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The Russian debt collection procedure implies recovering outstanding sums of money from unpaid bills and/or contracts which have not be honored. Debt recovery in Russia can be imposed to individuals and companies.
There is no special law providing for the grounds of the debt collection in Russia, however these proceedings are covered by the Civil Law and several banking regulations. Because of the fact that in most countries special regulations regarding the debt collection procedures apply, foreign debt recovery agencies are more successful than the local agencies. Any entrepreneur or a private company can a debt collector in Russia.
You can rely on our law firm in Russia for assistance in debt collection procedures.
Legislation on debt collection in Russia
Even if there is no special or better said specific law to provide on how to collect a debt, the Code of Civil Procedure and the Arbitration Code contain provisions on how to deal with financial disputes. While the Civil Code can be employed when dealing with court actions against a debtor who can be a legal entity or natural person, the Arbitration Code is generally used when dealing with debt recovery procedures between companies.
Most Russian companies dealing with corporate clients unable or unwilling to pay their debts can consider arbitration and mediation to extinguish their disputes. Cases that can be tried through arbitration in Russia are handled by the Supreme Arbitration Court.
If no agreement can be reached, a general court will try the case and the enforcement of the court order will be completed by a bailiff.
Our law firm in Russia can help you avoid lengthy and expensive debt collection procedures in court by trying to reach an amicable agreement with the debtor.
Debt collection agencies in Russia
The debt collection agencies’ clients are especially: banks, financial companies and credit institutions, telecommunication companies, utility providers and construction companies.
The debts may be recovered in two different ways: the first one implies the debt collection agency to pay the amount to be recovered to the company and keeps the amount collected or it receives a percentage from the recovered amount of money.
The market where the debt collection agency operates can be divided according to different criteria: the coverage area, the type of debtor, technique and ways of work.
There are two stages of the debt collection procedure in Russia. The first one is the out-of-court or amicable procedure and the second one is represented by the court proceedings. It is important to note that if the amicable procedure is successful and the creditor and debtor reach an agreement, there will be no need for other additional steps. However, if the amicable procedure fails, the next step is for the creditor to file a petition with a Russian court.
Those who need more information on how to avoid lengthy debt collection procedures can ask for the support of our Russian law firm.
Problems for debtors in Russia
A creditor must be very careful what agency is hiring for collecting the debts. A lot of agencies are paid with a commission on the recovery, so it has no scruples about the method of recovery of money. The little is the chance to recover money, the higher the percentage from the recovered amount of money.
The relationship between the creditor and the debtor is not important for some debt collection agencies so the hiring company must choose a subtle and professional agency.
The first step in recovering the debts is calling the debtor and trying to persuade him to pay the debts. If this doesn’t work, a collection agency can be hired to call the debtor. Usually this is working, because of the high pressure of being called by the collector.
Another method is paying the debts in partial payments, even though it’s a time-consuming method.
It’s very important for the economy for companies to be solvent and be able to pay their debts. If not, then the creditor may not be able to pay its own debts, so a vicious circle is created.
Our Russian lawyers can offer more information on the different types of debt collection procedures.
Types of debt collection procedures in Russia
The debt recovery process in Russia can be completed amicably or in the court of law. While the amicable procedure is short and implies reaching an agreement with the debtor, the court proceedings are lengthier and will imply the issuance of a court order.
The following steps will be taken in order to recover a debt in Russia:
the first step is bringing to the knowledge of the debtor the fact that they have unpaid amounts of money;
if the debtor fails to reply, notifications through which they will be asked to pay will be sent via email or direct mail;
in case the debtor continues without replying, the claimant can file a petition with the Russian court;
once the case is accepted, the claimant must submit all the evidence showing the defendant failed to pay the debt;
the court will analyze the evidence and issue the court order which will enforce the payment of the debt.
Russian companies dealing with debtors will usually try to recover any amount of money through amicable procedures. They can try to reach an agreement with the debtor on their own, however, in most situations, the assistance of a debt collection agency or law firm is requested. This usually happens because the procedures are expedited, and it is easier to reach an agreement for paying the debt.
During the amicable debt recovery procedures, the creditor will try to contact to the debtor several times before directing the request to a Russian court. It is allowed to contact a debtor by phone, email and postal services. It is important to note that evidence of such contact attempts must documented and kept as evidence in case a litigation procedure is commenced.
Returning to the out-of-court debt collection, the creditor has the right to assess the debtor’s financial situation and cause of debt based on which an advantageous agreement for both parties can be reached.
For complete information on the amicable debt collection procedure, you can direct your questions to our Russian attorneys.
Documents to be filed in court debt collection in Russia
When filing an application with a Russian court in order to recover a debt, the following documents must be filed:
the manes of the parties in the dispute;
information on the circumstances related to the case;
evidence related to the case (contracts, payment failure notices, etc.);
information about the amount of money to be recovered.
OurRussian lawyers can help you prepare the file to be submitted when claiming the recovery of a debt in court.
our services are available for both individuals and companies seeking to recover debts;
we can also help companies in commercial disputes related to the collection of debts;
we can offer support in the amicable recovery of a debt in Russia;
we can offer representation in the court of law, in case of judicial procedures related to debt recovery.
We invite you to watch a short video about the debt collection procedures in Russia:
The new Bankruptcy Law in Russia
In order to protect debtors from collectors overstepping the legal boundaries of debt recovery, the Government passed a new legislation under which natural persons can file a petition with a Russian general jurisdiction court and have their cases heard. For entrepreneurs, the case will be presented before the Arbitration Court in Russia.
In both situations, the case will be taken over by a receiver who will first propose a debt restructuring plan. The second phase will imply selling the company’s or the individual’s assets in order to cover the debt. However, the court can also help the debtor and the debt collectors to reach a settlement agreement for the repayment of the outstanding amount.
Protection of debtors in Russia
In 2017, a new law came into effect: Federal Law No. 230 – FL which provides for the protection of rights and interests of physical persons by debt collection agencies seeking to recover overdue amounts of money.
The new law does not provide for the debt collection procedures, but for the companies engaging in such activities which chase debts from Russian citizens and residents. The new law provides for such companies to respect the debtor by trying to contact them no more than 2 times per week. Also, a meeting once per week during the day is imposed.
Debt collection agencies are no longer allowed to use no-caller ID numbers when phone calling clients. Also, any debt collection procedure will be handled by the Federal Bailiffs Service.
The Federal Bailiffs Service is also in charge with keeping a register of all debt collection agencies in Russia.
According to the Registrar kept by the Service of Bailiffs:
in December 2016, there were only 414 legitimate debt collection agencies in Russia;
out of these, only 66 had as their main activity debt collection;
29% of all agencies are located Moscow, while 11% are located in Saint Petersburg;
at the level of 2018, there were around 890 active organizations operating as debt collection agencies in Russia.
Our law firm in Russia can offer you more details about the debt collection proceedings and the new legislation. If you have a debt to collect, you may contact a Russian lawyer who will assist you during the procedures of debt collection and protect your assets. You may contact our attorneys in Russia also if you are a debtor and you have legal problems with the local debt collection agencies that may harass you.
Evgeny M. Kuznetsov is the managing partner and founder of Herman & Smith LLC and he is specialized in debt restructuring, debt collection, mediation after pleading in litigation cases related to the Sea Law. After appearing in international arbitration courts, Evgeny has later specialized in offering support to foreign investors interested in operating in Russia. Contact us for details
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