Understanding the Execution Procedure (Debt Recovery) in Liechtenstein

Josef Bergt
2023

The execution procedure, also known as debt recovery, is a legal process that allows a creditor to enforce a claim against a debtor. In Liechtenstein, this process is governed by the Execution Order (EO). The purpose of this article is to provide an  overview of the execution procedure in Liechtenstein, including the prerequisites for filing an execution application, the different types of execution methods available, and the associated fees.

Prerequisites for an Execution Application

The primary prerequisite for filing an execution application in Liechtenstein is the existence of a legally binding execution title, such as a payment order, a judgment, or a decision from a domestic court. If the execution is based on a foreign execution title (which is only possible if there is an existing enforcement agreement with the respective country), the original title, accompanied by a confirmation of legal validity, must be submitted.

In the Absence of a Legally Binding Execution Title

In cases where a legally binding execution title does not yet exist, the creditor can initially apply for the issuance of a payment order against the debtor (also known as the debt drive procedure or debt collection procedure, pursuant to §§ 577 – 593 of the Liechtenstein Code of Civil Procedure or “ZPO” in German). If the debtor raises an objection to the payment order issued by the court within 14 days, the payment order loses its force. Both the creditor and the debtor are notified in writing of this development. If no objection is raised within 14 days, an execution procedure can be initiated with the legally binding payment order.

Execution Methods

During the execution process for outstanding monetary claims, the creditor can either target the debtor's immovable assets (real estate) or movable assets (personal property, bank or wage balances). The following execution methods are particularly available:

• Execution on immovable assets (real estate, condominium units) is carried out through the compulsory establishment of a lien and forced auction.
• Execution on movable assets can be carried out through:
  • Wage execution at the debtor's employer (salary or wage garnishment)
  • Balance garnishment with a third-party debtor (e.g., bank balance)
  • Chattel execution (movable physical items of value)

Wage Execution (Art. 210 -236 EO)

In a wage execution (or wage garnishment), the debtor's wage claims are garnished at their employer. If the creditor is unaware of the debtor's employer, the debtor's date of birth must be compulsorily included in the execution application, which can be obtained from the debtor's place of residence municipality by presenting the execution title. The employer, as a third-party debtor, is requested according to Art. 223 EO to submit a so-called third-party debtor statement, unless the application waives it. In this statement, the employer must declare, among other things, whether they acknowledge the garnished claim as justified and are ready to make payment or not.

The creditor can only reapply for a wage execution with an unknown employer once a year has passed since the previous execution approval or if it can be credibly demonstrated that the debtor has since acquired a corresponding claim.

Balance Garnishment and Transfer (Art. 210 -236 EO)

In a balance garnishment, a claim that the debtor has against a third-party debtor (e.g., bank balance) is garnished and subsequently transferred to the creditor. Therefore, in an execution application for balance garnishment, the creditor must compulsorily specify a third-party debtor (multiple can also be specified, e.g., exact designation of the bank along with the address). This third-party debtor is then served with the execution approval with the order to submit a so-called third-party debtor statement (Art. 223 EO). In this statement, the bank, for example, must declare, among other things, whether it acknowledges the garnished claim as justified and is ready to make payment or not. These third-party debtor statements from the banks cost at least CHF 43.10 per statement and are initially to be paid by the creditor. If no third-party debtor statement is desired, the application must explicitly waive such a statement.

Excursus on the planned Digital Euro

In 2023 the European Commission, based on the European Central Banks (ECB) exploratory phase on developing a digital euro, proposed the establishment of a legal framework for a possible digital euro as a complement to euro banknotes. While the exclusive legal currency of Liechtenstein remains to be the Swiss franc as Liechtenstein franc, pursuant to the Law of May 26, 1924 concerning the introduction of the franc currency, thus far, no concrete regulations or procedures have been established regarding the digital euro’s use in execution or enforcement procedures as part of debt collection.

