Debt collection litigation in Armenia

What are the main stages of debt collection litigation in Armenia?

The main steps to go through in a debt collection litigation are as follows:

  • Filing of the claim /the decision to accept a claim for examination is made within 7 days after filing/

  • Pre-trial stage /reasonable time/

  • Trial stage /reasonable time/

  • Deliberation /15 days/

  • One month for the judgment to enter into force unless an appeal is lodged

  • Judgments are subject to appeal to the Civil Court of Appeals within 1 month after the announcement

  • Examination of the appeal by the Civil Court of Appeals (reasonable time but no more than within 3 months after accepting an appeal for examination)

  • Deliberation by the Civil Court of Appeals (15 days)

  • Decisions of the Civil Court of Appeals are subject to appeal to the Court of Cassation within 1 month after its announcement 

  • Execution of the judgment by the Compulsory Enforcement Service. 

What is the statute of limitations?

The general period of limitation is 3 years. Even though a claim can still be filed after the passage of this period, it will be struck out if the defense points out that the statute of limitations had passed. The defense can do that until the court decides to allocate the burden of proof.

How much are the court fees?

The court fees are as follows:

  • 2% of the claim amount for a monetary claim

  • AMD 4000 for non-monetary claims

  • 3% of the appeal amount for an appeal against a monetary judgment

  • AMD 10 000 for an appeal against a non-monetary judgment

  • AMD 100 000 for a bankruptcy claim against an individual

  • AMD 500 000 for a bankruptcy claim against a legal person

If the claim is granted by the court, the loser will have to pay the winner’s costs and disbursements.

 

How can the respondent’s solvency be checked?

It is possible to check beforehand if the respondent owns any real estate, vehicles or company shares. Information about real estate owned by the respondent can be obtained from the Cadastre Committee (Real Estate Agency) by a licensed advocate (attorney). Bank account information or credit reports cannot be obtained without a court decision.

If the respondent is married, it may be useful to obtain information not only about the respondent in question but also about his or her spouse.

It is worth noting that an individual's last shelter cannot be seized if its value does not exceed AMD 4 900 000. If the value of such property exceeds AMD 4 900 000, only the excess amount will be seized after its sale and the remainder will be returned to the owner. 


This safeguard clause applies to enforcement proceedings instituted after 28 February 2017. It does not extend, however, to collaterals or cases when alimony, compensation for loss of life or personal injury need to be collected. 

 

What can be done to prevent the respondent from disposing of its assets?

By motion of a plaintiff, the court can issue a freezing injunction which will prevent the respondent from disposing of its assets. A motion for a freezing injunction can be submitted either with the claim or at any later stage until the end of the trial. When the motion is submitted with the claim, the decision is made within 7 days following the receipt of the claim. When the motion is submitted at a later stage, the decision is made not later than the following day. If the plaintiff’s motion for a freezing injunction is granted, the court will immediately send the writ of execution to the compulsory enforcement service for execution.

 

What is the basis for the commencement of involuntary bankruptcy proceedings?

A legal entity can be declared bankrupt if the default on its monetary obligations exceeds AMD 1 million and lasts 60 calendar days or more. In the case of involuntary bankruptcy actual insolvency of the debtor is irrelevant.

 

What effect can bankruptcy have on the collection?

Following a bankruptcy judgment, the distribution of the proceeds of the estate in liquidation is done in accordance with the rank they have on the list of creditors.

The debtor’s bankruptcy can open up the possibility of avoidance actions aimed at recovering the assets lost as a result of undervalued or preferential transactions that took place within the suspect period (up to 3-5 years prior).

Who can be a representative in a court?

Legal representation can be carried out by licensed advocates (attorneys, barristers, solicitors), including accredited foreign advocates.

Governing bodies or employees of an organization, as well as shareholders who hold shares representing more than 20% of the common stock, can act as representatives.

Close relatives can act as representatives if they perform that role free of charge.

Having a representative in the court does not deprive a citizen of the right to participate in the case in person.

How long does the procedure take?

