Kamal Aggarwal, Partner, takes us through the key legal issues to look at when considering overseas trade. Article first published in Finance & Management, March 2014.
Export is no different from any other type of transaction: the first step is to be clear exactly who you are doing business with. Sounds simple, but it is not unusual to find that the name of the customer has not been fully or properly recorded or that the name has been misspelt. Minor errors like these can lead to significant problems further down the road.
Occasionally, there are instances where the negotiations have been conducted with an individual representing a group but where the final agreement ends up being signed on behalf of a subsidiary with few, if any, assets. It is worth carrying out a few simple checks to avoid these sorts of problems, and your bank or professional advisers will often be able to help you do so if you speak to them early on.
You can’t hope to pursue a successful export strategy without proper upfront risk management, so it’s critical to ensure that you maintain systems which will enable you to produce the full paper trail quickly and efficiently. Ideally, you will have the documents which show the negotiations leading to the contract. This should include correspondence and telephone notes, orders and order acknowledgements, the contract itself, and then documents which show what has happened subsequently, such as order delivery and acceptance notes, any correspondence, invoices and demands for payment and any reasons given for non-payment.
If the letter of demand does not lead to payment, then legal action may be the only remaining option. In that case, the procedure required to issue and serve proceedings will depend almost entirely on the country in which the debtor is based. The UK has reciprocal recognition and enforcement treaties in place with many countries around the world. Each has its own particular requirements.
Except in certain cases where proceedings are to be commenced against a debtor in an EC member state, the permission of the court will usually be required to serve proceedings out of the jurisdiction.
If permission is granted, the court will specify the manner in which proceedings may be served, either by reference to any relevant treaty or convention, or by reference to the rules of service applicable in that particular country. Two of the most common requirements are to serve a certified translation of all the English court documents in the language of the country where service is to be effected, and to ensure that service of the documents is effected in accordance with the rules of service applicable in that country.
By the time that proceedings have been drafted, issued, permission to serve overseas obtained, documents translated into the local language and then local requirements of service complied with, it would not be unusual for total costs to have reached several thousand pounds. Once that has been properly done, apart from some minor variations to the usual deadlines for the defendant to file an acknowledgment of service and/or defence, the claim will proceed through the court in very much the same way as if the defendant were in England.
Assuming that the claim is successful, the final step will, of course, be to enforce the judgement if the debtor still fails to pay. The relevant procedure will again depend on the country in which the debtor is based. Where an EC member state is concerned, the process is relatively straightforward and simply requires the English judgement to be registered in that country, following which the English judgement is treated as though it was a local judgement, and may be enforced in the same way.
Pursuing claims against overseas debtors does have its challenges. By doing the right housekeeping up front you may be fortunate enough to avoid them altogether.
If you are unfortunate and do have to take action, these housekeeping measures will significantly reduce cost and uncertainty. What will be important then will be to ensure that you seek advice from a law firm that has experience of international litigation and ideally has local contacts it can work with.