How Lithuanian Companies Can Recover Unpaid Invoices in the Czech Republic: What to Do When Invoices Remain Unpaid

When a Czech customer refuses to pay your invoice, you face more than a simple accounting problem. Time is working against you under the strict three-year statute of limitations, procedural rules differ dramatically from Lithuanian law, and collecting the debt without expert guidance can cost you thousands in wasted effort. This article shows you exactly what steps to take, what mistakes to avoid, and when to engage professional legal support to recover what you are owed.

Executive summary for management

• Statute of Limitations is 3 Years: Unlike some jurisdictions with longer periods, Czech commercial claims expire in three years from the due date. Immediate action is required.
• Procedural Compliance determines Profitability: To get your legal fees paid by the debtor, you must send a specific pre-litigation notice (předžalobní výzva) at least 7 days before suing. ARROWS handles this to ensure you don't leave money on the table.
• Asset Tracing Saves Money: We check if the debtor has assets (Real Estate, Active Business, No Executions) before you spend money on a lawsuit.
• European Payment Order (EOP): For undisputed cross-border claims, this EU tool offers automatic enforceability across the EU, bypassing the need for domestic recognition later.
• Professional Representation Pays Off: With the "loser pays" principle, the cost of an attorney is often recoverable from the debtor. Attempting DIY collection risks losing this benefit due to procedural errors.

Why unpaid invoices from Czech customers are a serious business problem

An unpaid invoice from a Czech business partner represents a tangible financial loss, but its impact extends far beyond the missing money. When a Lithuanian company extends credit to a Czech buyer and that buyer fails to pay, the creditor's cash flow deteriorates immediately, forcing difficult choices about operations, payroll, and investments.

Companies often delay purchasing equipment, postpone expansion plans, or accumulate debt to their own suppliers simply because a customer is not paying on time. The psychological burden on business owners is equally significant. Many entrepreneurs naturally hesitate to pursue aggressive debt collection against their customers, fearing relationship damage or escalation.

In practical terms, companies that wait passively for payment are often the last creditors to recover anything, while those who act decisively within established legal frameworks secure their rights before the debtor's financial situation deteriorates further.

What many Lithuanian entrepreneurs do not immediately recognize is that each unpaid invoice is subject to a hard legal deadline. In the Czech Republic, the general statute of limitations for commercial debts is three years, generally measured from the invoice's due date. After that period expires, if the debtor raises a time-bar objection, the court must dismiss your claim regardless of its merits.

The Czech legal framework regarding debt collection

The Czech Republic's approach to recovering unpaid invoices is fundamentally structured around European Union law and Czech civil procedure. Unlike some jurisdictions that rely primarily on private debt collection agencies with limited legal authority, the Czech system integrates mandatory pre-litigation procedures, expedited court processes, and powerful enforcement mechanisms carried out by court-appointed bailiffs (soudní exekutoři).

For Lithuanian companies pursuing Czech debtors, understanding this framework is essential because the procedural steps differ materially from Lithuanian law. The Czech system requires specific formal actions before litigation can proceed successfully regarding cost recovery. Failure to comply with these procedural requirements can result in losing your right to recover legal costs.

ARROWS Law Firm's lawyers regularly assist foreign clients from Lithuania and other EU countries in navigating these procedural complexities, and they understand both the Czech legal environment and the differences between Czech law and Lithuanian legal practice.

The Czech legal system divides debt recovery into two distinct phases: the extrajudicial (amicable) phase and the judicial (court) phase. The extrajudicial phase involves direct communication with the debtor, negotiation, and demand letters sent according to specific legal requirements. If voluntary payment does not occur within a defined period, the creditor proceeds to the judicial phase.

Understanding the three-year statute of limitations

The three-year statute of limitations in the Czech Republic represents a critical deadline that governs commercial debts under the Civil Code. This period generally begins on the date when the right could be first exercised—typically the day after the invoice due date ( splatnost ). It is vital to distinguish between the invoice issuance date and the due date.

