Debt collection in Europe

Transcription

1 Debt collection in Europe MONARD - D HULST ADVOCATEN - AVOCATS - ATTORNEYS-AT-LAW - DHULST.BE

2

3 Debt collection in Europe Tillo Mestagh - Arthur Lahousse MONARD - D HULST ADVOCATEN - AVOCATS - ATTORNEYS-AT-LAW - DHULST.BE 1

4 2

5 foreword In our globalized world, relations between people and companies from different countries have become an integral part of our day to day life. Nowadays, we can hardly imagine a company aspiring to limit its activities in only one country. International trade relations have become inevitable. Despite of the unassailable advantages and resources of all kinds this evolution has brought, it also engenders some difficulties, for example for the recovery of trade arrears. What if a German customer doesn t pay the invoice sent by his Turkish supplier? As an impulse to go through with this, we like to start with a framework of the debt collection procedures in some of the main countries of the European Union. This comparative research shall provide debtors a first idea of the different debt collection possibilities in France, Germany, Spain, The Republic of Turkey, Italy, The Netherlands, The United Kingdom, Poland and Belgium. For this purpose, we systematically explored the different opportunities in the amicable stage as well as in the judicial stage. We also bring up the steps to follow for the enforcement of a foreign judgement. Monard-D Hulst has a long history of providing international legal and business advice and forms part of a broad European network. 3

6 4

7 1. FRANCE Amicable stage Before proceeding to the judicial stage, the creditor still has the possibility to try to collect the debt in an amicable way. In France, there are no specific formalities and conditions for the dispatch of a reminder to the debtor. The reminder has to be sent by letter with acknowledgement of receipt. There are no legal costs and the professional costs depend on the time a professional will have to spend examining the file. In France, it is impossible to obtain financial information about physical persons but people can collect information about companies. The attorneys, the bailiffs and debt collection offices are entitled for debt collection. Mortgage and conservatory attachments on for example bank accounts, rents, wages, and so on, are possible for the creditor in order to obtain guarantees for the payment. In case of late payment, the creditor can charge the debtor with the legal interests, the conventional interests and if defined therein, with the interests mentioned in the general sales conditions Judicial stage Besides the normal procedure, in France, there is a simplified procedure of injonction de payer for contractual debts only. This is a quick and not contradictory procedure. The defendant-debtor can take an appeal against this decision. Regulation (EC) 1896 (2006) creating a European order for payment procedure and regulation (EC) 861/2007 establishing a European Small Claims Procedure are also well known and well used in France. The prescription period for introducing a claim in court is 5 years. The legal costs and fees for a procedure in national courts are based on a flat-rate amount. For example, there is a registration charge for injunction of payment of 38,87 and 99,64 in case of opposition. The costs are the same fore every procedure, independent of the amount that has to be collected. The bailiff fees have been fixed at 12% for debts until 125, at 11% for debts from 126 to 610, at 10,5% for debts from 610 to 1525 and at 4% for debts from The information has been collected through a questionnaire, completed by ID AVOCATS, a leading attorney office in Lille, France. 2 Article 10, Decree number of 12 December 1996 concerning bailiff tariffs in civil and commercial matters, modified by decree number of 22 may

8 In France, injunctions and seizures are possible in order to protect the rights of the creditors as much as possible. Though, there are 2 conditions to obtain the authorization of the court: you will have to provide prima facie evidence that your claim is founded and there has to be a serious risk of non-payment of the debt. There is no time-limit or time consumption for the procedure in the judicial stage. In France, a court doesn t accept documents in a foreign language. The judge appreciates if he will award a compensation to the claimant for the professional fees (attorneys) he has paid. There is also a possibility for the recovery of judicial expenses (court fees). Interests will have to be paid at the applicable legal rate. Penalties for late payment are dependent on the general sales conditions. The creditors in France usually involve bailiffs and debt collection offices in debt collection procedures Enforcement of a foreign judgement For an exequatur 3, a request to the court is necessary. There are no formalities or conditions for a European enforcement order 4. The only professionals who are entitled to execute are bailiffs. There is a time-limit of 10 years from the date of the judgement for the enforcement of that judgement. There are no legal costs and fees for the enforcement of a judgement in France. For the execution, you need to appeal to a bailiff. The bailiff fees for execution are the same as mentioned up here. 3 An exequatur is the homologation of a judicial decision obtained in a foreign country, given by a court of the country where a decision has to be executed and is based on an ex parte application. 4 The European Enforcement Order for uncontested claims is a method of enforcing foreign judgments within the European Union without the need of any intermediate proceedings, such as exequatur. 6

