days from the date of cessation of payment and submit a detailed balance sheet. Creditors may file a bankruptcy petition, and in urgent cases, such as closure of the business, flight of the trader or concealment of an important part of assets, the court may consider protective measures. The court declaring bankruptcy has jurisdiction over disputes arising from bankruptcy rules.

From the date of the bankruptcy judgment, the bankrupt debtor is deprived of the administration of assets, including assets acquired during bankruptcy, and the administration passes to the bankruptcy trustees. Ordinary individual proceedings by unsecured creditors and creditors with general privileges are stopped, and claims are pursued through the bankruptcy estate. The bankruptcy judgment also accelerates unmatured debts owed by the bankrupt debtor and stops the accrual of interest on unsecured debts as against the estate.

If the debtor’s assets are insufficient to satisfy creditors, the bankruptcy estate may challenge certain transactions made before or after cessation of payment. The court must determine the date of cessation of payment, and this date may be moved back, but not more than eighteen months before the bankruptcy judgment.

The following transactions are automatically void against the body of creditors if made after the date of cessation of payment or within twenty days before that date: gratuitous acts and gifts, except customary small gifts; payment of debts before maturity; payment of due monetary debts by means other than money, bills of exchange, promissory notes or transfers; and creation of a mortgage, real-estate security or pledge over the debtor’s property to secure a previously existing debt.

Other payments of due debts and other transactions made by the debtor after cessation of payment and before the bankruptcy judgment may be annulled if the person receiving payment or contracting with the debtor knew about the cessation of payment. Mortgage and security registrations may also be affected where they are made after the bankruptcy judgment, or after cessation of payment or within twenty days before it, if the delay between creation and registration exceeded fifteen days and harmed creditors.

Claims to annul the transactions referred to in Articles 333, 334 and 335 of the Commercial Law are barred after eighteen months from the bankruptcy declaration. If the relevant transactions are annulled, restitution claims may allow assets or value lost by the debtor to be returned to the estate, increasing the funds available to satisfy creditors’ claims and cover bankruptcy costs.

If you need support with debt collection in Palestine, Grandliga can assist at all stages of the recovery process: debtor and document analysis, assessment of Palestinian jurisdiction, out-of-court negotiations, preparation of a formal demand, selection between ordinary proceedings, simplified proceedings and direct execution, conservatory attachment, judicial debt collection, recognition and enforcement of foreign judgments or arbitral awards, enforcement proceedings, and bankruptcy-related recovery measures.

The appropriate strategy should be selected after reviewing the contract, invoices, correspondence, payment history, debtor status, limitation period, available assets, enforceable instruments and the procedural stage of the claim.

# DEBT COLLECTION AGENCY PALESTINE

30.10.2024

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