Chasing debts made simple?

Those of you who have tried to enforce a debt in another country will be well aware of the problems that are faced: unfamiliar systems, language barriers, locating the debtor, not to mention costs – so much so that the complexity and expense of pursuing a claim in another jurisdiction, certainly a small claim, is more hassle than it’s worth. However, changes are afoot that seek to overcome the obstacles in relation to enforcing a claim in a foreign country and make life easier for lawyer and claimant alike.

Indeed, the need for speedy cross-border dispute resolution is a message often beaten out on the European political drum. The call for effective access to justice has often seemed like lip service with few practical benefits brought to bear. However as 2006 came to a close, real progress was made with European Justice Ministers finally signing up to the European Order for Payment Procedure “EPO”, which was created under Regulation 1896/2006 of 12 December 2006.

The European Order for Payment seeks to provide a uniform, rapid and efficient debt recovery mechanism for uncontested claims throughout the EU. This procedure can be used for a small claim as well as an outstanding high value commercial debt. The procedure is based on a system of standard forms. The idea behind this is that it will allow for all disputes to be dealt with by written procedure and via (where possible) automatic electronic data processing. Given that the idea is to keep things simple, legal representation is not mandatory! In addition, costs are determined by national law but must be equivalent to domestic court fees.

The idea is that a claimant in Kirkwall can use the European Payment Order procedure to enforce a debt in Krakow. When the claimant receives an order for an uncontested debt in his favour this is then automatically enforceable in every EU country – no further steps are necessary. So if the debtor is sunning himself in Crete the sheriff officers can catch up with him! However if the debtor decides to challenge an EPO, the case moves out of the realms of the fast-track European procedure and into domestic civil procedural rules.

It is important to note that the EU proposal neither replaces nor harmonises the existing mechanisms under national law. It seeks to lay down minimum standards and set up a uniform procedure throughout Europe for purely cross-border cases, rather than standardising payment procedures across Europe. An interesting question, yet to be addressed, is whether the EPO will be available for cross-border disputes between Scotland and England, or whether it only applies between the territories of member states rather than separate jurisdictions within the United Kingdom. This issue will need to be ironed out before the deadline to make give effect to the EPO Regulation, which is December 2008.

Another option

The EPO is offered as an option to those wanting to enforce an uncontested debt. The new rules do not make it mandatory to use this instrument in a cross-border case. A claimant can also use the European Enforcement Order “EEO”. Set up through Regulation 805/2004 of 21 April 2004 creating a European Enforcement Order for uncontested claims, this is a standard European order designed to supplement a domestic judgment to allow for pan-European enforcement. This is a two-stage procedure, in contrast to the payment order which is meant to be a one-stop shop process.

Changes were made to both the Rules of the Court of Session and the Sheriff Court Rules in order to give effect to this new procedure: www.scotcourts.gov.uk/sheriff/european.asp.

The idea is that a claimant makes an application for an EEO in the sheriff court where the uncontested claim was first dealt with – in our example, Kirkwall. Once granted the EEO supplements the Scottish court order for an uncontested claim and renders it enforceable in Krakow, without any need to register the order or indeed convert it into a domestic Polish order. The debt would be recovered, however, according to Polish rules of enforcement. On the other hand incoming European Enforcement Orders are sent directly to the Court of Session. So a claimant in Krakow with an EEO to be enforced in Kirkwall would send the relevant documentation to the Court of Session. The debt would then be enforced as if it were a domestic Scottish order. www.scotcourts.gov.uk/sheriff/european.asp

Will these rules really give effective access to justice or improve cross-border debt recovery? Only time will tell…

    Julia Bateman, Justice and Home Affairs Policy Adviser, Brussels Office of the Law Society of Scotland e: julia.bateman@lawsociety.org.uk