9 2. GERMANY Amicable stage There are no formalities and conditions for the dispatch of a reminder to the debtor in Germany. The attorney fees are fixed according to the law on remuneration of lawyers and depend on the value of the dispute. It is possible to negotiate about fees, but they can t be lower than the statutory rate. In Germany, it s possible to obtain financial information about physical persons or companies through credit agencies and local courts. There is a list of insolvent debtors and a publication of insolvency proceedings. Only attorneys and authorised debt collection agencies are entitled for debt collection. Bailiffs are official organs for enforcement by execution. Generally, they are not involved until the creditor has obtained a title of execution. The debtor and the creditor can agree upon a guarantee for the payment. There are no other possibilities to obtain a guarantee. In case of late payments, the annual statutory default rate of interest is 5% above the basic rate 6 of interest with regard to consumers and 8% above the basic rate with regard to entrepreneurs Judicial stage In Germany, there are no special chambers in court for the recovery of debts. There are two different possibilities: a summary proceeding, the German order for payment procedure, and the classical court action. Regulation (EC) 1896 (2006) creating a European order for payment procedure and regulation (EC) 861/2007 establishing a European Small Claims Procedure are not very well known and used in Germany. Foreigners can use the German order for payment procedure. The local court of Berlin-Schöneberg has exclusive jurisdiction when foreigners apply for this procedure. The prescription period for introducing a claim in court is, in general, 3 years from the end of the year in which the claim arose and the creditor obtains knowledge of the circumstances giving rise to the claim and the identity of the debtor, or would have obtained such knowledge if he had not shown gross negligence. The legal costs and fees depend on the value of the dispute. It s not a percentage of the debt, but the fees are fixed in a fee scale. The professional costs and fees also depend on the value of the dispute. Negotiated fees are possible, but they can t be lower than the statutory rate. 5 The information has been collected through a questionnaire, completed by THUM&CIE Rechtsanwälte, a leading attorney office in Frankfurt, Germany. 6 The basic rate of interest is based on the reference rate, which is the rate of interest for the most recent main refinancing operation of the European Central Bank before the first calendar day of the relevant six-month period, and is announced by the Deutsche Bundesbank in the Federal Gazette without undue delay after the day mentioned here up. 7 Section 288 of the German Civil Code (BGB), (note: This provision also serves in part to implement Directive 2000/35/EC of the European Parliament and of the Council of 29 June 2000 on combating late payment in commercial transactions). 7

10 Injunctions and seizures in order to protect the rights of the creditors are only possible in case of urgency. Prima facie evidence has to be furnished. There is no time-limit or time consumption for the procedure in the judicial stage. In Germany, a court doesn t accept documents in a foreign language. Professional fees are recoverable to the extent of the statutory remuneration provided for in the law on the remuneration of lawyers. There s also a possibility of recovery of the court fees and the interests, at the statutory default rate. This rate is limited to 5% above the basic rate for interests awarded with regard to a judgement. The assertion of further damage is not excluded, but is subject to provableness. The creditors in Germany usually involve bailiffs, debt collection offices and credit agencies in debt collection procedures Enforcement of a foreign judgement In order to obtain an exequatur, you need a notarised German translation of the foreign decision which also has to be recognized, an enforcement order of this foreign judgement (which is obsolete if the judgement was awarded by a court belonging to an EU member state), and an execution clause. A European enforcement order has to be translated in German. The only professionals who are entitled to execute are bailiffs and local courts. There is a time-limit of 30 years from the date of the final judgement for the enforcement of that judgement. The legal costs and fees for enforcement of a foreign judgement vary depending on the claim to be secured, because the law provides different possibilities for enforcement. 8

