TT300: Brexit? Exit no deal?
How will this impact on recovering debts post Brexit?
Brexit looms large for all businesses, some of which trade with Europe. How will collecting debts in a post Brexit environment impact your business? And what can you do to protect it if we crash out?
At the moment most suppliers of goods and services to the EU will include a clause in their contracts dealing with law and jurisdiction. Most clauses say that the parties agree that the courts of the United Kingdom will have exclusive jurisdiction and the laws of that jurisdiction will apply.
If you have supplied goods or service to a company based in the EU with this type of clause in place, then you will be able to sue the EU based company in a local court using English law.
On receiving judgment, you need to enforce this, and currently within the EU you can benefit from a regime that enables you to enforce your judgment in a member state.
If you do not have a clause like this, you can rely on the European Payment Order Mechanism.
Post Brexit….. What system will there be to help you recover any debt you have or recover judgements? Who knows?
What we do know is such clauses will be much more difficult to enforce as we will no longer be part of the EU.
So, what can you do to mitigate against such risks…. Some thoughts to consider are:-
- Credit insurance – definitely worth considering post Brexit as UK based credit insurers have a European network of offices and brokers. If this is the case, it is possible the credit insurer has processes in place that allows it to use local agents to try and collect debts in member states.
- Assignment of Debt – if you have a subsidiary or Holding Company in the EU, you might consider assigning the debt to that company, to allow an easier route to debt collection.
- Changing Your Trading Terms – A common sense approach going forward could be to change your trading terms and conditions. For example, rather than being paid 30 days after your invoice is sent, you could insist that 50% of invoice / order value is paid upfront, or 50% on delivery or at different stages throughout a project.
We are fast approaching leaving the EU, thinking time is now needed to consider your best options going forward for debt collection.
Most businesses will be affected by this so if you are in need or urgent advice or help, please contact your local partner for further guidance.
Talk to Barnes Roffe today