Cross-border debt recovery will be easier

The position of creditors with receivables abroad has improved as a consequence of a recast of the Brussels I Regulation on January 10, 2015. Brussels I determines which court is competent in cross-border cases. The revision of this Regulation has important consequences for international debt recovery and should contribute to a more rapid completion of claims and disputes. What do these changes mean for you if you have a dispute with a foreign business partner? We will discuss the two most important revisions.

If you have a dispute with a business partner abroad, both parties might wish to bring the matter before the court in their own country. If this dispute is already under consideration by another judge, this situation is called lis pendens. According to the original Brussels I Regulation, the initially appointed judge had to assess his competence for deciding the case first. Until this decision was taken, the other court could not start to consider the contents of the case.

Imagine that you have a dispute with a client in Italy and that you have contractually agreed that the Dutch court is competent. If your Italian business partner would bring the matter before an Italian court prior to your bringing the case before a Dutch court, the Dutch judge would have to postpone his consideration until Italy has decided whether that country is competent. This makes lis pendens an often-used means to slow down international litigation.

The new Brussels I Regulation determines that not the judge who was initially selected, but the contractually selected judge prevails. In other words, if you have agreed in writing that the judiciary in your own country is competent, the new Brussels I Regulation will prevent disruptions of any legal procedures. Obviously, it is essential that you clearly and unambiguously document your agreements with your international business partner about competent courts. Only then will you ensure rapid legal procedures with minimal damages for you as a consequence of the dispute.

Even more important is the Brussels I recast that abolishes the exequatur procedure. Imagine that you have a dispute with a French party and that a Dutch judge reached a decision condemning this French party to payment of the claim. According to the original Brussels I Regulation, court decisions could be executed only under the condition that the judge from the country of your business partner recognizes the ruling and issues a statement of enforcement. This is called the exequatur procedure. In our example, the French court would have to complete various formalities before the Dutch court decision could be executed. These bureaucratic steps in the original Brussels I Regulation could seriously slow down the realization of a court decision.

The revision has taken this bureaucratic step out of the process of international court decisions. The result is that a statement from the judge in the targeted country is no longer necessary. In the future, you can take a Dutch court decision directly to a French bailiff, as in our example, and request realization of the decision without obtaining a French judge’s declaration of enforceability first. Please take note, however, that the abolition of the exequatur procedure applies to judicial procedures started after the 10th of January 2015 only.

The revised Brussels I Regulation takes us one step closer to a simplification and improved efficiency of litigation in the EU member states. Once again, this Regulation shows the great importance of clear agreements with your international business partners about which court is competent. To fully benefit from this revision, you need to formulate clear agreements with your business partners about which court will be competent in case of disputes.