Penalty payments: how can you prevent a successful legal proceeding from losing its effect?

A trade name prohibited by the court continues to be used, confidential information is not returned, or an imposed obligation is simply ignored.

Fortunately, you are not powerless from a legal perspective. In such situations, a penalty payment can be an appropriate legal remedy to financially encourage the other party to comply with the judgment.

Over the years, penalty payments have proven to be a particularly effective remedy and are widely used today.

Since no one can be physically forced to perform or refrain from performing a particular act, a financial incentive proves to be the most effective means of exerting pressure.

However, there is an important pitfall when enforcing penalty payments. Many creditors lose part of their claims because they fail to act in time, resulting in the limitation of accrued penalty payments.

What is a penalty payment?

A penalty payment is an amount of money that becomes payable when a party fails to comply with a court order (other than an order to pay a sum of money).

For example, a court may:

• prohibit the continued use of a trade name;
• prohibit the sale of a particular asset;
• order certain documents to be handed over;
• prohibit the disclosure of confidential information;
• require certain works to be carried out.

If the obligation is not complied with, a predetermined penalty payment becomes payable.

The court may set the penalty payment:

• as a fixed amount;
• per infringement;
• per day of delay;
• possibly subject to a maximum amount.

For example, a court may order a company to pay EUR 1,000 per day for as long as it continues to use a prohibited trade name.

A penalty payment must be requested by one of the parties. The court will not impose a penalty payment on its own initiative.

The court decides whether or not to grant a request to impose a penalty payment and may even impose a higher penalty payment than the amount requested. When a penalty payment becomes payable, the full amount is payable to the creditor, irrespective of the actual loss suffered.

When do penalty payments start to accrue?

A penalty payment cannot start to accrue before the judgment imposing it has been served by a bailiff.

This service formally makes clear that compliance with the judgment is required.

Only from that point onwards can infringements give rise to penalty payments.

Moreover, a penalty payment will only become payable when the principal order is enforceable (and therefore, for example, not if enforcement is suspended by the filing of an appeal).

The payment order: the first step in enforcement

The payment order is the first formal step in compulsory enforcement if the penalty payment is not paid voluntarily. Through a bailiff, the debtor is formally ordered to comply with the obligations arising from the judgment and to pay the penalty payment. This constitutes the final formal demand before further enforcement measures (such as attachment) are taken.

The payment order must be sufficiently clear and complete so that the debtor knows exactly how much must be paid to avoid further enforcement or attachment proceedings. The order must contain an accurate breakdown of all amounts due, including the principal amount, interest, costs and calculated penalty payments.

In addition, the payment order must state why these penalty payments have accrued. Only then can the payment order have legal effect.

The payment order is therefore more than a formality and brings us to another important point of attention, namely the limitation of penalty payments.

The biggest pitfall: the short six-month limitation period

Penalty payments are subject to a short limitation period. An accrued penalty payment becomes time-barred six months after it becomes payable. The limitation period is assessed separately for each infringement and on a day-by-day basis. It must therefore be determined for each day which infringements occurred more than six months ago.

The short limitation period for penalty payments often proves to be a pitfall: failure to act in time can result in a significant part of the claim being lost.

Service of the payment order interrupts the limitation period, meaning that a new six-month period starts to run from that point.

It is therefore very important to act in time and to ensure that the payment order is carefully drafted.

A few examples may help clarify this:

A penalty payment per day

By judgment of 1 July 2025, the court prohibits the continued use of a trade name, subject to a penalty payment of EUR 1,000 per day. The judgment is served on 1 August 2025. From that point onwards, the penalty payments begin to accrue. Despite a demand to cease using the trade name, the prohibition is not respected. On 1 July 2026, the creditor has a payment order served. The creditor will only be able to recover the penalty payments that accrued between 1 January 2026 and 1 July 2026, as the penalty payments accrued up to 1 January 2026 are time-barred. In this way, the legislator seeks to encourage the creditor to act and to prevent the debtor from being financially ruined.

What if the maximum amount has been reached?

In the same example, the court sets a maximum amount for the penalty payment, namely EUR 1,000 per day, up to a maximum of EUR 100,000. Should accrued but time-barred penalty payments be taken into account when determining whether the maximum amount of the penalty payment has been reached? The answer is yes. The maximum amount therefore relates to the total of all accrued penalty payments, even if some can no longer be recovered because they are time-barred. Once the maximum amount has been reached, no further penalty payments can accrue or be recovered. If the judgment was served on 1 August 2025, infringements from 9 November 2025 onwards (100 days later, when the maximum of EUR 100,000 has been reached) will therefore no longer give rise to additional penalty payments.

Not every penalty payment is automatically preserved

The court prohibits both the sale of an asset and the advertising of that asset, with each prohibition subject to a penalty payment. The payment order claims a penalty payment only for the prohibited sale of the asset but makes no mention of the breach of the advertising prohibition, even though that breach is also taking place. The effect of the payment order in interrupting the limitation period will then not apply to the penalty payments accrued as a result of the breach of the advertising prohibition.

The enforcement judge as arbitrator

When a dispute arises concerning the enforcement of a penalty payment, it is brought before the enforcement judge. The judge determines whether enforcement is being carried out lawfully and properly. In doing so, the judge also examines whether the debtor’s conduct is contrary to the purpose and scope of the penalty payment imposed.

The enforcement judge may not amend, limit or extend the original order imposing the penalty payment. The judge must adhere to the content and wording of the judgment.

In an enforcement dispute, the enforcement judge will only determine whether the penalty payments being recovered have actually accrued and are not time-barred. The judge does not rule on other penalty payments that are not disputed.

The enforcement judge may also assess whether the creditor is abusing its rights when recovering the penalty payment. Suppose the debtor stops using the trade name but, through an oversight and in good faith, forgets about an online listing. The creditor does not notify the debtor but allows several months to pass before claiming a disproportionate penalty payment. In that case, the enforcement judge could reduce the amount of the penalty payment or deny the creditor the right to rely on it.

Conclusion

A penalty payment is undoubtedly an effective legal remedy, provided that it is correctly imposed and carefully enforced, taking into account the specific six-month limitation period.

It can make the difference between a judgment that remains a dead letter and a decision that is actually complied with.

The Litigation team of Moore Law’s Commercial Law department is happy to assist you, both in obtaining a penalty payment and in effectively enforcing it. This ensures that a favourable judgment also delivers results in practice.