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Brexit: impact on international debt recoveries

Following the UK‘s decision to leave the European Union there will now be a need to review the laws affecting how we deal with incoming and outgoing judgment enforcement.

International Recoveries – Following exit from the EU

As more and more companies trade across an international reach, the DWF Recoveries team is regularly asked for solutions to recover monies from EU jurisdictions as well as an ever increasing number of jurisdictions worldwide.

As you would expect, there are divergent regulations covering practices for consumer and corporate recoveries. Our team of experts can provide local knowledge, ensuring that monies owed can be recovered as promptly and cost effectively as possible.

There will inevitably be an impact on recoveries following the UK vote to leave Europe and I believe that there will be a particular affect on the enforcement of judgments against defendants outside the UK, and also the enforcement of overseas judgments against UK defendants.

Under existing legislation the main vehicles which assist in the recovery of debt are:

1. European Enforcement Order (EEO) – these orders are still used across the EU to allow the court to treat the judgment awarded in an EU country as if it had been awarded in their jurisdiction.

The rules surrounding EEOs changed in January 2015, so that an EEO is no longer needed for EU judgments for enforcement in England and Wales, as the judgment can be enforced as though it were a local judgment. The change was made under Regulation EU 1215/2012, and the Civil Procedures Rules were updated to allow this.

2. The Brussels Regulation – also applies to EU countries and is used to enforce a more complex non-money judgment.

3. The Lugano Convention – applies to enforcement between Norway, Iceland and Switzerland. It is similar to the Brussels Regulation, but the enforcing court here has more discretion about whether to allow enforcement under certain circumstances: if there is a dispute between the same parties in England and Wales, if the debtor did not have time to respond to the original claim, or if it goes against public policy.

4. Bilateral agreements – this covers Crown states, former and current Commonwealth countries. The judgment needs to be final and for a specific sum, then it can be registered and enforced in the UK. 

If a country is not covered by any of these, then new legal proceedings need to be commenced, generally under a summary judgment process.

What will happen now?

As a result of the UK vote to leave the EU, the basis of a new relationship with the EU needs to be determined across all areas, not just in terms of enforcement – and this would affect how judgments would be enforced in the future.

New arrangements need to be set up, without the current agreements. I expect that there is likely to be increased time and costs expended. The UK will also be reliant on the willingness of the EU to create new arrangements, such as accepting the UK under the Lugano Convention, or whether individual treaties would need to be signed.

The January 2015 procedure where an EEO is no longer required to enforce an EU judgment in England and Wales as if it had been issued here is likely to disappear.

Service on defendants may also become more difficult and slower, as service on defendants would be under the Hague Convention (where each country has to appoint a central authority to handle service requests from other countries) instead of the existing Service Regulation.

EU States wishing to enforce judgments in England and Wales are also likely to find the process slower and costlier after Brexit.

It is unlikely that Judgment enforcement within the UK will be affected by  Brexit. However, there would unquestionably be an impact on judgment enforcement beyond our borders.

If you have any questions or would like any more information, please feel free to get in touch.

Author: David Scottow

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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David Scottow

Director - National Head of Recoveries

I am a Senior Director and National Head of Recoveries with almost 40 years’ experience in debt litigation, insolvency and credit management..

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Neil Jinks

Director

I am a Director within the recoveries team at DWF. I have over 25 years of experience working in law firms, the credit industry and High Court enforcement sector, managing and developing debt recovery operations and client relationships.

Jeffersen Gledhill

Legal Recoveries & Operations Manager

I am Legal Recoveries and Operations Manager, working on the recovery of volume and 'niche based' commercial and consumer debts.