Legal procedures for enforcing pecuniary claims

Creditors in Bosnia and Herzegovina have two options to commence legal action. The creditor can either file a lawsuit or start Enforcement procedure on the basis of the authentic instrument.

Enforcement procedure on the basis of the authentic instrument

Types of authentic instrument are prescribed by law. The most common authentic instruments are cheques and bills of exchange. The enforcement procedure on the basis of the authentic instrument in Bosnia and Herzegovina is recommended only when it is expected that the debtor will not object to payment. The court issues writ of execution automatically and services it to the debtor. If the debtor doesn't object to the writ of execution within eight days, the writ of execution becomes final and enforceable. This type of procedure in practice takes up to 60 days. If the debtor objects to the writ of execution in time, the court will set aside the writ of execution and pass the file to the competent court for litigation.
In connection to litigation, the creditor will have to prepare the complaint and support it with full documentation about the claim (invoices, contract, proof of delivery etc.). If the complaint is not submitted in time or the court fee for legal action is not settled in time, the court will reject creditor's application.
If debtor's objection against the writ of execution was too general (e.g. the debtor claims to have settled all debts towards the creditor or that they have no knowledge of creditor's company), the creditor can file a motion for preliminary order for freezing of debtor's assets for the time of the litigation.

Lawsuit

The creditor can also file a lawsuit in Bosnia and Herzegovina  without having to institute the Enforcement procedure on the basis of the authentic instrument.
The court must service the lawsuit to defendant in 30 days.
Unless the defendant files answer to lawsuit within 30 days, the court will issue a default judgement in plaintiffs favour, on condition that all proofs support plaintiff's claim. If the defendant files a response to the lawsuit, the court will continue with the litigation procedure. The court must service the defendant's answer to the plaintiff in 30 days. Usually several court hearings are necessary before the court renders a judgement.
The court always asks the parties to try to solve the dispute by mediation. The creditor can also refuse to attend the mediation. The parties can always conclude the court settlement at the court hearing.
The judgement must be issued in 30 days as from the last court hearing. Both parties have 15 or 30 days (in Republic of Srpska only 15 days and in Federation of BiH 30 days) to appeal against the judgement. If none of both parties appeal, the judgement becomes final and enforceable.
Courts accept only documentation in domestic language; therefore all documents must be translated into one of the three official languages (Bosnian, Serbian or Croatian). Translation must be made by the court certified translators.

Protective measures

The creditor can also avail him of protective measures (e.g. freezing of debtor's assets) such as preliminary order and interim order. Debtor's objections and appeals against protective measures don't stay the proceedings.

Preliminary order

In case of the enforcement procedure as well as in civil procedure creditor can demand from the court to issue a preliminary order. The creditor must show that there is a probable risk that enforcement of the claim will otherwise be impossible or rendered considerably more difficult. It is assumed that such risk exists if the content of debtor's objection against the writ of execution was to general (e.g. if the debtor claims that they have settled all claims towards the creditor or that he never heard of the creditor's company).
The preliminary order states the amount of the secured claim, with interest and costs, the security ordered and the period of time for which it is allowed.
A preliminary order may last no longer than 30 days from the occurrence of the conditions for enforcement, meaning that in the period of eight days the creditor must start the enforcement procedure otherwise they will lose the benefits of the preliminary order. The creditor can ask the court for the duration of the preliminary order to be extended, if the court decision hasn’t became enforceable yet.

Interim order

The application for interim order can be submitted to the court prior to filing a lawsuit or in the course of lawsuit. If an order is issued before the submission of an action, the court provides the creditor with a deadline by which it must commence legal action. If the legal action is not started by that date, the court will halt the proceedings.
The court issues the interim order only if the creditor can demonstrate:

1. the likelihood of the existence of a claim or that a claim against the debtor will arise,
2. the risk that enforcement of the claim will be impossible or rendered considerably more difficult (due to disposal, concealment or other use of the property by the debtor).

If a creditor can demonstrate that interim order would cause to the debtor only insignificant damage, the creditor doesn't have to prove the risk.
The period of validity of an interim order is determined by the court. If the interim order is issued before the submission of an action or the commencement of another procedure, or if an order is issued to secure a claim that has not yet arisen, the court provides the creditor with a deadline by which it must commence a procedure or submit an action.
Legal costs consist of court fee, attorney fee, translation costs, costs in connection with witnesses or appointing an expert. The losing party must reimburse legal costs to the party who won the lawsuit.

Insolvency procedures

An application for the opening of the bankruptcy procedure can be filed by the debtor or by the creditor. The legal representative of the debtor is obligated to file for bankruptcy if the debtor is not paying due debts for more than 30 days.

Period for lodging the claim in bankruptcy procedure is 1 month and late applications are accepted very rarely (only on first hearings). Trustee examines lodged claims in 30-40 days from the expiry of deadline for lodging the claim and publishes a list of lodged claims after the end of first hearing. If the claim is disputed, the creditor must file a lawsuit within one month, otherwise the creditor automatically loses right to payment.

1. allow the bankruptcy debtor to retain all or part of its property in order for the business operations of the bankruptcy debtor to continue,
2. transfer all or part of the bankruptcy debtor’s property to one or more existing legal entities or legal entities that will be created,
3. merge the bankruptcy debtor with one or more legal entities,
4. sell all or a part of the bankruptcy debtor’s property, subject to or free of any lien,
5. distribute all or part of the bankruptcy debtor’s property among the creditors,
6. convert debt to equity,
7. determine the manner of satisfying the bankruptcy creditors,
8. satisfy or modify the rights of secured creditors,
9. reduce or postpone payment of the bankruptcy debtor’s liabilities.

The trustee cashes the debtor’s assets by selling debtor’s property and collecting debtor’s claim. Bankruptcy procedures tend to last several years.

Ordinary claims are settled only after the priority claims (wages, taxes, and secured creditors) are settled. Ordinary creditors receive equal percentage of the dividend. Some claims of the lower range (delay interests, costs in connection with bankruptcy etc.) are settled only after the ordinary claims are settled in full (which happens very rarely).
The bankruptcy procedure ends with debtor’s company being cancelled from court register.

Limitation period

General limitation period for commercial claims in Bosnia and Herzegovina is 3 years.