11 3. SPAIN Amicable stage There are no formalities or conditions for the dispatch of a reminder to the debtor, but it is advisable to send a prior claim to the debtor by burofax 9. In Spain, an attorney can freely negotiate with his client. Usually, at this stage, a hourly rate is applied. It s possible to obtain information about physical persons and companies. At this stage, there are no specific requirements for professionals. Though, a lawyer is recommendable. The creditor can get guarantees for the payment of the debt. Unless both parties reach an agreement, at this stage, no interests or penalties can be charged for late payments. Later, before the court, legal interests will be applied Judicial stage In Spain, the only way to start a procedure for debt recovery is to introduce a court action. Regulation (EC) 1896 (2006) creating a European order for payment procedure and regulation (EC) 861/2007 establishing a European Small Claims Procedure are well known and well used in Spain. Depending on the documents the creditor can display, the prescription period for introducing a claim in court can vary from 1 year to 3 or 15 years. The costs and fees for a national procedure are based on a flat-rate amount. There are taxes between 90 for debts less than and 600 in case of a high court appeal according to Law 53/2002, of the 30th December, on Tax, Administrative and Social Order Measures. To determine the lawyer fees, two variables have to be taken into consideration: the type of proceeding and the amount involved in the proceeding. For example, when the amount of the proceeding is up to in an ordinary proceeding, the lawyer fees are recorded at Injunctions and seizures are possible in order to protect the rights of the creditors as much as possible. There is no time-limit or time consumption for the procedure in the judicial stage. Spanish law establishes that the documents must be in Spanish, but if the other party doesn t complain about that, it could be accepted. It is recommendable to translate the documents before the legal actions are initiated to make sure they will be accepted. Professional and legal fees are recoverable and the amount is fixed by law, respectively by the court, according to bar association rules. Interests can be recovered as well. In case of late payments, the debtor will be charged with the legal interests. 8 The information has been collected through a questionnaire, completed by CASALS ABOGADOS, a leading attorney office in Barcelona, Spain. 9 Burofax is an official fax with legal value. 9

12 The professionals who are usually involved in debt collecting procedures are debt collection offices and credit insurers Enforcement of a foreign judgement An exequatur is delivered if the executory letter meets the necessary requirements in the country in which it was drafted. The only professionals who are entitled to execute are the court lawyers ( procurador ) and the attorneys. There is a time-limit of 5 years from the date of the final judgement for the enforcement of that judgement. 10

13 4. REPUBLIC OF TURKEY Amicable stage It s possible to send a reminder or a notification through the notary public or by a registered and reply paid letter before taking a legal action. For physical persons, it is possible to check whether there exists a lawsuit against them or not by using the ID card information of these persons. For companies, it is possible to check whether the company is insolvent or carries on a business from the trade registry. It is always possible to obtain guarantees from a debtor in consideration of his debt such as a surety, letter of guarantee, pledge or hypothec Judicial stage A claimant may either introduce a court action or directly initiate enforcement proceedings. Regulation (EC) 1896 (2006) creating a European order for payment procedure and regulation (EC) 861/2007 establishing a European Small Claims Procedure are unknown and unused in the Republic of Turkey. The prescription period to introduce a claim in court depends on the grounds of the claim. The prescription period may differ from 6 months to 10 years. Usually, the legal costs and fees for a national procedure are calculated according to a percentage (5,94%) of the amount that is claimed. However, pursuant to the laws of the Republic of Turkey, some types of proceedings require a flat-rate amount of approximately 100, increased by other costs such as expert fees, survey fees, translation fees, etc. If the legal fees are a flat-rate amount, the attorney fee will also be a flat-rate amount. The attorney fee tariff is drafted by the Bar Association of the Republic of Turkey every year. The flat-rate amount of attorney fees varies according to the type of courts. Mostly, the attorney fee is a percentage of the claimed amount. These percentages vary according to certain fixed amounts. For example, if the amount of the debt is Turkish Liras, the attorney fee is 12% from 0 to Turkish Liras and 11% from to Turkish Liras. Injunctions and seizures are possible in the Republic of Turkey. There is no time limit for the procedure in the judicial stage. It may take a very long time. In the Republic of Turkey, a court doesn t accept documents in a foreign language. Professional fees and court fees are recoverable if an agreement can be reached between the parties. The recovery of interests is possible but the creditor has to reserve this right at the moment he demands his receivables, otherwise the interests won t be allowed. Parties can freely agree upon the interest rate. In the absence thereof, the related law provisions will be applied. Conventional penalties for late payments can also be agreed between parties. 10 The information has been collected through a questionnaire, completed by REİSOĞLU-ENSARİ-DOĞRUL LAW FIRM, a leading Turkish law firm in Ankara, Republic of turkey. 11

