Partner at specialist debt recovery firm Welbeck Solicitors, Jeremy Boyle, discusses the processes creditors can use to recover debt from businesses in Europe, and how they might change in a post-Brexit world
| Jeremy Boyle |
Partner, Welbeck Solicitors
So you did some work for a client in Madrid and you are based in England.
In the event of non-payment, how do you recover the sum due to you under your invoice for professional accountancy services provided?
Prior to the regulations referred to below, if a small business or consumer needed to recover money from a debtor in another EU country, such recovery was difficult, time consuming and expensive.
Challenges included differences in national or domestic laws, the cost of hiring legal expertise and translating documents.
Accordingly, the European Commission proposed a Europe-wide expedited regime aimed to ease the recovery of cross-border debts for both citizens and businesses.
Dealing as we do on a daily basis with cross-border debts at Welbeck Solicitors, we always advise clients to ensure that they regularly update their terms of business.
For the sake of expediency, one of the main clauses we like to see in agreements reads something along the following lines:
“This engagement letter is governed by and construed in accordance with English law. The courts of England will have exclusive jurisdiction in relation to any claim, dispute or difference, concerning this engagement letter and any matter arising from it”.
It is likely that post-Brexit, the EU member states will still recognise a choice of English law so its perhaps of paramount importance that such a clause is inserted into contracts sooner rather than later.
Presently, there are two useful tools in a creditor’s armoury:
European enforcement order (EEO)
The chances are that if you do have such a clause in your terms of business you can secure a judgment in the English court.
At the very least it will encourage your debtor to engage with you in the English courts which will mean they will probably have to appoint a solicitor to deal with the matter.
Who knows – the debtor may decide, at that point, that it would be more beneficial to pay the invoice rather than hire a lawyer.
If the debtor does not reject the claim, or fails to appear in the proceedings, after initially objecting to the claim and you obtain a judgment – what’s next?
Member states can enforce ‘uncontested’ judgments under the European enforcement order regulation.
A judgment is considered ‘uncontested’ if it comes via a consent order approved by a court or if the defendant did not reject the claim, or failed to appear in the proceedings, after initially objecting to the claim.
If the EEO regulation applies, a creditor may apply for an EEO certificate from the court where the judgment was entered.
Once certified, the judgment is automatically enforceable in the court of any other member state as if the judgment had been made in that particular state.
European order for payment (“EOP”)
Although a judgment on an ‘un-contested’ claim may be obtained as above, in addition as of December 12 2008, use may be made of the uniform procedure called a European order for payment process.
If a European order for payment is obtained, this order is automatically enforceable once a declaration of enforceability has been obtained without having to get a European enforcement order certificate.
An EOP is automatically enforceable in every EU country if it is uncontested by the defendant.
What is the position post-Brexit?
It is unlikely that there will be an immediate change.
The procedure for a member state that withdraws from the EU is set out in Article 50 of the Treaty on the European Union.
It provides for the UK to negotiate a withdrawal agreement with the EU and for the treaties to apply to the withdrawing state after two years, unless there is unanimous agreement to extend that period.
Posted on 22nd November 2016 by Marcel LeGouais
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