Once this three-year period expires, the obligation becomes a "natural obligation." This means the debt still exists, but it cannot be successfully enforced in court if the debtor formally objects by raising a time-bar defense (námitka promlčení). If this objection is raised, the Czech court must dismiss the claim.

The period cannot be extended except through specific legal mechanisms, the most common being a written acknowledgment of the debt (uznání dluhu). If the debtor provides a written acknowledgment of the debt (including the specific amount and legal ground), a new ten-year limitation period begins from the date of that acknowledgment.

When ARROWS Law Firm's lawyers contact a Czech debtor on behalf of a Lithuanian creditor, they often attempt to obtain this written acknowledgment, even as part of a payment plan negotiation.

The practical implication is simple but urgent: do not delay in pursuing an unpaid invoice. A three-year period sounds like sufficient time, but in the Czech legal system, procedural steps consume time. Waiting two years to begin collection efforts leaves you with a dangerously narrow window to complete necessary legal steps.

The two-phase debt collection approach

Czech law encourages creditors to attempt amicable resolution before initiating court proceedings. This mandatory pre-litigation phase is not merely a courtesy—it is a legal requirement under Section 142a of the Code of Civil Procedure for the recovery of legal costs. While you can technically file a lawsuit without it, you will likely be denied the right to have the debtor pay your legal fees.

The extrajudicial phase typically involves contacts with the debtor culminating in a formal pre-litigation notice (předžalobní výzva). The creditor must send this notice to the debtor's delivery address or last known address at least seven days before filing any court action.

The form and method of sending this notice matter considerably. It must be capable of proof—either through registered post with a delivery receipt, or preferably through the Czech data box (datová schránka), which is the official electronic communication system for businesses in the Czech Republic.

ARROWS Law Firm's lawyers understand these technical procedural requirements intimately.

For Lithuanian companies unfamiliar with Czech procedure, the seemingly simple act of sending a demand letter becomes a minefield of technical requirements. Errors in this phase often have major financial consequences regarding cost reimbursement. This is precisely why engaging experienced Czech legal counsel early in the process protects your long-term interests.

Why self-help in debt collection fails

Consider a practical scenario: a Lithuanian company sends a demand letter to its Czech customer via standard email. The debtor ignores it. Later, the Lithuanian company files a court action. At trial, the debtor's lawyer argues that the creditor is not entitled to reimbursement of legal costs because the pre-litigation notice was not properly served.

The court may rule that while the debt is valid, the creditor must pay their own legal fees. The result is a judgment for payment, but no recovery of the significant amount spent on attorney fees and court costs.

Extrajudicial debt collection strategy

The extrajudicial phase of debt collection offers the single highest success rate for cost-effective recovery. A significant portion of cases resolve during this phase without requiring court intervention, which means lower costs and faster resolution. This phase typically spans three to four weeks during which the creditor makes escalating contact with the debtor.

During this phase, ARROWS Law Firm's lawyers typically engage the Czech debtor through a series of carefully designed contacts.

The initial contact often comes as a professional written demand letter explaining the situation, specifying the amount owed, and requesting payment within a defined period. This letter maintains a professional tone that does not burn bridges but makes clear that the creditor is serious about recovery.

The psychology of this escalating approach is important. Many debtors respond to professional, persistent pressure—particularly when they understand that legal action is imminent. A debtor who has simply been ignoring informal reminders often recognizes the shift when they receive a professionally drafted letter from a law firm.

During this phase, ARROWS Law Firm's lawyers also gather information about the debtor's financial situation. If asset tracing reveals that the debtor is already the subject of multiple enforcement proceedings, the creditor can make an informed decision about whether continued investment in collection efforts is commercially justified.

Legal tips on extrajudicial collection

1. What happens if a debtor ignores my pre-litigation notice?
If the debtor does not respond to your formal notice within the specified period, you have clear justification to proceed to judicial collection. The formal notice creates a documented record that the debtor had the opportunity to pay without legal consequences, ensuring your right to claim reimbursement of legal costs. Contact ARROWS Law Firm at office@arws.cz to ensure your notice meets all technical requirements.