14 Bailiffs, debt collection offices and credit insurers are never involved in debt collection procedures. In the Republic of Turkey, an enforcement officer has to be involved for collecting the money if a debtor doesn t pay in an amicable way or after a court judgement Enforcement of a foreign judgement An exequatur is needed for the enforcement of a foreign judgement in the Republic of Turkey, but there are no specific formalities. Only attorneys are entitled to execute foreign judgements. There is no time-limit for the enforcement of a foreign judgement. The costs and fees for enforcement depend on the subject matter of the judgement. If it doesn t concern receivables, the legal costs and fees and the professional fees are fixed amounts. If the subject matter regards receivables, the same percentages as mentioned here up will be charged. 12

15 5. ITALY Amicable stage There are no formalities and conditions for the dispatch of a reminder to the debtor in Italy, but it is highly advisable to send the reminder through a Registered Letter. The costs and fees for lawyers are set tariffs which rise in proportion to the amount due by the debtor. Lawyers tariffs are fixed in the Decree of the Ministry of Justice n. 127 of 8th April 2004, in force from 2nd June In Italy, it s possible to obtain financial information about physical persons or companies. Only attorneys and debt collection agencies are entitled for debt collection. There are many possibilities for the creditor to obtain guarantees for the payment. In case of late payments, legal interests are charged, and more often in commercial matters, interests calculated according to Dir. 200/35/EC combating late payment in commercial transaction Judicial stage In Italy, the summary proceedings are mostly used, but the plain court action is always possible. If the debtor contests the claim, the summary proceedings become ordinary ones. Regulation (EC) 1896 (2006) creating a European order for payment procedure and regulation (EC) 861/2007 establishing a European Small Claims Procedure are also well known and well used in Italy. The prescription period for introducing a claim in court is 10 years. There are shorter prescription periods in particular matters, like companies-related and transportation-related disputes. The costs and fees for a national procedure are as follows: in summary proceedings, there are fixed costs and court taxes, depending on the amount claimed, which vary from 100 to 500. Lawyer fees vary as well, from 1000 for smaller claims to higher sums for more substantial claims. Usually, an estimation is made in advance. The fees rise if the debtor contests the debt, starting an ordinary action. Injunctions and seizures are possible in order to protect the rights of the creditors. There s no time-limit for the procedure in the judicial stage. In Italy, a court accepts documents in a foreign language because there are no specific requirements in the civil procedure code, although documents are normally translated into Italian. Attorney fees are partially recoverable and court fees entirely. The interests can be claimed at the same rate as mentioned here up. Generally, when the judge issues a decision in favour of a creditor, he condemns the other party to pay all fees and expenses of the judicial action to recover the credit. However, the amount does not include what s been paid in the pre-judicial stage, like fees/expenses for sending letters to the debtors or doing credit researches on him, and some fees related to non strictly-judicial activity conducted during the judicial stage (e.g., a meeting with the client to discuss the strategy during the proceedings). 11 The information has been collected through a questionnaire, completed by DE NARO PAPA E ASSOCIATI STUDIO LE- GALE, a leading law firm in Milano, Italy. 13

