Chasing the debt

The growth in cross-border trading activity, particularly since 1992, has meant the problem of late payment has emerged on a new stage. Statistics show that debts are paid more quickly by debtors in northern Europe than in southern Europe. Indeed, many UK companies find northern European customers pay up more quickly than those in the UK.

Law firms and debt collection agencies have found their clients now want debts pursued throughout the Continent. It is not enough to offer an introverted debt collection service covering only the UK. Debt collectors have had to swot up on jurisdictional aspects and develop ties with colleagues throughout the continent who can provide agency services on their behalf.

Solicitors and debt collection agencies will have to devote more time and effort in building relationships with foreign agents if they are to offer the comprehensive service sought by UK businesses.

International debt collection has been codified throughout Europe by the 1968 Brussels Convention on enforcing judgments and the 1989 Lugano Convention. It allows a business to sue a foreign debtor in a UK court if this is incorporated as a contractual term. Debt collectors need to lend this advice to clients to give them this sort of tactical edge on the European market.

A common complaint about European lawyers and agents is that they are too slow and expensive. This must be addressed, as clients will not understand why they can have a swift and low-cost computerised service when recovering UK debts, but not on overseas debts. Why should the business person's credit control and debt recovery cost more simply because the debt is in a different part of one large market?

The solution may be to set up European-wide groups or consortia, where fixed agency costs arrangements can be set up between debt collectors in all

European countries. We cannot always advise clients that they are entitled to sue a foreign debtor in the UK courts and so an approved agent in the debtor's jurisdiction must be used. Speed is important and clients do not wish to wait while their lawyer paws through the telephone directory.

Another problem is that some foreign agencies, for example in Belgium, cannot obtain judgments by themselves for a client. It would be of little use to a UK debt collector wishing to instruct a Belgian debt agency. Knowledge of who can do what in each European country is therefore vital.

Continentals will want us to make greater efforts to bridge the language gap, particularly where modem links are established. Even a lawyer who sues every foreign debtor through the UK courts will usually have to enforce it in the debtor's country, making regular ties with familiar foreign agents essential.

The limitation of actions in various jurisdictions is another important element of European debt collection. For example, those debts relating to goods or services provided are subject to a two-year limitation period in Germany. In France there is a 10-year limitation period for debts between business entities. Lawyers must advise clients accordingly so UK business can maximise its cashflow.

Richard Piper is a solicitor at Eversheds in Leeds.