Debt Collection in Europe - an overview of the applicable EU Rules

For almost all businesses today, the marketplace is now global rather than a local. This presents huge opportunities for international development. But what happens when the new customers do not pay? Are creditors forced to bring expensive proceedings in foreign jurisdictions to obtain and enforce a judgment or can they just enforce their judgment in another country?

The EU has tried to simplify the process through several different processes and regulations. This article gives a brief overview of the applicable EU rules. Each method of enforcement differs and is based on different criteria. The creditor will need to check with legal advisors which method is appropriate for enforcement of his/her particular debt.

1.  Which court do I go to, to get a judgment? Where and how can I enforce it?
According to the general rules of Reg. EC 44/2001, the court that has jurisdiction to hear disputes in civil and commercial matters is identified according to the following criteria:

• the defendant's domicile;
• the place of performance of the obligation which is the subject of the contract¹.

When the creditor obtains an order for payment (judgment) from the court, he must then apply to the court of the country where the judgment is to be enforced for the recognition and enforcement of the judgment. For example, if a creditor obtains judgment in Italy but wants to enforce it in France, he must apply to the French court for a statement of enforceability.

The judge will usually grant this statement after a mere check of the validity of the documents. At the request of the debtor, the judge can stay or freeze the enforcement proceedings if the judgment has been challenged in the country of origin and those proceedings are pending.

2.  How can I stop the defendant delaying enforcement?
Since 21 January 2005, some judgments, which comply with certain requirements (i.e. an "uncontested claim", where the creditor, given the verified absence of a dispute as to the nature or extent of a pecuniary claim, has obtained either a court judgment or an enforceable document which requires the debtor's consent, be it a court settlement or an authentic instrument) can be executed directly in EC countries other than where they were obtained without the need for an acknowledgement or enforcement procedure. This obviously saves the creditor time and money.

In this case, the judge who issues the judgment checks that the requirements are met and then certifies the judgment as an European Enforcement Order (EEO). The judgment can then be enforced throughout the EU.

As mentioned, EEOs can be obtained in civil and commercial matters where the debt is not contested, subject to some exclusions². In addition a strict procedure for obtaining the judgment and EEO must be followed.

Before granting an EEO the judge must check that ALL of the following criteria are:

• (i) the judgment is enforceable in the country where it has been issued;
• (ii) the judgment must not be in conflict with the disposition regarding the jurisdictional competence exclusive or in the insurance matter, referred to CE 44/2011 Regulation (see question1 above);
• (iii) the judgment was obtained in proceedings which complied with the defendant's right to notice and to submit a defence;
• (iv) in contracts with consumers, the judgment must be obtained in the EU Country where the consumer-debtor is domiciled.

Once the creditor has an EEO he can enforce the judgment according to the regulations of the EU country where the judgment will be enforced, without the need of exequatur, i.e. a declaration of enforceability and without any possibility of opposing its recognition.

The judge in the country where the judgment is to be enforced no longer needs to check if the EEO requirements have been met.  The debtor cannot delay judgment in the same way as under paragraph 1, by asking that judge to review the matter, the decision nor its certification as an EEO. The judge can only refuse to enforce the judgment if it is not compatible with a previous decision issued by another country.

3.  Is there a fast track proceeding to obtain a judgement if I have a pecuniary claim?
Since December 2008, a creditor who has a claim, which meets certain criteria³, can obtain an European Order for Payment (EOP)⁴. This procedure simplifies, speeds up and reduces the costs of litigation.

To obtain an EOP, a request is presented to the appropriate court in the appropriate form⁵. The request can be also presented in electronic format if both the country in which the EOP is sought and that in which the EOP will be enforced agree.

If the request is considered justified and all the criteria are met, the judge issues the EOP within 30 days from the request. Once the EOP is issued and served the defendant can pay the amount indicated or may lodge a statement of opposition.  The EOP becomes enforceable unless the defendant presents their statement of opposition to the judge in the country of origin within 30 days from the notification. If the debtor presents a statement of opposition, the judicial proceedings will then continue according to the regulations governing civil procedure of the origin country.

If no opposition is presented within 30 days, the judge declares the EOP enforceable. This means that the EOP is recognised and can be enforced in other EU member countries; the EOP cannot be reviewed by the court of the country of execution. The EOP is enforced in accordance with the regulations governing civil procedure of the country of execution. Execution can be refused by the court of the country of execution if the EOP is not compatible with a previous judgment involving the same parties and about the same matter.

4.  What about small debts? Is there a small claims procedure?
There is now⁶ a European procedure for civil and commercial debts of less than €2,000 at the moment of the request⁷. The procedure is carried out in writing, using standard forms. Lawyers are not required. The procedure ends with a judgment which can be enforced in other member countries and cannot be reviewed by the court of the country of enforcement. The judgment is enforced according to the rules of civil procedure of the country of enforcement. Enforcement can be refused by the court of the member country of execution if the judgment is not compatible with a previous judgment involving the same parties and about the same matter.

Conclusion
The thinking behind all the above mentioned Regulations is simple: debt collection in the EU, including the new members of Eastern Europe, will be less complicated and less expensive than it used to be. Now clients can contact their own local lawyer to obtain a title against their foreign customer before their local court without any delay caused by the recognition abroad of the foreign judgment. Enforcement of their title is possible and easy as it is against a debtor who is located in their own country.

Debt collection in the EU is now easier, quicker and therefore more efficient, in particular the EU rules on the increased interest rate applicable to commercial debts which are meant to pay back the risk of a delayed payment. It is in the interest and scope of a European network such as ELF to respond to the massive request of this market and to offer its joint "know-how" and legal services as a whole.

For more information contact Claudio Ceriani of Ceriani e Associati, Milan, Italy
t: +39 02 45472049   e:  cceriani@cealex.it

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¹ (EC Regulation no. 44/200) The 44/2001 Regulation specified that (i) in the sales contracts, the place where the obligation is deducted in court is presumed to coincide with the place where, according to the contract, the goods were and should have been delivered; (ii) in contracts regarding the provision of services, the place of the execution in question coincides with the place where the services were supplied or where they were supposed to be provided under the contract.
² The Regulation does not cover revenue, customs or administrative matters.
³ There are a number of exclusions including revenue, customs or administrative matters, matrimonial property disputes, bankruptcy and insolvency proceedings, social security claims and claims arising from non-contractual obligations. 
⁴ CE 1896/2006 Regulation.
⁵ Under 44/2001 Regulations the request must include the names of the parties, the amount of the debt, the basis of the claim, a description of the evidence that supports the request and the reasons that the court has jurisdiction.
⁶ Since 1 January 2009.
⁷ CE 861/2077.