16 Bailiffs can be involved in debt collecting procedures, provided that the debtor owns an enforceable title. Debt collection offices and credit insurers can always be involved Enforcement of a foreign judgement Specific conditions and formalities for enforcement of decisions coming from the EU are set in Regulation 44/2001 and in the Regulations mentioned above sub 5.2. For judgements coming from a non-eu country, substantive conditions similar to those in Reg. 44/2001 apply, but the proceedings may be longer. Only bailiffs are entitled to execute. There is a time-limit of 10 years from the date of the judgement for the enforcement of that judgement. The costs for the enforcement of a foreign judgement depend on the amount of the claim and on the procedure used. 14

17 6. THE NETHERLANDS Amicable stage The creditor can write a demand to the debtor asking him to fulfil the payment. For this purpose, no special conditions or formalities are required. The written warning needs to contain a reasonable period of time which gives the debtor the opportunity to fulfil the obligated payment. The creditor can write the warning himself. It is important to save the evidence that the debtor received the warning. Another possibility is to have a lawyer, a bailiff or a debt-collection agency writing the warning. For the professional costs, the attorney and the creditor can agree upon certain percentages which vary in proportion to the amount due by the debtor. The costs may also be based on a hourly rate. For financial information about physical persons, the creditor can appeal to a detective agency who can investigate the financial position of the debtor. It is also possible to consult the register for properties. This register is accessible to the public. The financial facts of a company can be consulted in the trade register. It is also possible to hire a detective agency for information about companies. In the amicable stage, everyone is entitled for debt collection, but in practice, creditors rely on bailiffs, debt collecting agencies and lawyers. Pre-judicial seizures on for example a bank account or a property are possible in order to obtain a guarantee for payment. Depending on the contract, it is possible that the debtor needs to pay contractual interest in case of late payment. During the time of default, the debtor has to pay legal interests Judicial stage For debts under (this limit of competence will be raised probably around July 2011 up to ), the creditor needs to bring the case before the subdistrict court which has jurisdiction. No legal representation is required. For debts above (again under reserve of the probable raising to ), the creditor needs to bring the case before the civil section of the court which has jurisdiction. Legal representation is required here. Regulation (EC) 1896 (2006) creating a European order for payment procedure and regulation (EC) 861/2007 establishing a European Small Claims Procedure are well known and well used in The Netherlands. The prescription period for an action is 5 years from the day the claim has become due and payable. The action that needs to take place doesn t have to be the introduction of a claim in court, but if the creditor doesn t take any measure against the debtor within 5 years, it won t be any longer possible to introduce a claim in court. 12 The information has been collected through a questionnaire, completed by DIRKZWAGER ADVOCATEN & NOTARIS- SEN, a leading law firm in Arnhem, The Netherlands. 15

18 The costs and fees for a national procedure are between 71 and 5.894, depending on the amount of the claim, the court instance (court of first instance, court of appeal, Supreme Court) and the capacity of the parties. The costs of debt collecting agencies or lawyers can be based on a hourly rate or on graduated rates. Costs for formal bailiff services are based on a decree on tariffs for bailiff actions. In The Netherlands, you can commence interlocutory proceedings. For this purpose, you need to demonstrate that there s an urgent interest in requesting a preliminary injunction. Seizures are also possible in the judicial stage. Documents in foreign languages are accepted in court. The assessment of the evidence is at the sole discretion of the court. A translation of English/German documents into Dutch is usually not necessary, but if the documents are written in another language, translation is recommended. In case of an exequatur, a sworn translation of the judgement is required. Attorney costs are recoverable for a small part, according to a fixed scheme. Court fees can be recovered for the entire amount. When the debtor doesn t fulfil his obligations after sentenced by a judgement, he also needs to pay legal interests and eventually contractual interests. Usually, bailiffs, debt collection offices, credit insurers and lawyers are involved in debt collecting procedures Enforcement of a foreign judgement Judgements made by courts of the EU member states will be recognised without any kind of trial, except when one of the grounds of rejection mentioned in the articles 34 and/or 35 Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters appears. The judgement with immediate effect made by the court of a EU member state can be executed in The Netherlands after obtaining leave of the professional judge. In case of judgements made by courts of non-member states, there has to be a convention or law on which recognition and enforcement in The Netherlands is allowed. In that case, recognition and enforcement take place after obtaining leave. Otherwise, it is necessary to start a procedure in The Netherlands. Only bailiffs are entitled to execute. After receiving a positive judgement, the creditor has to execute within 20 years. The costs for an exequatur are 568 when the creditor is a company and 258 when the creditor is a physical person (or 71 when the creditor has to be considered as an indigent person). 16

