Cross Border Debt Recovery Post-Brexit
Jaunuary 2020
Pre-Brexit Debt Recovery from Clients within the EU
At the moment, UK businesses providing goods and services to clients in the EU will likely include a clause in contracts dealing with law and jurisdiction. This clause tends to outline that the parties agree that the courts within a certain UK constituency will have exclusive jurisdiction, where the laws of that jurisdiction will apply.
This clause allows firms to sue an EU based client in a local court, using either Scottish, English or Northern Irish law as appropriate. Once this judgement has been obtained, the business can then enforce it in a member state as if it were a local judgement.
Where a contract does not include such a clause and a dispute arises between parties residing in different countries within the European Union, the parties will utilise the European Payment Order. This is an EU law that determines which country’s laws apply, which courts have jurisdiction and how judgments should be enforced.
Post-Brexit Recovery within the EU
While we are now aware a deal with the EU is seeming likely, it is still currently unknown what exact systems will be put in place to help UK businesses recover judgment debts from EU clients post Brexit.
Although the future is uncertain it is likely that the collection of debts which have originated in the UK will remain unchanged and collection of debts from clients in the European Union will remain the same too until all negotiations have been completed.
As the exact terms of the UK’s exit from the EU have not yet been decided, we are unsure how and if the current processes are likely to change after negotiations have ceased. However, what we do know here at AMA is that preparation is always key when it comes to debt recovery, with uncertain times making this even more vital.
It is looking extremely likely there will be some changes when it comes to cross-border judgment enforcement and it is important to look at the difficulties this may cause in the marketplace. If the UK economy slows down due to the EU exit it is likely that some customers will face difficulties paying their debts. There is also a strong chance that unemployment may increase and UK goods prices will be on the up. It is therefore advisable to recover debts as soon as invoices become overdue, as opposed to waiting until we exit the EU.
Amidst this uncertainty what we can do here at AMA is reassure you that your debt recovery cases will remain in good hands, as it is our responsibility to make sure that we are fully aware of the new laws and agreements which will be made so that we can ensure our clients are properly advised.