Debt Collection in Yemen

The procedure for debt collection in Yemen begins with a legal, documentary and enforcement-oriented assessment of the debtor. In addition to solvency, business activity, commercial history, available evidence, current court cases, enforcement proceedings and possible objections to the debt, the creditor should determine where the debtor is located, where its assets are situated, whether the obligation is connected with Yemen and whether a Yemeni court has jurisdiction over the dispute.

For a foreign creditor, this preliminary review is especially important because Yemeni procedural rules may link jurisdiction to the debtor’s domicile or residence, property located in Yemen, an obligation created or to be performed in Yemen, the place where a commercial agreement was made or executed, or a court agreed by the parties. The same assessment also helps determine whether the case should begin with documented pre-court communication, a payment order, ordinary court proceedings, enforcement of an existing title, recognition and enforcement of a foreign court decision, or bankruptcy-related measures.

If the debtor has no ongoing court cases or outstanding judgments for debt collection, continues commercial activity and can be contacted through reliable channels, the creditor may first use the out-of-court debt collection stage.

This stage involves out-of-court debt collection in Yemen through documented negotiations with the debtor in order to reach an agreement on payment of the creditor’s claim or another commercially acceptable settlement, such as return of goods, transfer of debt to a third party, exchange of services or goods, provision of security, partial repayment or a structured payment plan.

Communication with the debtor begins after sending a payment notice by mail, email, telephone, instant messenger or another appropriate channel. The file should preserve proof of delivery, the debtor’s responses, settlement proposals, partial payments, undertakings to pay and any express or implied acknowledgement of the creditor’s claim, because these materials may later be relevant for limitation, evidence and court strategy.

In Yemen-related matters, the practical possibility of receiving payment should be assessed at the pre-court stage. Before accepting a settlement or payment schedule, the creditor should verify the proposed bank, payment channel, currency, sanctions exposure of the debtor or intermediary, and the possibility of receiving funds through a compliant route. Yemen’s financial sector continues to face restrictions in international transactions, liquidity and banking infrastructure, so settlement terms should clearly define the payment method, deadlines, documentary confirmation of payment and consequences of default.

If voluntary payment is not achieved, the debtor disputes the claim, the evidence shows that negotiations are unsuitable, or there is a risk of asset dissipation or limitation issues, the creditor should proceed to collection through the courts.

Before initiating judicial collection, the creditor should assess the limitation period for debt collection in Yemen according to the legal nature of the claim, the due date of the obligation and the documents confirming the debt. Yemeni civil law contains different time-bar rules for different types of claims and also regulates the start, suspension and interruption of the period. The period generally begins from the date when the debt becomes due or from the date when a suspensive condition is fulfilled.

The running of the limitation period may be suspended when a material or moral obstacle prevents the creditor from claiming the right. It may also be interrupted by a judicial claim, even before a court that lacks jurisdiction, by an official demand for payment, seizure of the debtor’s property, filing the creditor’s claim in bankruptcy or distribution proceedings, notification of the debtor during pending litigation, or express or implied acknowledgement of the creditor’s right by the debtor. After interruption, the previous period is disregarded and a new period of the same duration begins from the end of the effect that caused the interruption.

The expiry of the relevant period is applied by the court only when the debtor invokes it. The debtor may rely on this defence at any stage of the proceedings. If the debtor voluntarily pays after the period has expired, such payment is treated as performance of the obligation and is not recovered merely because the time-bar defence was available.

Yemeni law provides for judicial debt collection in Yemen through the ordinary court procedure and by issuing a payment order.

The ordinary judicial procedure begins with filing a claim with the competent court. The claim is submitted in writing and should include the claimant’s details, the respondent’s details, the date of filing, the court, a chosen address in the city of the court if the claimant has no address there, a concise but complete statement of the claim, the factual basis, the evidence, the claimant’s demands and the signature of the claimant or attorney with the relevant power of attorney details. The clerk reviews the documents, records the claim, assigns a hearing date and gives the original claim for notification of the defendant. If the claim is not notified to the respondent within 30 days from filing, it is treated as if it had not been filed.

After notification, the defendant must submit a written or oral response to the claim at the scheduled hearing. In the case of an oral response, the secretary enters it into the minutes, which the defendant signs, and attaches it to the case file. The period for appearing in court is 10 days, but if the defendant is outside Yemen, an additional 60 days is added. The parties or their representatives must appear in court at the appointed time, by 8:00 a.m., waiting to be called by name.

If both parties fail to appear, the court adjourns the case for 60 days. If the plaintiff does not request a hearing within the specified period, the case is dismissed. If the plaintiff is present and the defendant, despite due notice, fails to appear without good cause, the court shall issue a second notice and may impose a fine.

If the defendant fails to appear again, the court shall appoint a representative from among his relatives up to the third degree, an attorney, or another person at the discretion of the court, to conduct the case on behalf of the defendant. If the defendant appears, the representative shall be removed unless the defendant authorizes him.

At the hearing, the court shall accept documents not previously submitted with the statement of claim and the answer thereto and shall bring their contents to the attention of the other party. If the claim is in order, the judge shall require the defendant to answer all the facts, stating specifically what he admits and what he denies. The court shall record the admitted and contested points and shall instruct the plaintiff to prove the defendant’s denials by hearing his arguments and witnesses.

If the defendant has admitted, denied, or remained silent, and the plaintiff has proven the facts denied by the defendant, or if the plaintiff has demanded an oath from the defendant and the defendant has refused, the court shall rule in favor of the plaintiff. If the plaintiff has failed to provide evidence or has not demanded an oath, or if the defendant has taken an oath, the claim shall be dismissed.