19 7. UNITED KINGDOM Amicable stage In the United Kingdom, there are formalities for the dispatch of a reminder to the debtor. A letter of claim has to be sent to the debtor before court proceedings are started. If the debtor is a person, a company must give specific information to the debtor, including that free independent advice and assistance can be obtained from certain organisations. A company should also provide the debtor with (a) details of how the money can be paid and (b) confirmation that the debtor can contact the creditor to discuss possible payment options. The costs of instructing a lawyer to dispatch a reminder to the debtor depend on (a) the law firm and (b) the complexity of the matter. Some law firms will charge a fixed fee, some will charge on a time basis in accordance with their hourly rates and some may charge based on a percentage of the debt to be collected. In the United Kingdom, financial information about physical persons can be obtained through credit checking agencies. Financial information about companies can be obtained through credit checking agencies and Companies House. 14 Anyone can act to collect debts, even if not a professional. However, if court proceedings are to be started, this can only be done by the creditor or a lawyer. The creditor can only obtain guarantees for the payment if the debtor is willing to provide one. There are three bases for claiming interests in case of late payments. The interests start from the day after the money was due to be paid. (a) The interests as stated in any contract with the debtor, at the rate specified in that contract. This must be fair and it cannot be a penalty. (b) The interests under the Late Payment of Commercial Debts Act 1998 which is fixed at 8% above the bank base lending rate from time to time. (c) If the interest is not claimed under 1 or 2, the Court can give it (currently at a maximum of 8%) Judicial stage Court proceedings can be brought in any civil court (High Court or Country Court) depending on the size and type of the debt claimed. Summary proceedings can be used. Proceedings can also be brought to wind up a company or make an individual bankrupt. Regulation (EC) 1896 (2006) creating a European order for payment procedure and regulation (EC) 861/2007 establishing a European Small Claims Procedure are unknown and unused in the United Kingdom. The prescription period for introducing a claim in court is 6 years from when payment became due. The court fee for bringing a debt claim depends on the size of the debt. For example, in the Country Court and High Court, the fees vary from 30 for debts up to 300 to for debts above the The information has been collected through a questionnaire, completed by COLLYER BRISTOW, a leading law firm in London, United Kingdom. 14 The organisation which holds public information about all registered companies in England and Wales. 17

20 The costs of instructing a lawyer to issue a debt claim are the same as mentioned here up under 7.1. A freezing injunction can be obtained to freeze the debtors assets if it can be proved that the debtor intends for instance to move the assets to another country. However, these types of injunctions are very costly and difficult to obtain. It is very rare indeed for an injunction to be obtained in a routine debt claim. In the United Kingdom, a court doesn t accept documents in a foreign language. A translation is always needed. Attorney fees and court fees can be claimed back. The interests can also be recovered at the maximum rate of 8% above the bank base rate. There are no other penalties for late payments. The recoverability of attorney fees and court fees varies. Usually, creditors involve bailiffs to enforce a judgement. Creditors also appeal on debt collection offices and credit insurers in debt collecting procedures Enforcement of a foreign judgement Lawyers are entitled to execute. The legal costs depend on the method of enforcement used. The costs of instructing lawyers to enforce a foreign judgement will vary but most lawyers will charge on a time basis in accordance with their hourly rates. 18