Credit Manager Magazine 9/2021

50 CREDIT MANAGER MAGAZINE WRZESIEŃ / SEPTEMBER 2021 Cross Border Debt Collection in Europe Credit Management has long since evolved from a branch of accountancy, and it no longer falls solely under the label of “Credit and Collection’ or ‘Accounts Receivable’. It became a customer facing function and it involves activities beyond accounting. Especially contracts with customers in foreign countries require thorough screening not only in financial aspects but also regarding the legal environment of the customers home base. When it comes to debt collection the location of the customers assets and the legal system at the location is key to successful collection. Elisabeth Mayer-Wildenhofer Kraft Rechtsanwalts GmbH & Co KG, member of EuroCollectNet Lawyers Very often the terms and conditions of the contract regarding jurisdiction and applica- ble law are not in the focus of the contracting parties and the contract remains silent on the applicable law and jurisdiction or the seller is not able to negotiate domestic law and ju- risdiction. In case of delinquency or default of such customers for the company the first step is to obtain a title and the second step is to enforce the title, ideally in all jurisdictions where the debtor has assets. Since obtaining an execution title is often difficult, it is all the more important to consider questions of en- forceability regarding the target country be- fore acting. Fortunately, within the European Union a set of well-established rules enables efficient cross border debt collection thus ensuring that also when the company was selling to a customer in Europe who ends up seriously delinquent or in default the situa- tion is not hopeless. The following article therefore provides an overview how to obtain a judgement in Eu- rope (first part) and the enforceability of said judgement (second part) for successful cross border debt collection in Post Brexit and hopefully Post Covid Europe. I.Key Points of Obtaining a Judgement in Europe EuroCollectNet, Lawyers (ECN) the author’s debt collection network, published two bo- oks addressing those issues: Outlines of Debt Collection in Europe and Credit-Manage- ment Securities in Europe. Both books may be downloaded for free on the ECN website www.eurocollectnet.com . The debt collection book describes the re- quirements applicable in various European jurisdictions before a lawyer is able to start a case, the statute of limitation relevant in each country, the statutory interest rates and the rules for court action. Court costs as well as the procedures for instituting a valid court case vary. The book serves to evaluate the risk in case contractual problems arise or where there is a complete lack of contract or where it becomes necessary or advisable to pursue a claim with the assistance of a local lawyer. • Documentation of the case Since the majority of the court procedures regarding debt collection are simplified pay- ment order procedures the presentation of documents is not required upon filing of a claim. In case the defendant contests the claim, the case continues as normal civil proceeding and claimants have to present documents to prove their claim. Clients are well advised to have the following docu- ments ready: signed contract, purchase or- der, confirmation of purchase order, delivery receipts, invoices, terms and conditions, cor- respondence with the buyer etc. Documents in other language than the court’s language usually require translations. • Statute of Limitation The statute of limitation varies from one Eu- ropean jurisdiction to another. The statute of limitation ranges for B2B claims from 3 months to 10 years. It is therefore recommen- ded to start the collection process as soon as possible after due date and verify the statute of limitation or other local legal peculiarities with a local lawyer. • Statutory Interest Rate Due to the EU’s efforts to fight late payment (Directive 2011/7/EU – combating late pay- ment in commercial transactions) the statu- tory default interest rate is usually 8 % over base rate of the European Central bank. • Out of Court Collection Whereas it is customary that the seller or a lawyer or a collection agency send written re- “The efficiency of dunning letters should be reviewed critically, as it is a fact in debt collection practice that delays in the collection process significantly increase the risk of collectability. One or two reminders with short payment deadlines should be the maximum.” BUSINESS