Resolution of Disputes and Debt Recovery in Georgia: Judicial and Extrajudicial Mechanisms

1.1. General Procedure for Debt Recovery

Procedure for Filing a Lawsuit:
When opting for general litigation in a Georgian court, the creditor submits a statement of claim at the place of contract execution or the location of the defendant. As courts of first instance, district and city courts handle debt recovery cases, including Tbilisi, Batumi, Kutaisi, Telavi, and others. The claim is prepared in accordance with the prescribed format, always in Georgian, and may be submitted electronically through the official judicial system portal or in paper format. After registration, participants receive a login and password for access to the electronic case management system, where they can track case materials and the current status of the proceedings. A complete set of evidence confirming the existence of the debt must be attached to the claim. The lawsuit may be signed either by the plaintiff or their authorized representative acting under a power of attorney. Although having a lawyer is not mandatory, professional legal support significantly increases the chances of success in complex cases.
The duration of case review in the court of first instance depends on the complexity of the case and the court's workload, averaging seven months. The judge has the right to postpone the hearing or declare a recess. If the defendant fails to appear in court but has been properly notified, the court may issue a default judgment, which is subject to appeal. The court decision may be announced within one month after the completion of the case review.When filing a lawsuit, a state duty is charged. In debt recovery cases in Georgia, the fee is 3% of the claim amount, but does not exceed 3,000 GEL for individuals and 5,000 GEL for companies.

Appellate Proceedings and the Court of Cassation:
After the first-instance court issues its decision, the parties who disagree with it have the right to file an appeal within 14 days. Generally, appellate courts in Georgia review appeals with a panel of three judges, but in some cases, a single judge may handle the case. The state duty for filing an appeal is 4% of the claim amount, but does not exceed 5,000 GEL for individuals and 7,000 GEL for companies. If a party disagrees with the appellate court's decision, they have the right to file a cassation appeal with the Supreme Court of Georgia. The deadline for filing a cassation appeal is 21 calendar days from the date the party receives the reasoned decision/ruling of the appellate court. Cassation appeals are reviewed by a panel of judges specializing in legal interpretation and can take up to 6 months. The decision of the Supreme Court on a cassation appeal is final and cannot be further appealed.

Enforcement of Court Decisions
Once a court decision becomes legally binding (if no further appeals are made), the creditor receives an enforcement document, which is submitted to the enforcement bureau to initiate forced debt collection in Georgia. A state duty of 2% of the debt amount is charged to open enforcement proceedings, but this amount is reimbursed to the creditor after the debt is fully collected. Enforcement proceedings remain valid for 10 years. For foreign creditors, debt collection is conducted exclusively in Georgian lari, requiring them to open an account in a local bank or authorize a representative to manage the transactions.

Interim Measures
The success of debt recovery in Georgia largely depends on the timely application of interim measures. The court may issue a ruling on securing the claim, aimed at preserving the debtor’s assets until the final decision is made. The applied measures include seizure of liquid assets, prohibition on asset disposal, and temporary restrictions on transactions involving the debtor’s property, which significantly increase the chances of successful debt collection in Georgia.

Statistics and Key Features:

• Average case duration: First-instance court – 5–6 months, appellate proceedings – around 6 months, total duration – 1 to 1.5 years.
• The likelihood of successful debt recovery in Georgia directly depends on the timely application of interim measures and the completeness of the presented evidence.

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1.2. Simplified Proceedings (Uncontested Proceedings with a Court Bailiff)

Essence of the Procedure:
The simplified procedure is used for debt recovery in Georgia without a full court trial when the obligation is undisputed and the debtor does not contest the debt.

Procedure Stages:

1.Filing an Application:
The creditor submits an application to the National Bureau of Enforcement, providing supporting documents that confirm the debt. The documents must be in Georgian and can be submitted electronically or in paper format.
2.Debtor Notification:
A bureau officer sends a notice to the debtor, explaining the consequences of failing to fulfill obligations.
3.Debtor’s Response (Within 10 Days):
The debtor may fully or partially repay the debt, file a written objection, acknowledge the claim, or propose a settlement.
4.Decision Making:
If the debtor does not file an objection or acknowledges the debt, the enforcement bureau issues a decision in favor of the creditor and initiates forced debt collection.
5.If the Debtor Files an Objection:
If the debtor objects, the creditor must proceed with litigation. Any expenses incurred during the simplified procedure can later be recovered in court.

Cost:
The fixed fee for application processing is 200 GEL, and the fee for securing measures is 100 GEL.

Advantages:
• A decision can be issued within a few weeks, significantly accelerating the debt recovery process in Georgia.
• Lower legal costs if the debtor does not contest the claim.

Extrajudicial Dispute Resolution allows parties to avoid lengthy court proceedings, reduce costs, and maintain business relationships. Below are the key methods: arbitration in Georgia, mediation in Georgia, and notarial writ of execution.