2. Can I recover the costs of extrajudicial collection efforts from the debtor?
Yes, partially. Czech law allows recovery of legal costs incurred before the lawsuit (pre-litigation legal service) as part of the total cost award in the subsequent court judgment, provided the pre-litigation notice was sent properly.

3. How long should I give the debtor to pay after sending the pre-litigation notice?
The law requires sending the notice at least seven days before filing a lawsuit. However, providing a deadline of ten to fifteen days is practical and more likely to motivate settlement without appearing unreasonable.

The payment order procedure for undisputed debts

When a debtor simply refuses to pay without offering any legitimate legal defense, the Czech legal system provides an expedited mechanism called the "Order for Payment" (platební rozkaz). This procedure bypasses the need for a full courtroom hearing initially and allows the court to issue a binding payment order based solely on the written evidence submitted by the creditor.

The payment order procedure requires the creditor to submit clear, organized, compelling documentary evidence. This means signed contracts, issued invoices, confirmed delivery notes, correspondence acknowledging the debt, and any communications from the debtor regarding the invoiced amounts.

Once the court issues a payment order and serves it on the debtor (into their own hands or data box), the debtor has precisely 15 days from receipt to either pay the full amount (including costs) or file a formal resistance (odpor). If the debtor takes no action within 15 days, the order automatically becomes a final, enforceable title.

If the debtor files a resistance within the 15-day period, the payment order is cancelled in full, and the case proceeds to standard civil litigation hearings.

The Czech Republic also offers a fully electronic version of this procedure (elektronický platební rozkaz - EPR) for claims not exceeding CZK 1,000,000 (approx. €40,000). The electronic payment order carries the same legal force as the standard version but involves lower court fees and is processed electronically.

ARROWS Law Firm's lawyers routinely handle payment order applications for foreign clients and understand how to organize documents to maximize the chance of the order being issued without delay.

Legal tips on payment order procedures

1. What evidence do I need to support a payment order application?
You need documentary evidence that establishes the claim: signed contracts, orders, invoices, delivery notes (CMRs), and ideally acceptance protocols. The evidence must be unambiguous. ARROWS Law Firm will review your documentation to assess its strength.

2. What happens if the Czech court rejects my payment order application?
If the court finds the evidence insufficient to issue an order without a hearing, it will simply schedule a standard court hearing. You do not lose the claim; it just converts to standard litigation.

3. Can I use the payment order procedure if the debtor disputes that the goods were delivered?
The payment order is best for clear-cut cases. If you know the debtor actively disputes the delivery, a standard lawsuit might be necessary. However, filing for a payment order is often still the best first step to test the debtor's defense.

The European payment order

For Lithuanian companies pursuing Czech debtors, the European Payment Order (EOP) procedure under EU Regulation 1896/2006 provides significant advantages. The EOP is designed specifically for cross-border monetary claims between parties domiciled in different EU member states.

The EOP procedure allows the creditor to submit a standardized application. Critically, if the debtor does not oppose the order, it becomes automatically enforceable throughout the entire European Union without the need for a separate declaration of enforceability (exequatur) in the Member State of enforcement.

This automatic EU-wide enforceability is a major advantage if the Czech debtor has assets in other EU countries (e.g., Slovakia, Poland, or Lithuania). A traditional domestic Czech judgment would require a certificate of enforceability to be recognized elsewhere, whereas the EOP is directly enforceable.

The EOP is available for cross-border claims regardless of the amount (unlike the Czech Electronic Payment Order). If the debtor files an opposition, the proceedings continue before the competent courts of the Member State of origin (Czech Republic) under standard civil procedure rules.

