NO MORE PAYMENT WARRANT PROCEDURE FOR FOREIGNERS IN HUNGARY?

23 January 2018

From 2018, the threshold of the mandatory small claims regime is increased to HUF 3 Million in Hungary. In addition, foreign creditors must meet further residency conditions to start this cost-effective on-line debt collection method. But what to do if you do not meet these conditions? Read our latest article for the answer!

What is Payment Warrant Procedure?

For those who have not yet startedPayment Warrant Procedure (PWP) we sum up the must-knows: it's a simple, fast and cost-efficient e-procedure for collecting small claims in Hungary.

You can start the procedure on-line at the notary public, who doesn’t investigate the base of the claim, whether it is lawful or not. If your request is complete, the notary public issues the payment warrant and sends it to your debtor.

If the debtor does not raise any objection in 15 days, the payment warrant has the same force as a judgement from the court, and you can enforce it. If the debtor sends an objection within 15 days, the procedure turns into litigation.

As you see, PWP is a quite fast procedure, and it is also cheap, because the duty of the procedure is only 3% of your claim.

What’s new from 2018?

For claims under HUF 1 Million the PWP was the default obligatory procedure, in other words, you could not start litigation against your Hungarian debtor if your claim was below this threshold.

From 2018, this threshold is raised to HUF 3 Million, so if your monetary claim is under this amount, you must start PWP, instead going into court.

In addition, from 2018 there is a new residency condition to be able to start PWP. You can start this procedure only if both you and your debtor have registered seat, commercial representation or financial branch office in Hungary, or in case of private individuals address, or habitual residence in Hungary.

So foreign companies, not having registered seat or at least some kind of representation in Hungary, as well as foreign individuals, not having at least their habitual residence in Hungary cannot start PWP from 2018.

Well, but what can you do in this case against your Hungarian debtor?

Solution No. 1 - European Payment Order

If your company has its registered seat in the EU, or you are private individual, having habitual residence in the EU, you can start the European Payment Order procedure against your Hungarian debtor.

The procedure is very similar to the PWP: the case starts at the notary public, who sends the EU payment order to the defendant, and if there is no answer for 15 days, it is enforceable. The duty is also the same as at PWP, so it is 3% of the claim.

The only disadvantage of the European Payment order is that it is paper-based, so relatively takes more time, in copmarison with on-line PWP.

Solution No. 2  - Litigation

If your company is seated outside the EU, or in case you are private individual, not having habitual residence in EU, then starting litigation right ahead is still an option.

Unfortunately, it is usually longer compared to the previous two procedures, and the court duty is the double (6%).

Summary

To sum up the above, if you have address, registered seat or at least some kind of commercial representation in Hungary you can choose the fast and cost-effectice payment warrant procedure to collect debt from Hungarian debtors.

If you are from the EU, you can choose the European payment order to collect money from your Hungarian debtor.

Last, but not least, in case you do not fulfil the requirements of these procedures, you can still bring your claim to the Hungarian court.