The court shall grant a stay if a party requests time to produce a significant document, to respond to a document produced, or to call witnesses.

The parties may agree to suspend the proceedings for up to one year to obtain evidence that has not been provided previously, if they present compelling reasons to the court. In this case, the court may set a period sufficient to suspend the case.

When the court finds the evidence provided sufficient to make a decision, the court concludes the hearing and makes a decision.

The payment order procedure is used to collect a debt in a clearly defined amount where the claim is due and supported by written documents. Before applying for the order, the creditor must send the debtor a demand for payment. If the debtor does not comply with it within five days, the creditor may file an application with the competent court for a payment order.

The application should be accompanied by the debt instrument, documents confirming the claim and proof that the demand for payment was served on the debtor. It should also identify the creditor, the debtor, their addresses, the factual basis of the request and the creditor’s chosen address in the city of the court if the creditor has no local address there.

After the application is filed, the court issues an order for payment within a week. If the court cannot satisfy the application, a hearing is scheduled.

The application and the order must be served on the debtor within three months from the date of issuance of the order, otherwise it loses force. The debtor may object to the order within 10 days of receiving it. The objection is considered in the same manner as a claim. If the defendant fails to file an objection within the prescribed period, the payment order becomes a final decision.

The decision of the court of first instance may be appealed to the court of appeal within 60 days from the date of notification of the contested decision. However, appeals against decisions of the courts of first instance are not allowed if the amount of the claim is less than 100,000 Yemeni riyals in a civil case or 300,000 Yemeni riyals in a commercial case. The decision of the court of appeal may be challenged before the Supreme Court of Yemen within 60 days from the date of notification of the contested decision. The decision of the Supreme Court is final and cannot be further appealed.

If the creditor already has a foreign court judgment or another foreign enforceable title, recognition and enforcement of foreign court decisions in Yemen may become a separate recovery route. Under Yemeni civil enforcement rules, a foreign enforceable title is enforced through a request submitted to the court specialized in execution. The title must be final and enforceable under the law of the country where it was issued, must come from a competent court or judicial authority, must not violate Sharia, public morals or public order in Yemen, must not contradict a previous Yemeni judgment, and must satisfy the reciprocity condition. The parties in the foreign proceedings must also have been properly summoned and heard in the case.

After the court decision comes into legal force, the creditor should initiate enforcement proceedings in Yemen before the competent enforcement court. The enforcement court is generally connected with the debtor’s residence, the place where the debtor’s money or other enforceable assets are located, or the court that first examined the dispute if the debtor has no visible property or specified residence. Enforcement is carried out under the authority of the enforcement judge, and the debtor must be notified of the enforceable title and ordered to comply before compulsory enforcement begins.

In the context of enforcement, the creditor’s claims may be satisfied by seizing and writing off funds from the debtor’s accounts, seizing movable and immovable property and selling it, seizing securities, seizing company shares, and seizing the debtor’s property or financial rights held by third parties. For a company debtor, practical enforcement analysis should include bank accounts, receivables, goods, shares, movable assets, real estate, contractual claims against third parties and assets located in the jurisdiction of a competent enforcement court.

After the court decision comes into legal force, the creditor should initiate the procedure for enforcement. The decision can be presented for enforcement within 5 years. In the context of the enforcement of a court decision, the creditor’s claims may be satisfied by seizing and writing off funds from the debtor’s accounts; seizing the movable and immovable property of the debtor with their subsequent sale; seizing and confiscating securities; seizing and confiscating company shares, seizing and confiscating the debtor’s property held by third parties.

An alternative option for collecting a debt from a company or an entrepreneur is the debtor’s bankruptcy procedure in Yemen. According to the Commercial Law of Yemen, the creditor has the right to initiate this procedure if the debtor’s commercial activity is disrupted and the debtor has stopped paying debts. This route is relevant where the debtor’s financial condition shows insolvency indicators, ordinary recovery may not lead to full payment, and the creditor’s goal is to participate in collective satisfaction from the debtor’s estate.

After bankruptcy is opened, the debtor’s assets are gathered and administered for the benefit of creditors under the applicable bankruptcy framework. The creditor’s position depends on the evidence of the debt, the ranking of the claim, the existence of security, the value of the bankruptcy estate, and whether the debtor made transactions that reduced the estate before the bankruptcy decision.

If the debtor’s assets are insufficient to fully satisfy creditors’ claims, it is possible to challenge transactions made with the intent to harm creditors or transactions falling within the legally relevant period after cessation of payments and before the bankruptcy decision. Such transactions or actions include, in particular: gifts, with the exception of small gifts; early repayment of debts that are not yet due; repayment of debts in a manner not agreed upon by the parties; provision of security for pre-existing debts; and any transaction that causes damage to creditors where the debtor’s counterparty knew about the cessation of payments.

Claims for the cancellation of these actions or transactions may be filed within one year from the date of the bankruptcy decision. As a result of cancellation, the value lost through such transactions may be returned to the debtor’s estate, increasing the liquidation estate available to satisfy creditors’ claims and cover the costs of the bankruptcy procedure.

If you have any questions or need support with international debt collection in Yemen, our team can assist at all key stages of the matter: preliminary debtor and document analysis, pre-court communication, settlement negotiations, limitation assessment, selection of the appropriate court route, preparation for a payment order or ordinary proceedings, enforcement strategy, foreign judgment enforcement analysis and bankruptcy-related recovery options. This approach helps the creditor choose a legally grounded and practically enforceable recovery route for a Yemen-related debt claim.

# DEBT COLLECTION AGENCY YEMEN

08.11.2024

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