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Debt Collection

Action on Foreign Debt Rises by 19%

By CreditMan Wednesday, July 15, 2009

Legal action to secure payment from foreign debtors is on the rise according to Lovetts, one of the UKs leading debt recovery law firms. The number of Letters Before Action (LBAs) being issued on behalf of UK businesses to foreign debtors has increased 19% Q1 2009 vs Q1 2008.

Furthermore, there has been a 39% increase in LBAs being issued to foreign companies on behalf of businesses in Eire during the same period. LBAs are used to secure payment, or to obtain a response from a customer before the commencement of a legal claim.

In the current economic downturn, the challenge for exporters is to ensure rigorous processes are in place to tackle late payment when the debtor may be on the other side of the world and operates in a completely different language. Lovetts is urging exporters to consider some simple tips to make sure they are prepared for any pre-legal or legal action they may need to take.

Trevor Philips, Director of Sales and Marketing for Lovetts says: There are a number of key considerations to ensure your business is ready to deal with any potential disputes. While its always good to be positive and hope that debt issues wont occur, the reality, as our analysis has shown, is that late payment is entirely probable and debtors may try to use distance and language barriers to their advantage.

LOVETTS TIPS FOR MANAGING FOREIGN COLLECTIONS

Dont let language be a barrier

· Agree which language will be used for the contract and subsequent communications

· Ensure that when chasing payment you will be able to do so in your mother tongue. This needs you to identify your key contacts in advance.

· Remember that if you litigate, documents may need to be translated and personally served on the debtor

Do it by the book

· Check the true identity of your client

· Ensure they are creditworthy

· Obtain acceptance of your Terms & Conditions in England & Wales to ensure contract formation within home jurisdiction

· Make sure your paperwork is accurate and timely

· Resolve any queries promptly

· Consider credit insurance cover

Terms and conditions

· Ensure your Terms and conditions allow you to charge overdue interest and compensation for late payment

· Make sure they give you the right to suspend ongoing shipments when default occurs

· Stipulate England & Wales are the law governing the contract

· Include a clause so that you can claim immediate payment on invoices not yet due

· Where you need third party assistance in recovering the debt make sure you can pass on the charges to the debtor

Trevor Phillips concludes: Recovering Overseas Debt through the court is not always as straightforward as it may seem. While you may have a jurisdiction clause in your contract to use local courts, some countries will not legally recognise an action started in a foreign country. For example, French courts are reluctant to accept a Judgment issued in an English court, they want the proceedings to be handled by a French lawyer in their local court.

The best strategy for any contract with an overseas businesses is to ensure you do the groundwork first know who you are dealing with by using credit and identity checks - and agree the terms and conditions of payment leaving no room for miscommunication through language difficulties. With the bases covered you can focus with confidence on getting business done.