The European Commission kicked off a campaign to help SMEs recover debts across borders. The campaign will inform SMEs on how to take advantage of existing laws and tools in order to more easily and successfully pursue debtors in other countries.
Many small and medium sized enterprises (SMEs) can be reluctant to operate outside the borders of their own country, as they are afraid of encountering burdensome procedures when trying to claim payments for their products and services. SMEs often find it too daunting, complicated or expensive - because of consulting fees, legal counsel, document translation, etc. - to pursue legal action against companies or individuals in other Member States. This is especially damaging in the current economic crisis, when going abroad to do business is no longer merely an option but in many cases has become an obligation to become more competitive. Therefore, the European Commission kicked off a campaign to help SMEs recover debts across borders. The campaign will inform SMEs on how to take advantage of existing laws and tools in order to more easily and successfully pursue debtors in other countries. To this end events will be organized in all 27 EU Member States plus Croatia. The campaign is strongly supported by Ms. Monika Hohlmeier, Member of European Parliament.
European Commission Vice President Antonio Tajani, responsible for Industry and Entrepreneurship, said: "With this campaign we wish to encourage small enterprises to operate beyond their borders. Facilitating the recovery of cross-border debts is key to address this issue at a time when Europe's 21 million SMEs face particular obstacles to tapping cross-border markets. Their uncertainties are mainly due to the lack of knowledge of existing mechanisms for reducing the risk involved in cross border contracts, insufficient credit management processes, or even cultural differences in doing business between different Member States."
EU laws to help SME's recover foreign debts
The EU already has a system of laws in place designed to help businesses with cross-border litigation. Legislation governing contractual obligations and competent jurisdiction, as well as procedural tools for simplifying cross-border debt recovery are already in place:
Law governing contractual obligations
The principle of free choice of law abides1. If no law is chosen by the parties, the law applicable to sales contracts in respect of movables, services, franchise or sales contracts will be determined by the domicile of the party providing the characteristic performance.
The courts of appropriate jurisdiction are generally the courts of that Member State2 in which the defendant is domiciled3. If a situation arises where the SME must enforce a cross-border claim through the courts, the competent court is basically the court in which the customer is domiciled. Alternatively, under certain circumstances it is also possible to file an action against the opposing party before a court in another Member State.
Cross-border litigation and simplified cross-border debt recovery
The advantage of all the following EU procedures is that no enforcement in the other Member States is required:
- The European enforcement order for uncontested claims: This process facilitates the simple recognition and enforcement of a national ruling on an uncontested claim in another Member State4 (with the exception of Denmark)5. A European Enforcement Order can be enforced by the enforcement authorities of the other Member State without any further formalities.
- The European order for payment procedure: No court order for payment in the classical sense is applied for, but a European payment order6. The advantage of this procedure is its expedience: only one application is necessary. The result can also be enforced in other EU Member States with the exception of Denmark. By contrast to the European Small Claims Procedure applicable only for claims not exceeding €2,000 in this procedure there is no maximum claim amount7 (see next point).
- The European small claims procedure: The aim of this procedure8 is to simplify and expedite the enforcement of small cross-border claims of less than €2,000. A judgement rendered within the context of this process is also recognised as legal and enforced in the other Member States (with the exception of Denmark) without the requirement of a declaration of enforceability.
More information on the campaign in your country
The European Commission is organising a series of national events whose purpose is to provide SMEs that operate across borders and SME stakeholders with information on credit and claims management. The events will be held in all 27 EU Member States plus Croatia and will take place from March 2013 to June 2014.
Their aim is to help SMEs optimize their business procedures in the area of claims management instruments and to improve the use, understanding and awareness of the available legal instruments for the cross-border enforcement of claims, with a focus on the relevant EU legislation.
Tips and tricks for SME cross border debt recovery
The events will disseminate practice-based guidelines to introduce the subject and methodology of credit and claims management and explain the application of existing legal instruments to national and cross-border claim enforcement. They will provide user-friendly guidance, tips and materials on how to manage credit and invoicing. Payment issues will be dealt with from the beginning of the commercial relationship with a new client, until its last stage (i.e. invoicing and payment).
Help for entrepreneurship trainers
This pilot project will also include the development of teaching modules whose content can be integrated and used in vocational advanced training and advanced training of young entrepreneurs. These modules will be available from autumn 2013.
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