We can speculate on some possibilities based on existing practices with other forms of digital assets and currencies:

• Direct Seizure: If the digital euro is held in a digital wallet controlled by the debtor, it could potentially be seized directly by authorities, similar to how funds in a bank account can be seized. This would likely require the cooperation of the entity providing the digital wallet service.
• Conversion and Seizure: If the digital euro can be readily converted into traditional fiat currency (like the physical euro), authorities could potentially require the debtor to convert their digital euros into physical euros, which could then be seized.
• Court Order: Courts could issue orders requiring debtors to pay a certain amount of their debt in digital euros. Failure to comply with such an order could result in penalties.
• Third-Party Debt Orders: Similar to how third-party debt orders work with traditional bank accounts, a court could potentially order a third party who owes money to the debtor (this would impliedly be the ECB) to pay that money to the creditor instead. If the third party owes the debtor money in the form of digital euros, this could effectively result in the garnishment of the debtor's digital euros.

These are speculative scenarios and the actual procedures will depend on the specific regulations to be put in place in the future by competent authorities. It's also worth noting that the use of digital currencies in debt collection could raise complex legal and technical issues, such as those related to privacy, security, and international jurisdiction.

Chattel Execution, Valuation, Sale (Execution on Movable Physical Items, Art. 168 – 209 EO)

Chattel execution targets movable physical items of value (e.g., vehicles, laptops, furnishings, etc.). If the court approves the execution through seizure and sale of movable items, the bailiff visits the debtor and attempts to collect the outstanding claim in the form of cash. If this is unsuccessful, the bailiff checks whether there are any seizable items. If such items are found, they are potentially included in a seizure and valuation protocol, and the procedure is continued with the valuation and sale (auction) of the found items. The auction proceeds, minus the auction costs, are allocated to the creditor.

Notes on the Various Execution Methods

Various execution methods can also be combined in an application. A wage execution takes precedence over a simultaneously requested chattel execution. The chattel execution is therefore only implemented if the wage execution has been unsuccessful.

Fees

Court submissions can trigger a fee obligation. The amount of the court fee can be taken from the Court Fee Act (“GGG” in German). Applications for the issuance of a payment order and execution applications trigger a fee obligation (see the following fee list). The fees are to be paid by the creditor after the court has determined the fees (billing). A submitted submission (application) is only processed by the court after payment of the court fees.

General Notes

All applications or other submissions to the court must always be submitted with an original signature. If a party is represented by another person, a signed power of attorney must also be compulsorily submitted in the original or in a certified copy (does not apply to lawyers as party representatives). If a payment order or an execution is requested against a legal entity (e.g., companies limited by shares, limited liability companies, , etc.), a current commercial register extract of the debtor must be attached to the application (the commercial register extract is available from the Office of Justice – Commercial Register Department. 

Fees in the Enforcement Procedure

(Excerpt from the fee table according to the appendix to Art. 30 Para. 1 Court Fee Act)

Execution Procedure Fees

Debt Drive Procedure (Payment Orders) Fees

The execution procedure in Liechtenstein is a well-structured process that allows creditors to enforce their claims against debtors effectively. The process is governed by the Execution Order (EO), and it involves several steps, including the filing of an execution application, the selection of an execution method, and the payment of associated fees. It is important to note that the execution procedure can only be initiated if a legally binding execution title exists. In the absence of such a title, the creditor can apply for the issuance of a payment order against the debtor.

Source: Factsheet Explanatory Notes on the Execution Procedure (Debt Collection). Version June 2021; §§ 577 – 593 ZPO; Art. 168 – 209 EO; Art. 210 -236 EO; Art 30 GGG.

Executive Summary:

• The execution procedure in Liechtenstein is governed by the Execution Order (EO).
• The primary prerequisite for filing an execution application is the existence of a legally binding execution title.
• In the absence of a legally binding execution title, the creditor can apply for the issuance of a payment order against the debtor.
• The execution process for outstanding monetary claims can target either the debtor's immovable assets (real estate) or movable assets (personal property, bank or wage balances).
• Various execution methods can be combined in an application, with wage execution taking precedence over a simultaneously requested chattel execution.
• Court submissions can trigger a fee obligation, with the amount of the court fee taken from the Court Fee Act (GGG).
• All applications or other submissions to the court must always be submitted with an original signature.