4.1. General information
The modern German legal system is composed of public law, which regulates the relations between citizens and the state, and civil law, which regulates the relations between two people or companies.
Entering into legal proceedings is possible without a prior warning to the debtor. However, all the courts are trying to mediate between creditors and debtors, and, in order to shorten the amicable phase of legal proceedings, they may ask for proof that all pre-court efforts did not reach a conclusion and will ask to see all the prior correspondence in order to reach a quick and final judgment.
4.2. Legal systems
The nature of the cases and the amounts of monies owed divide court jurisdiction. The scheme below is a simplified extract of the German jurisdiction, usually applicable for cases regarding outstanding money. You (the plaintiff) are not required to be represented by a registered attorney before a local court (for claims up to EUR 5,000), although professional legal representation is mandatory before any other court.
4.3. Required documents
In order to apply a legal dunning procedure, we require copies of the contracts, invoices, and statements indicating the payments and credit notes that have been paid against the outstanding monies.
In the case of a regular lawsuit procedure, copies of all the contractual documentation should be available, starting with contracts, orders, order confirmations, delivery notes, and invoices. Every part of the trading relationship between both parties should be provable by documentation.
In case of dispute, all the notes of the conversations between you and your debtor should be kept and given to our lawyers. In the case of oral negotiations, we require the visit or negotiation reports and the names of any witnesses.
4.4. Legal dunning procedures
This type of proceedings is only applicable for monetary debts where the debtors are traceable. The Berlin-Wedding court is responsible for non-German clients, whilst various competent local courts are responsible for German cases. Inorder to obtain an enforceable judgment by legal dunning procedure, first the court order (Mahnbescheid”) and second the enforcement order (“Vollstreckungsbescheid”) need to be applied one after another and served on the debtor within the time frames stipulated in the German Civil Process Law. The debtor can appeal during both stages. That would transfer the dunning procedure into a regular lawsuit procedure.
A regular lawsuit procedure is initiated directly either after the amicable collections have failed due to a dispute by the debtor, or after the legal dunning procedure if the debtor has appealed. A written pre-procedure is usually issued. Both the plaintiff and the defendant must exchange opinions and proof by letter until the judge believes all the relevant information needed to make a judgment has been received. In this case, a hearing is scheduled, during which both parties must be present. After the hearing, the judge sets a date to publish the final judgment, and both parties will be informed about the outcome in writing by the court.
Appealing the judgment (the threshold is EUR 600) is possible. That will trigger a second verdict by the court of second instance (local court to district court, district court to higher regional court). In the case of the third instance, the review will be restricted to a check on whether or not the statutes were applied correctly. Any later amendment of facts or proof is not permissible.
4.7. Expected time frame
The average duration of a legal dunning process is between eight and 12 weeks, whereas a court procedure can take 12 months or longer, depending on the complexity of the case and the availability of the judge and lawyers on both sides.
4.8. Costs and interest in the legal phase
Any costs incurred during the civil law procedure (court fees and lawyers’ fees) are determined by the provisions of the RVG (law for lawyers’ fees) and the GKG (law for court fees) and are not subject to any negotiation. All costs are dependent on the outstanding principal amount and are calculated taking into account the amounts kept by each party. There are different fees that can apply during the proceedings, making it difficult to predict the total costs. In addition to this, costs of witnesses and/or experts might also arise. The costs of a legal dunning procedure are usually from 20% to 40% of the costs of a full court procedure. Costs can be kept down if the debtor does not react to the court summons and accepts the claim.
Extrajudicial interest and costs can be claimed as part of the outstanding monies during the legal proceedings. Approximately 60% of the German courts award this additional claim, but the outcome depends on the court and the judge. In all cases, the losing party has to bear the costs of the legal proceedings according to paragraph 91ff. of the German Civil Process Law. In the case of a legal settlement, the parties bear the costs of the corresponding proceedings in proportion to their prevailing or failing.
(End of chapter 4 - Legal collections)