International Debt Collection in Monaco: Opportunities and Challenges

With 140 nationalities represented on its territory, an attractive tax system and a recognised banking place, despite its small size, the Principality of Monaco attracts large amounts of capital invested in the local economy, real estate or deposited in local banks.

These assets, whatever their nature, can represent an interesting opportunity of recovery for any foreign creditor encountering difficulties in obtaining payment in its home jurisdiction.

This fact has led to a significant increase of litigation before Monegasque courts concerning the recovery of debts arising abroad.

While the concentration of a wide range of assets over 2km² is likely to be a godsend to the committed creditor, these assets may be volatile and are often difficult to identify. Fortunately, Monegasque law provides for various proceedings, allowing to establish a global strategy for the debt recovery.

Thus, the first step in any recovery attempt is to identify the assets available before anything else.

Only limited data is publicly available for this identification stage. At most, it is possible to order information from the mortgage registry held by the Tax Services for real estate, and to consult the Business Registry held by the Economic Development Department for any business or shares in commercial companies.

For the rest of the assets that can be seized – and there are many of them – (bank accounts, jewels, works of art, cars, yachts, safe-deposit boxes, etc), it will be necessary to proceed judicially through the filing of a non-adversarial application to be authorised to request the relevant information from the competent authorities.

In practice, this mapping of assets is essential to determine the overall strategy.

At this stage, the assets are not yet frozen, so discretion is essential. The success of the strategy will usually be conditioned by a surprise effect on the debtor.

Once the seizable assets in the Principality are identified, the aim will naturally be to secure them by filing one or several ex parte provisory freezing applications prior to any actions on the merits.

For instance, a garnishment application can be contemplated to freeze various assets such as immaterial movables (bank accounts, annuities, securities, remunerations, shares of companies), or material movable assets (jewels, works of art, cars, yachts, safe-deposit boxes).

Real estate assets can also be secured by obtaining an ex parte provisional judicial mortgage. Once this order is granted, a lien is registered on the debtor’s real estate property precluding the owner from selling the real estate without the consent of the creditor. It allows the creditor to be reimbursed for his claim by priority in case of sale of the asset.

These provisional measures are traditionally granted when the creditor can demonstrate the existence of a claim that is certain in principle. At this stage, the claim does not have to be certain, liquid and payable. However, the criteria used by the Monegasque courts to grant or refuse such a measure vary according to the specific features of each case.

Once obtained, the provisory order is served upon the debtor by a Monaco bailiff.

Provided the conditions for freezing are not met, the debtor may obtain, in a certain timeframe, by the way of an expedite procedure, a court decision for the order’s withdrawal and the lifting of the provisory measures.

The freezing order(s) served upon the debtor are accompanied or followed, depending on the procedure, by a summons before Monaco courts in validation of the provisory attachment.

This step marks the beginning of the adversarial procedure whereby we serve the opponent with our legal writings and exhibits.

The most straightforward situation is when the Monaco courts are competent to hear the case on the merits. In this case, the creditor obtains a res judicata decision that sentences the debtor to pay together with the validation of the provisory measure.

In practice, the dispute on the merits is often submitted to the foreign courts; the Monegasque courts only intervene because of the presence of assets that can be seized in the Principality.

In such cases, close co-operation between Monegasque counsel and counsel handling the case on the merits before the competent foreign court is essential.

During the Monegasque validation procedure, a stay of proceedings will be requested pending the outcome of a judicial or arbitral procedure abroad.

This foreign final and binding decision will have to be enforced in Monaco through an exequatur procedure before resuming the validation proceedings.

In summary, the key to successful debt collection in Monaco lies mainly in the rapid establishment of a strategy adapted to local specificities, coupled with effective co-operation with foreign counsel to deal with the various procedural defences available to the debtor.