“POST BREXIT – HOW DO I RECOVER A DEBT FROM A CLIENT IN EUROPE?”
Introduction
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 European wide expedited regime aimed to ease the recovery of cross-border debts for both citizens and businesses.
Jurisdiction
Dealing as we do on a daily basis with cross-border debts at James Edward & Associates, 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 your 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 that your debtor will probably have to appoint a solicitor to deal with the matter. Who knows he may decide at that point that it would be more beneficial to pay your invoice rather than hire a lawyer!
If the defendant does not reject the claim or fails to appear in the proceedings after initially objecting to the claim and you obtain a judgment what next?
Member states can enforce ‘uncontested’ judgments under the European Enforcement Order Regulation. A judgment is considered ‘uncontested’ if the judgment comes via a consent order approved by a court, or if the defendant either 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 the court of the member state.
Example
In 2015 James Edward & Associates acted for an English lady resident in Spain who had secured a judgment in the Spanish courts against another British couple who we discovered had assets in London.
Having registered the Spanish judgment in the High Court in London, we were able to place a Charging Order over the judgment debtor’s London property which we found through our tracing team. The settlement of the judgment followed swiftly!
European Payment Order (“EPO”)
Although a judgment on an ‘uncontested’ claim may be obtained as above in addition as of 12 December 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 without the need for a declaration of enforceability nor a European Enforcement Order certificate.
An EPO is automatically enforceable in every EU country if it is uncontested by the defendant.
Example
By way of example, we act for condominiums of owners in Portugal who raise management charges through the urbanisation against British residents owning second homes on the Algarve.
Once we have details of the management charges from our Portuguese clients, we can apply for an EPO in an English county court and once obtained, the EPO can be enforced like any other English judgment.
This could be via the Enforcement Officer (formerly known as the Sheriff), a Third Party Debt Order, Attachment of Earnings Order or by placing a Charge over the debtor’s home.
What is the position post-Brexit?
It is unlikely that there will be an immediate change.
The UK’s exit from the EU will not take place immediately. The procedure for a member state that withdraws from the EU is set out in Article 50 of the Lisbon Treaty. 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.
Author’s note
The author, James Edward is a solicitor and partner at James Edward & Associates, based in central London – info@jamesedwardassociates.com– Twitter | https://twitter.com/jbsummit
Disclaimer
The information and any commentary on the law contained in this article is provided free of charge for information purposes only. No responsibility for its accuracy and correctness, or for any consequences of relying on it, is assumed by any member or employee of James Edward & Associates. The information and commentary does not and is not intended to amount to legal advice and is not intended to be relied upon. You are strongly advised to obtain advice from a solicitor about your specific case or matter and not rely on the information or comments in this article.