Enforcement of judgments

Obtaining a favorable judgment is a victory, but it does not guarantee automatic payment. If the debtor fails to pay voluntarily after the judgment becomes final, the creditor must initiate enforcement proceedings (exekuce). In the Czech Republic, enforcement is carried out by private judicial bailiffs (soudní exekutoři).

These bailiffs have significant legal authority to seize debtor assets, including freezing bank accounts, garnishing wages, seizing movable property, and selling real estate.

To initiate enforcement, the creditor must file a formal enforcement motion (exekuční návrh). The bailiff then obtains authorization from the court. A key feature of the Czech system is that the bailiff—not the creditor—searches for the debtor's assets using state databases.

If payment is not made after the initial notice, the bailiff proceeds with asset seizure.

Enforcement law in the Czech Republic is effective but complex. The bailiff's fees are generally recovered from the debtor, but the creditor may be asked to pay a modest advance.

Navigating the insolvency proceedings

If enforcement efforts reveal that the debtor has insufficient assets, or if the debtor is in a state of bankruptcy, the creditor must navigate insolvency proceedings. Under Czech law, if a debtor has multiple creditors and overdue monetary obligations aimed at more than 30 days past due which it is unable to pay, it is insolvent.

Once insolvency proceedings commence, individual enforcement actions (bailiffs) are stayed (paused). Creditors must lodge their claims (přihláška pohledávky) into the insolvency proceeding within a strict deadline set by the court (usually 2 months from the bankruptcy decision).

Insolvency proceedings can result in bankruptcy (liquidation of assets) or reorganization (for larger companies). While recovery rates in insolvency can be lower, it is often the only route for distressed debtors. Furthermore, statutory directors may be held personally liable for damages if they failed to file for insolvency in time.

Asset tracing and due diligence

Before committing resources to court proceedings, savvy creditors conduct asset tracing. This investigation answers a critical question: is the debtor solvent? The Czech Republic provides public information sources:

• Commercial Register (Obchodní rejstřík): Corporate structure and directors.
• Land Registry (Katastr nemovitostí): Real estate ownership.
• Central Evidence of Executions (Centrální evidence exekucí — CEE): A public database maintained by the Chamber of Executors showing active enforcement proceedings.

Checking the CEE is vital. If a debtor has 10 active executions, filing a new lawsuit may be throwing good money after bad. ARROWS Law Firm performs these checks routinely to advise clients on the economic viability of litigation.

Interest and legal costs

Czech law permits creditors to recover the principal amount, late payment interest, and legal costs. Unless agreed otherwise in the contract, the statutory late payment interest rate is determined by the government regulation implementing the Civil Code.

Currently, the rate corresponds to the repo rate set by the Czech National Bank plus 8 percentage points.

The winning party in Czech litigation is generally entitled to reimbursement of legal costs from the losing party. This includes court fees and attorney fees. Note that attorney fees are reimbursed based on a statutory advocate's tariff (advokátní tarif), which is calculated based on the value of the dispute.

Situations where recovery becomes difficult

• Bankruptcy: Once declared, individual enforcement stops.
• Shell Companies: Debtors with no assets or employees.
• Asset Transfer: Debtors transferring assets to relatives to avoid seizure (though these can be challenged via actio Pauliana lawsuits).

Differences between Lithuanian and Czech law

• Statute of Limitations: Czech period is 3 years.
• Cost Shifting: Czech Republic strictly applies "loser pays," but it requires the pre-litigation notice.
• Bailiffs: Private bailiffs in CZ have extensive powers to search for assets independently, unlike in some other jurisdictions where the creditor must identify assets.

ARROWS Law Firm is a leading Czech law firm based in Prague, with extensive experience representing foreign clients, bridging the gap between Lithuanian business expectations and Czech legal reality.

The European account preservation order

For cross-border cases (Lithuania vs Czech Republic), the European Account Preservation Order (EAPO) under Regulation (EU) No 655/2014 is a powerful tool. It allows a creditor to request the court to freeze funds in the debtor's bank account in another EU Member State without prior notice to the debtor.

