Archive 29.7.13

Debt collection in a foreign jurisdiction – it can be done!

Archived Post
Archived Post
Archive 29.07.2013

CBW partner John Dickinson explores what can be done to recover funds owed by an overseas debtor. We’ve all faced the frustration of pursuing debts but that frustration can be magnified where the debtor is overseas and seemingly untouchable. Often the initial reaction is to write off the debt and mark it down to experience. But with a little knowledge of the processes involved, plus some well placed and expert help, it is possible to recover these debts. The recommended course of action is to:

  1. Confirm your position. As basic as it sounds, always start with confirming that the debt is overdue, unpaid and owed. There are several ways of doing this, including securing an acknowledgment from the debtor. However, in the UK the first course of action is usually to issue a statutory demand but this is assuming that you have a retention of title and that the goods have been supplied.
  2. Get help. Consult someone with a working knowledge of the rules in the relevant jurisdiction. In some countries, it will be possible to attach some form of security to the assets of the debtor.
  3. Act quickly. The sooner you act, the greater your chances of a full recovery, not least because in many cases where a business is struggling to pay its debts, it will often act on the age old principles of “first come, first served” and “the squeaky wheel gets the most oil”.
  4. Follow through. Have the courage of your convictions. Do not threaten to issue proceedings without being prepared to do so. In too many instances ‘letters before action’ are sent (ie the “threat”) but are not followed up. This will encourage your debtor to ignore your demands.
  5. Persevere. In some jurisdictions where the local legal system is relatively unsophisticated, it may take considerable time to realise an asset, but the effort can be well worth it.
  6. Take heart. Even though chasing international debts can seem difficult, there is help.  CBW has significant experience in recovering assets overseas.
  • In one case where CBW was acting as the Trustee of a bankrupt, the team had unconfirmed suspicions that the bankrupt was holding undeclared funds in Swiss bank accounts. Following an investigation into the individual’s banking history, the team was able to identify the possible bank. Unfortunately the team’s initial request for information from the bank was unsuccessful and so CBW sought the assistance of Mackrell International. The local member was able to make a successful request for information through the Swiss authorities. The result was the opening of formal bankruptcy proceedings in Switzerland and, therefore, full information disclosure and potential recovery of €1 million.
  • In another case, CBW was appointed to realise the assets of a bankrupt where the only high value asset was a foreign property. The Corporate Recovery and Insolvency team had to persevere with the French legal system – at both a national and local level – in order for the French authorities to recognise the powers of the trustees to act under the UK bankruptcy order.   Following 12 months of slow progress through the French courts, CBW was able to appoint a local agent to complete the sale of the property. Although realising the asset took a great deal of time and tenacity, the result of the sale will enable all of the bankrupt’s creditors to be paid in full and some surplus cash will be returned to the bankrupt.

Note: If you find that your debtor is already in some form of insolvency process, you may still have a good chance of recovering the debt – but again, see specialist advice from an insolvency practitioner (IP) with knowledge of the local legislation. John Dickinson