Lawyer Monthly - June 2022

83 JUN 2022 | WWW.LAWYER-MONTHLY.COM EXPERT INSIGHT alternative to court proceedings by the intervention of a similar authority, e.g. arbitration. Reputational aspects play an important role in whether the path of out-of-court settlement is followed by the parties, especially in the recovery of high-value debts. Our firm’s standard procedure for debt recovery is to send a letter of claim, which is the first attempt to resolve the dispute. In many cases, the letter itself is sufficient for the debtor to repay the debt. This option is the most economically advantageous for the creditor and, under Czech law, a procedural requirement for a successful claim for reimbursement of court costs (including the court fee and legal representation costs). It has to be delivered to the debtor at least 7 days before the action is brought before the court. Prior to the commencement of court proceedings, but also during the proceedings, in an attempt to find a solution to the situation, the parties may agree to resolve the matter through mediation with their choice of independent third party assisting them. In some cases, the court may also order the parties to meet with a mediator. Although the meeting with the mediator ordered by the court is not obligatory and the disputing parties cannot be forced to do so, it may have an impact on the reimbursing costs of the court proceedings in the latter stage of court proceedings. The costs associated with mediation are borne by the parties individually. However, with the mediator’s assistance, many disputes can be resolved faster and amicably. Such negotiations may result in agreements on a repayment schedule, or a partial waiver of the debt accessories as an expression of the creditor’s good will, motivating the debtor to repay the debt at least in the original amount, without accessories. The parties may, of course, conclude out-of-court settlement agreements without the mediator’s involvement, or they may turn to a notary who will draw up the contents of the agreement in the form of a notarial deed with a clause of direct enforceability. If the debtor is willing to negotiate but is unable to pay the debt at the time of the negotiation, our law firm recommends to at least conclude an agreement in which the debtor acknowledges the debt. Such a procedure has a significant impact on the statute of limitations and also strengthens the creditor’s position in any dispute. Are there any particularly common challenges that are encountered in the course of recovery? In the case of high-value debts, it is often the case that debtors, unable to repay the debts to their creditors, opt for the liquidation of the company or insolvency proceedings in order to minimise debt repayments. According to recent long-term statistics of insolvency proceedings in Czechia, a creditor obtains on average less than 20% of the original amount of the receivable if the insolvency ends up with bankruptcy – and in case of debt relief, less than 60% of the original amount. Aforementioned consumer disputes are another problematic part. The strict case law of the Constitutional Court and other higher courts in Czechia, even retroactively, places emphasis on the assessment of the debtor’s creditworthiness or on certain credit terms, for example. It is ideal to have all communication with the counterparty in writing.

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