This surprise effect prevents the debtor from moving funds before a judgment is enforced. It is available only for cross-border cases and requires showing a real risk that enforcement will be frustrated.

Risks and sanctions	How ARROWS (office@arws.cz) helps
Missed statute of limitations deadline: Failure to initiate legal proceedings within three years of the due date results in loss of enforceability if the debtor raises the objection.	Timely action: ARROWS Law Firm calculates the exact limitation period (SML) and initiates proceedings before the claim expires.
Procedural noncompliance on pre-litigation notice: Failure to send a formal pre-litigation notice at least 7 days before filing results in denial of cost reimbursement.	Strict compliance: ARROWS Law Firm drafts notices that satisfy Section 142a OSŘ requirements and ensures proper delivery via Data Box or registered mail.
Choosing wrong court: Filing in an incompetent court causes delays and potential cost awards against you.	Jurisdiction analysis: We determine the correct competent court based on the contract and EU Brussels I bis Regulation.
Inadequate evidence: Submitting disorganized or untranslated documents leads to rejection of Payment Orders.	Evidence management: We organize and review evidence to meet the strict standards of Czech courts for expedited orders.
Debtor insolvency: Suing a bankrupt debtor is often a waste of court fees.	Pre-suit vetting: We check the Insolvency Register and Central Evidence of Executions before filing to assess economic viability.
Ineffective enforcement: Choosing a passive bailiff can lead to years of waiting.	Strategic enforcement: We work with effective bailiffs known for proactive asset seizure and coordinate the enforcement strategy.

Conclusion

Recovering unpaid invoices from Czech customers is a manageable legal process if approached with the correct strategy. The Czech legal system provides effective tools—Payment Orders, EOPs, and private bailiffs—but they require strict adherence to procedural rules. A Lithuanian company that navigates this independently risks falling into procedural traps.

ARROWS Law Firm is ready to help Lithuanian companies recover their unpaid invoices in the Czech Republic.

Contact the experienced lawyers at ARROWS Law Firm today at office@arws.cz for an initial assessment.

Frequently asked legal questions about recovering unpaid invoices

1. How long does it typically take to collect an unpaid invoice from a Czech customer?
If a Payment Order is issued and not opposed, you can have an enforceable title in 2–4 months. If the debtor defends the case, standard litigation can take 1–2 years. Enforcement (bailiff) timelines vary based on asset liquidity.

2. What is the statute of limitations?
The general limitation period for commercial debts is 3 years from the due date. The claim does not vanish automatically, but if the debtor raises the objection of limitation in court, the claim will be dismissed.

3. Can I recover my attorney fees?
Yes. Under the "loser pays" principle, the court awards the successful creditor reimbursement of legal costs (attorney fees based on the tariff and court fees), provided the mandatory pre-litigation notice was sent properly.

4. What is the Payment Order ( Platební rozkaz )?
It is a court decision issued without a hearing based on documents. The debtor has 15 days to pay or file a resistance (odpor). If no resistance is filed, it is final and enforceable.

5. How much is the court fee?
For a standard electronic payment order proposal, the court fee is typically 4% of the claimed amount (minimum CZK 1,000). For standard litigation, it is generally 5%. These fees are recoverable from the debtor if you win.

6. Can I check if the debtor has money before suing?
Yes. ARROWS Law Firm can check the Central Evidence of Executions and Insolvency Register to see if the debtor is already facing enforcement or bankruptcy.

Disclaimer: The information contained in this article is for general informational purposes only and serves as a basic guide to the issue. Although we strive for maximum accuracy in the content, legal regulations and their interpretation evolve over time. To verify the current wording of the regulations and their application to your specific situation, it is therefore necessary to contact ARROWS Law Firm directly (office@arws.cz). We accept no responsibility for any damage or complications arising from the independent use of the information in this article without our prior individual legal consultation and expert assessment. Each case requires a tailor-made solution, so please do not hesitate to contact us.