There is no fixed time-limit for a trial in standard debt collection litigation. The rule of thumb is that cases must be tried within a reasonable time. The length of the proceedings depends on the complexity of the case, the workload of the judge, the behavior of parties and unexpected circumstances that can affect the procedure. Both the pre-trial and trial stages can consist of a number of hearings which are normally convened 1-3 months apart.

The court must set the date of the first pre-trial hearing within three days after an answer to the claim has been filed or the two-week time-limit for filing the answer has passed (Article 166 of the Code of Civil Procedure).

The first pre-trial hearing must be convened within 30 days following the decision to that effect. However, this timeline is often breached due to the workload of judges.

How are court decisions enforced?

After the court decision enters into force, it can be enforced by the RA Compulsory Enforcement Service. The claimant can request enforcement of the court decision within one year after its entry into force. This time-limit can be restored if the claimant shows good reason for missing it. To initiate enforcement proceedings, the claimant needs to request a writ of execution which the court directly sends to the Compulsory Enforcement Service.

After a bailiff (enforcement officer) institutes enforcement proceeding, the assets of the respondent, corresponding to the amount of the claim, are seized.  Real property is sold to the highest bidder in a public auction. The starting price of real property in an auction will be equal to 75% of its market value as evaluated by an expert. If no bid is placed within 10 days of the auction session, the starting price is lowed by 10 percent. This continues until the property is sold.

As a general rule, enforcement proceedings must be completed within 2 months. The actual length of the proceedings, however, may significantly defer in each individual case.

Special (simplified) trial procedures

Remote trial proceedings: The court can, with the consent of the plaintiff, initiate remote trial proceedings if the notified respondent has not appeared in court and has not submitted a request to continue the trial in his absence.

Simplified proceedings: The court initiates simplified proceedings if the amount of the claim does not exceed AMD 2 million. In such a case, the court adjudicates the case without convening a hearing.

Expedited trial proceedings: The court can initiate expedited trial proceedings in certain types of disputes (e.g. when the claim is based on an uncontested transaction) if there is no need to question the participants, witnesses, expert witnesses, examine evidence on the spot or issue special court orders. The types of cases that qualify for expedited trial proceedings are when the amount of the claim does not exceed AMD 50 thousand,  a claim for alimony has been made, the claim is based on a written contract and defendant does not dispute the validity of that contract, if the parties notified the court in writing about their willingness not to take part in the hearing, there is an agreement among the participants to have expedited trial, the facts in the case are undisputed, and the court only needs to consider questions of law or when the respondent has accepted the claim. In such a case, the court sets the date for delivering its judgment which must be within 15 days after making a decision on expedited trial proceedings.

Payment order proceedings: The claimant can initiate payment order proceedings when the amount of the claim is certain: it is set by a mutual agreement of the parties or can be accurately ascertained on the bases of law or contract. When the court receives a request for a payment order, it has 2 weeks either to grant the request or reject it. If the request is granted, it is sent to the respondent the following day. The latter has 2 weeks to object or make a payment of the specified amount. If the respondent does not object to the payment order within 2 weeks after receiving it, the payment order becomes enforceable.

Recognition of foreign judgments and arbitral awards

Armenia is a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention), which means that Armenia recognizes and enforces arbitral awards made in other contracting states. An application to recognize a foreign arbitral award is reviewed within 2 months. Normally, courts do not convene a hearing to review the application.

Foreign judgments can be recognized and enforced in Armenia based either on Armenia’s international treaties or the principle of reciprocity. Reciprocity is assumed unless proven otherwise.  Proceedings regarding recognition of judgments requiring execution are conducted in accordance with the general rules of civil procedure of Armenia. Applications regarding judgments not requiring execution in Armenia are reviewed without convening a hearing.

Judgments requiring enforcement can be submitted for recognition and enforcement within 3 years after their entry into force in a foreign county.

Useful links:

          Datalex.am

          Arlis.am

Litigation attorneys at Counsel provide debt collection services in Armenia.

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