2.1. Arbitration in Georgia

Concept and Features:
Arbitration in Georgia is a form of alternative dispute resolution where the parties, by prior agreement, submit their dispute to one or more arbitrators for consideration. This method is regulated by the Law on Arbitration, which is based on the UNCITRAL Model Law.

Key Features of Arbitration:

• Existence of an Arbitration Agreement:

Disputes arising from contractual relationships are referred to arbitration based on a pre-existing agreement between the parties.

• Flexibility of the Procedure:
• The parties independently select arbitrators (usually a panel of three arbitrators, unless otherwise agreed) and determine the rules of the dispute resolution process.
• Confidentiality:

Arbitration proceedings are private, ensuring the protection of commercially sensitive information.

• Timeframe:

The law provides for an arbitration decision to be issued within 180 days, with a possible extension to 360 days.
Advantages:

• Speed and efficiency – Limited appeal options allow the decision to take effect quickly.
• Reduced time and financial costs with proper case management.
• Adaptability to international disputes, making arbitration particularly beneficial for foreign companies.

Statistics and Practice:

• The average duration of arbitration proceedings in Georgia is 6–9 months.
• Arbitration decisions are nearly final, which enhances their effectiveness.

Examples of Arbitration Institutions in Georgia:

• Arbitration Chamber at the Georgian Chamber of Commerce and Industry
• Arbitration Center at the International Chamber of Commerce of Georgia

Cost of Arbitration:
The arbitration fees range from 1% to 3% of the claim amount, with minimum fees of 200–500 GEL.

2.2. Mediation in Georgia

Essence of the Process:
Mediation in Georgia is a voluntary process where a neutral mediator helps the parties reach a mutually beneficial agreement. The goal of mediation is not to determine a winner, but to achieve a compromise that satisfies both parties.

Key Features of Mediation:

• Informal Nature:

The process is not a formal court proceeding, allowing parties to maintain business and personal relationships.

• Speed:

Disputes can be resolved within 2–3 months.

• Low Costs:

The costs of mediation are significantly lower than court expenses.

• Mediator Qualifications:

Information about qualified mediators can be found in the registry on the website of the Ministry of Justice of Georgia (justice.gov.ge).

Outcome of Mediation:
At the end of mediation, the parties sign an agreement, which can be notarized. If a party fails to fulfill the agreement, a notary can issue an enforcement order. If mediation takes place within a court proceeding, the outcome may be formalized as a settlement agreement, which the court approves as long as it does not violate the law or third-party rights.

Statistics:
More than 60% of labor disputes in Georgia are resolved through mediation, significantly reducing the burden on the court system and lowering costs for the parties.

2.3. Notary's Executory Endorsement

Method Description:
In the case of an undisputed obligation, a notary's executory endorsement is used, which becomes the basis for the forced collection of the debt in Georgia without the need for judicial proceedings.

Advantages:
• Speed and Simplicity:
The execution of the executory endorsement allows the collection process to be expedited.
• Minimal Costs:
Compared to judicial procedures, the costs for notarial registration are significantly lower.
The executory endorsement (or execution order) is issued in the case of non-fulfillment of obligations under a notarial transaction and is used for forced collection of debt in Georgia.

Stages of Enforcement Proceedings

After the court decision becomes legally binding, the creditor receives an enforcement document, which is submitted to the enforcement bureau to initiate forced debt collection in Georgia.

Key Points:

• State Duty:

A fee of 2% of the debt amount is charged for initiating enforcement proceedings. This fee is refunded after the full execution of the court decision.

• Validity Period:

The enforcement document remains valid for 10 years.

• Conditions for Foreign Creditors:

Debt collection is conducted exclusively in Georgian lari, requiring foreign companies to open a local bank account or authorize a representative to manage the process.

• Restarting the Procedure:

If debt recovery fails within two years due to the debtor’s lack of assets, the enforcement proceedings are canceled. However, the statute of limitations is suspended, allowing the creditor to restart the process once new assets are identified.

Significance:
Effective forced enforcement of court decisions ensures that legal rulings are not just formalities but are actually implemented, securing the creditor’s rights.

The choice of debt recovery method in Georgia depends on multiple factors, including the amount of debt, the nature of the dispute, the parties' willingness to cooperate, and legal considerations. While litigation in Georgia remains a reliable tool, it can be time-consuming and costly. Extrajudicial methods, such as simplified proceedings, arbitration, and mediation in Georgia, offer flexible and efficient alternatives, allowing creditors to protect their interests more quickly.

The JUST Advisors team, consisting of highly qualified lawyers, arbitrators, and mediators, provides an individualized approach to each client. Our expertise extends beyond debt recovery in Georgia to the resolution of complex disputes in family law, labor law, investment issues, tax matters, and migration cases. We ensure comprehensive support at every stage – from initial consultation to the enforcement of court decisions, which is particularly crucial for foreign clients.

If you are facing debt recovery challenges in Georgia or need assistance with a dispute, trust the professionals. Contact the legal experts at JUST Advisors – your reliable partner in dispute resolution in Georgia.