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.
Dealing as we do on a daily basis with cross-border debts at Welbeck Solicitors, 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 it is 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
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 (EEO) 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.
In 2015, Welbeck Solicitors 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
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 (EPO) 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.
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 Treaty on European Union. 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.
Jeremy Boyle is a solicitor and partner at central London debt collection firm, Welbeck Solicitors LLP.