By Moses, Max G.; Lubitz, Murray S.
Business Credit , Vol. 98, No. 10
As we approach the end of this century, it is clear that business has become more global. Pressure on the sales and marketing departments to increase market share has led many companies to devote significant resources to international markets. The result of this increase in sales in foreign countries has been an increase in the potential problems the credit manager must face when the sale goes bad and collection efforts must be made.
What follows in this two-part series is a brief synopsis of some of the types of information that the credit manager should know about the collection environment in 15 countries throughout the world. It will give an insight into the attorney fees and court costs that may be required, the types of options available for enforcing a judgment, possible prejudgment remedies available, pitfalls that you might face in attempting to get a U.S . judgment accepted overseas and any peculiar requirements that you should know before you even grant credit. This article is designed solely to provide general background information on the subject and not to provide legal advice.
Other than in the bankruptcy arena, or as an adjunct to another commercial piece of litigation based upon federal law, the federal court system is not the normal forum for debt collection. Rather, each of the eight states or territories will be the forum for debt collection. Both collection agencies and attorneys are deeply involved in the process of collecting debts. Although collection agencies may not institute legal proceedings, they may be involved in the placement of the debt with an attorney. An agency may charge on a contingency basis and, if it is authorized to place the claim with an attorney, it may include legal costs and expenses as well.
Attorneys, on the other hand, are not permitted to charge on a contingent fee basis; rather, they must handle the claim on the basis of the time spent or an agreed upon fee schedule. Should the creditor prevail in court, it is very common for the court to award the creditor its legal costs.
Generally the only option available to the unsecured creditor, if the efforts of a collection agency are unsuccessful, is to file suit. If judgment is obtained and the debtor still refuses to pay, the creditor's option is to make application for the commercial debtor to be "wound up" or placed into liquidation.
All commercial debt collecting activities are based on invoices. An "accepted invoice" is evidence of the sale/purchase agreement. If a debtor fails to promptly dispute an invoice, it is deemed to be accepted, and such an "accepted invoice" should be sufficient in court to prove that what is claimed is in fact due. Nonetheless, it is important to maintain copies of all documents relating to the sale, including purchase orders, correspondence, proof of delivery and customs documents. Remember that all goods imported from abroad must include an invoice in order to comply with customs and tax regulations. Therefore, it isn't necessary for the creditor to request a formal acknowledgment of the debt, submit any affidavits or even furnish a witness in court. Penalty clauses for late payment are generally permitted if they appear on the invoice. It is not uncommon for courts to find penalty clauses of up to 15 percent of the amount of the invoice to be deemed reasonable. Interest clauses should also be included on the invoice itself. Practitioners in Belgium recommend that clauses giving jurisdiction to the U.S. courts should be avoided because there are no conventions on the enforcement of judgments currently in operation between the United States and Belgium.
Assuming that negotiations for the amicable collection of the claim fail, the debtor will be summoned to appear in court. However, note that there is no such thing as pretrial procedures, discovery, interrogatories and so on in the Belgian system. While general law requires a foreign plaintiff to provide a security deposit to make certain that costs and other amounts due will be paid should the plaintiff lose, there is a convention between Belgium and many other countries, including the United States, that cancels this obligation. …