Debt collection in Germany

Although Germany has the most developed economy in the EU and the time to take legal action is shorter than in other countries, the costs for the procedure are high. This is why also foreign creditors rely on Invenium to recover their debts

Germany is one of the most economically developed nations in the world. Third for volume of trade in dollars and GDP, it is the fifth for purchasing power and the first in Europe. In fact, it has always been considered the economic engine of Europe.

The German economy is expected to grow resiliently this year and the next, thanks to the support of domestic demand. While political tensions at home have seemingly eased, escalating trade tensions with the United States could weaken the foreign trade and therefore the external sector.

Despite this risk, FocusEconomics Consensus Forecast panelists expect the economy to expand 2.1% in 2018, and 1.8%  in 2019.

If we take into consideration the commercial trade, Germany is the third country in the world for both imports and exports.  Precisely, Germany exports the following products to the rest of the world:

  • Vehicles: ($US 257.2 billion) or 17,8% of total exports
  • Machinery: ($245.4 billion)
  • Electronic equipment: ($148.8 billion)
  • Pharmaceuticals ($84.1 billion)
  • Medical and technical equipment: ($72,8 billion)
  • Plastics:  ($ 63,6 billion)
  • Aircraft, spacecraft:  ($41,8 billion)
  • Iron or steel products: ($30,5 billion)
  • Mineral fuels including oil: ($26.8 billion)

In other words, about two-thirds (65.9%) of German exports by value are delivered to other European countries while 18.3% were sold to Asian importers.

Germany incurred the highest trade surpluses with United States ( the export value amounted to $125.9 billion), then with United Kingdom,  France, Austria, Spain, Sweden, United Arab Emirates and Italy.

 

How does Debt collection work in Germany? 

Debt collection in Germany is more simple than in Italy, but in any case we need to proceed step by step: first of all, If a creditor wants to assert his claim against a German debtor, he needs first of all an enforcement order or a sentence.

It is not easy to answer the question whether the sentence will be issued by a German judge or by a foreign judge whose nationality is the creditor, since the answer is to be found in the contractual documentation. If in the documentation (orders, invoices) it has been decided that the jurisdiction is the foreign one (that is the one of which the creditor has the nationality), a trial brought in Germany will probably have a negative result due to the territorial incompetence of the judge. If there is no contractual discipline then the jurisdiction in a trial against a German debtor will automatically be in Germany.

Secondly, documentation and tests are verified; The judge must check and decide whether the creditor’s claims are legitimate. While in Italy, for example, a registered invoice constitutes sufficient proof of credit, this does not happen in Germany. The German judge first checks the validity of the contract, in other words, wants to see the order and its confirmation. It is always advisable – before proceeding with the judgment – that the creditor involves the debtor in a correspondence from which credit recognition or a promise of payment could result.

It often happens that the parties cannot reach an agreement and then the injunction is used. In this case It is not necessary to present any evidence but to make an appeal a simple signature is sufficient, so it is advisable to proceed immediately with the legal action.It is very important not to spend too much time between the onset of credit (expiry of invoices) and the recognition of your rights through a judicial proceeding. Creditors often send up to five reminders to their German debtors. A payment reminder and a letter of formal notice would be completely sufficient; after which the lawyer has to deal with the matter.

As for the costs of the judicial procedure, the “loser pay” rule applies.  However, the creditor must anticipate the costs for court costs and the skills of their lawyer. Judicial and legal costs are governed by specific laws and the amount of costs always depends on the value of the case.

To avoid all this – the costs of legal action and the time despite these are shorter than in other countries – the extrajudicial approach is used.

Invenium, thanks to its consolidated experience in debt collection, is able to assist all foreign creditors who have a credit in Germany.

For further information and to talk to one of our experts contact us or visit our website.