Debt Recovery Across Borders

In a globalised business world, laws transcend borders as often as business opportunities. It is therefore extremely important to consider the impact of paperwork, local laws and possible legislative agenda changes when doing business abroad.  

It is key to ensure that contractual terms agreed are clear, understood by all parties and properly translated and also to consider what happens if there is a dispute, non-payment or a claim against your business.

Which Court in which country will have jurisdiction over the dispute and which law applies to any dispute that arises, for example German law could apply in English courts if the contract provides that as a condition.  Start with the end in mind and also looking on the negative side if things go wrong which is an important starting point. What if things go wrong and how do we resolve them is a key factor. 

Assuming it is better to apply English Law and jurisdiction, the best way to ensure that English Law applies and the Courts of England and Wales have exclusive jurisdiction to deal with any dispute or claim arising is to specify exactly that in the contract which is signed by duly authorised representatives of both parties. The basic rule is that is that if the parties to the contract have agreed to adopt the Law and the Courts of a particular Jurisdiction then any subsequent disputes if not resolved will be dealt with by those Courts and subject to which Law applies.  

The best approach is to obtain a written agreement with a translation signed by both parties. Signatures should be by persons with authority to bind both businesses to an agreement. Ideally an original document properly executed as opposed to an exchange of emails or faxes is the best approach. If the contract is dependent upon email exchanges for example that could create an argument over jurisdiction and also risk. For example, if a business supplies goods and all services but despite the customer making payment they sue for breach of contract and damages outside of this jurisdiction this could create an issue. The important point is that the business must also be insured against the risk and the terms of the contract must be incorporated properly by both parties signing them or included in the agreement reached. If the terms are not incorporated there is a problem because the jurisdiction rules applicable could be disputed and parties could walk into a situation where a foreign jurisdiction applies without that originally being the intention at the start of engaging into a contractual relationship.  This as a preliminary issue can of course be very expensive and is an important consideration.

If for example the claim is for a debt and the Debtor resides outside the UK it is not always straight forward to issue proceedings in England and Wales and before proceedings are started it is always necessary to seek the Court’s permission to start proceedings here. The key is always to seek legal advice from the outset when a dispute is about to arise and also how to start proceedings particularly following Brexit in order to navigate through the matrix of conventions and law that apply to any given situation.  

Businesses may have a clear understanding of debt recovery legislation in the UK and collecting a debt from abroad doesn’t have to be a tricky issue. It is essentially a matter of credit control procedures being in place in the first instance which are both established and agreed with a customer.  The starting point is to obtain payment in advance or a letter of credit which is a guarantee of payment usually by a bank. The approach to credit control should be no different between dealing with a customer in this jurisdiction or abroad. It is vital to know your customer. Who are you dealing with and what is their financial worth having taken the appropriate credit checks.  Usually payment on account or a letter of credit will suffice to ensure payment is made. In the event that payment is due and not made the stages of payment should coincide with the delivery of the goods and or services so that the supplier has terms which entitle it to suspend or stop providing the goods or services until issues are resolved. 

When working with overseas businesses, it is important to stay aware of warning signs of an inability or unwillingness to pay debt and take effective action accordingly. Taking “action” early is important and having established procedures in place to do.  Upon the assumption that things may go wrong always ensure you can instruct Lawyers that have established connections with other law firms in the jurisdiction where your customer is based.  That is to have UK Lawyers experienced in overseas debt recovery with the relationships already in situ. It is one thing to be able to start proceedings here, obtain judgement etc but the important point will be when it comes to enforcement. Whilst judgements here are recognising Europe how will a creditor enforce judgment outside jurisdiction. How long will it take and how costly and effective will the enforcement process be?  Research and establishing links with reliable foreign legal agents is an important consideration.  For example, Else Solicitors used Bierens Incasso based in Holland who have a network of offices throughout Europe as a Litigation and Enforcement Advisory Partner for clients dealing with European Businesses and locally based Lawyers for debts in jurisdiction outside Europe. 

Chasing debts to create a precedence is a useful approach.  It should be known within the relevant industry that a business transacting with customers overseas will not simply write the debt off rather than chase it.  In one case Else Solicitors acted for a UK based Client and dealt with a Debtor based in India. To successfully enforce the debt we had to deal with a Delhi based Director of the Debtor company upon which we were instructed to recover a significant sum.  Ultimately the best approach in this case was to maintain a dialogue and working relationship with the Director of the Debtor company who often had to travel to London to deal with business issues.  Because of this dialogue and connection we were able to meet with the Debtor in London and agree an amount to settle the debt. There was no dispute apart from the Debtor’s Director being insistent upon only paying the amount that he decided that he wanted to pay in specific circumstances. There were other UK companies apart from our Client involved in chasing this particular Debtor however meeting him was the main and most important approach which eventually recovered payment. The one thing that that sticks in my mind about this dialogue was that this particular Debtor made it clear that he would only pay the amount which he chose to pay and if we chose to take a harder line and pursue enforcement through the English Courts and enforce a judgement in India he would delay and tie the matter up in knots.

Similarly, knowing the Debtor and having a proper dialogue if possible with the Debtor is important to overseas collection in as much as it is important to collections in the UK but perhaps more so.  If it comes to enforcement having the contacts in Debtor’s jurisdiction is key and researching how to enforce payment in advance should also be a consideration if things go wrong. 

Although the UK has left the EU, it is still important to understand EU law and how it relates to business you are working with within the single market. This is because EU law still applies to your Debtor and can bestow upon them privileges under EU law which you must navigate. In the UK it can take a significant period of time to obtain a judgement if a matter becomes defended and the claim is in excess of the small claims limit it can eighteen months to two years to bring a case to trial. With the court delays occasioned by Corona Virus there are significant delays to most cases in the UK at present and we would expect this also to be the position throughout Europe and Worldwide. Choice of jurisdiction and researching which jurisdiction is best suited to the particular product or services supplied is an important consideration.  The cost of taking action in the English Courts is for example much higher in terms of court issue fees (which is the amount paid to start proceedings to the courts as opposed to the lawyers). In Holland for example the Court fees are cheaper and in other jurisdictions the cost of obtaining satisfaction or a judgment may be more expensive or cheaper. Again, establishing the links with legal representatives in other jurisdictions is key and again instructing lawyers that regularly instruct foreign legal agents is also an important consideration. It is usually a question of how long is a piece of string in determining whether or not a case can be won quickly or it could take several months or years. In comparing EU jurisdictions to England and Wales the best approach is to research the position and not to rely and wait until things go wrong. Probably the best approach would be to agree suitable mediation process followed by an arbitration process depending on the value and the nature of the claim.  By mediation the matters can be kept confidential and hopefully resolved between two pragmatic and beneficial commercial contracting parties.   

If however the situation involves a debt that has gone bad and the Debtor is struggling to pay whichever jurisdiction is chosen by contract or whichever jurisdiction is chosen by the creditor in which to pursue the Debtor ultimately it may be appropriate simply to write the debt off rather incur the expense delay and additional time involved in pursuing the matter. 

Chris Else is managing partner at Else Solicitors and can be reached at

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