Payment Order in the EU

Payment Order in the EU

The payment order procedure, well-known in the Hungarian legal system, is not limited to Hungary. A similar mechanism exists at the EU level, offering a viable alternative for out-of-court enforcement of claims against foreign debtors. The rules laid down in Regulation (EC) No 1896/2006 creating a European order for payment procedure bear many similarities to the Hungarian payment order regime; however, it is essential to understand the differences between the Hungarian and EU procedures.

The purpose of the EU regulation is to simplify, accelerate, and reduce the costs associated with cross-border enforcement of uncontested monetary claims. An application for a European payment order may be filed where the debtor or the creditor has their domicile, habitual residence, or registered office in a different Member State.

However, the EU regulation does not apply to all matters. For example, it does not cover claims arising from matrimonial property regimes, wills, or succession.

It is important to note that not only the EU regulation applies to the European payment order procedure, but in matters not specifically governed by the regulation, Act L of 2009 on the Hungarian payment order procedure shall also apply subsidiarily.

The application may be submitted before any Hungarian notary public, and instead of being drafted freely, a standard form must be used. This form is available in all official EU languages, including Hungarian. However, it is recommended to submit the application also in the official language of the debtor's Member State, as the notary will serve the application on the debtor.

Upon filing, the procedural fee under Hungarian law must be paid, which amounts to 3% of the claim, with a minimum of HUF 12,000 and a maximum of HUF 300,000.

The notary will examine the application and, pursuant to the regulation, generally issues and serves the payment order within 30 days.

Once the debtor receives the payment order, two options are available:

If the debtor considers the claim justified, they may settle the debt under the pressure of the payment order and a potential enforcement procedure.

Alternatively, the debtor may file a statement of opposition. While under Hungarian law the deadline for opposition is 15 days, the EU procedure allows 30 days. No reasoning is required for the opposition—only a declaration that the debtor contests the claim.

If the debtor files an opposition, the procedure transforms into a civil lawsuit in the Member State where the payment order was issued. In the case of a European payment order filed before a Hungarian notary, litigation must commence before a Hungarian court. Unlike in the domestic procedure, the EU payment order application must specify whether the creditor wishes to pursue litigation in case of opposition. If the creditor indicates in the application that they do not wish to continue the proceedings, the procedure will be terminated upon opposition.

If no opposition is filed by the debtor, the claim becomes enforceable. However, enforcement will not be carried out in Hungary in the case of a foreign debtor. Instead, it will be conducted in the Member State where the debtor possesses seizable assets, under the procedural rules of that jurisdiction. A copy of the enforceable payment order and its translation, if necessary, must be submitted to the competent enforcement authority of the relevant Member State, after which the enforcement process may begin.

Therefore, if a foreign-based partner fails to pay its outstanding debt, initiating a European payment order procedure may be a cost-effective alternative to litigation. This formalised and EU-wide accessible mechanism can at least compel a non-responsive foreign debtor to react—either by responding or by paying. If the payment order successfully avoids litigation, it can result in significant savings of both time and legal costs.