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Chinese Exporters Collecting Debts Post-Brexit

2021/03/16 17:52 (GMT)

From 1 January 2021, any new Court Proceedings started in many countries will not be easy to enforce in the UK. This is because the UK has left all EU Treaties which facilitate the recognition & enforcement of judgments. Thankfully, Brexit does not have a retroactive effect. Very few such changes do. So, this means that any action started before 31 December 2020 will continue to be handled as if the UK was still in the EU. The UK becoming a third country (= country not member of the EU) is very inconvenient to say the least. Companies exporting to the UK, when faced with deciding whether to start a new Court Action in 2021, will have to carefully consider and review their options and this uncertainty could make it difficult for exporters to decide whether to hold off on any new Court Proceedings, which would impact their cashflow and reduce their chances of recovery. They should therefore reflect on what they could do to find alternatives way of obtaining a more versatile judgments, still capable of crossing borders. 

I have, in the past, come across many clients’ terms & conditions (T&Cs) and in my view, the most versatile and interesting ones are those which give options, especially when it comes to jurisdiction. Being an exporter myself, I have just reviewed and improve ours. In the current context it is now urgent to immediately review T&Cs, especially the jurisdiction clause, and get your clients to sign/agree to them as soon as possible. For example, one of our large client’s T&Cs which points to English Law and English Courts, but with an option to issue proceedings in any other jurisdiction if appropriate is quite versatile and convenient. The reality is that there is "no one size fits all" and each country needs to obtain legal advice according to the markets they export to and consider (maybe) a separate set of terms and conditions per country.

Chinese exporters currently have the option to rely on the rules of the Hague Convention 2005 on Choice of Court Agreements, which the UK remains a part of as it is a party to the Convention in its own right. So, if your Terms & Conditions point to an exclusive jurisdiction (e.g. England & Wales) the recognition and enforcement of foreign judgments in cross-border disputes with all countries who withed the convention will be made easier. These are:

The UK, all EU Member States, China, Mexico, Montenegro, North Macedonia, Singapore, Ukraine, the United States.This year, you need to remember to ask your lawyer to look at your contracts so you can recover your cash more easily when you do not get paid by your international clients. 

Finally, there are many reasons why English Courts may refuse to enforce a Chinese judgment and with Brexit being a reality, many reciprocal enforcement arrangements may be under threat and exporters will need to be very inventive to avoid complicated legal action actions when they do not get paid for their exports.