This article explains how a Dutch creditor can enforce a commercial claim where the debtor and assets are located in England & Wales. It also deals with relevant issues of Brexit.
1. Jurisdiction for main proceedings
Usually, the first step is to obtain a court decision for your claim. Consequently, you will need to establish which national court has jurisdiction to handle your case. The United Kingdom (UK) and The Netherlands are both parties to the Recast Brussels I Regulation (EU 1215/2012) and the Brussels I Regulation (EU 44/2001) (the “Brussels Regulations”). The Brussels I Regulation applies to proceedings initiated before 10 January 2015 (when the Brussels Regulation Recast came into force).
Under the Brussels Regulations – subject to certain rules on exclusive competence (e.g. regarding immovable property, company matters, public registries, patens, and the enforcement of judgments) – the defendant must be sued in the state of domicile unless there is a valid agreement on jurisdiction. Parties often agree on jurisdiction (in the main contract or in general terms and conditions). Alternatively, proceedings may be initiated in another EU country, in which there is a closely factual connection with the claim or closely connected proceedings are taking place. In contractual matters, for example, a closely factual connection with the claim is deemed to exist at the place of performance of the obligation. In the case of the sale of goods this is usually the place where under contract the goods were delivered or should have been delivered. The Brussels Regulations further contain specific rules for insurance, employment, and consumer contracts.
2. Jurisdiction for interim measures
The Brussels Regulations also provide for rules on provisional or interim measures. A court has jurisdiction when there is a connecting link between the measure and the place of the court (even if another court has jurisdiction over the main proceedings).
In England & Wales, there are many types of interim injunctions, such as the freezing of assets or orders for a search (of evidence and property) or to provide information about the whereabouts of assets. In certain circumstances, an English court may issue a Worldwide Freezing Order. This is an order prohibiting a party to dispose of or deal with his worldwide assets. Non-compliance may lead to contempt of court and a subsequent imprisonment, fine or sequestration of assets. It is unclear to what extent this order in personam is enforceable outside England & Wales (where an equivalent measure may not exist).
Interim cases are usually heard by the High Court, although in certain circumstances the County Court may grant a freezing order. Where the application is without notice to the debtor, full disclosure is required of all material and relevant information (including unfavourable evidence and information coming to light after the order has been granted). The debtor can request the court to set aside an injunction made without notice once he becomes aware of it. You should be aware that you may be liable for damages if the initial interim court decision turns out to be wrong.
The UK has opted out of EU Regulation 655/2014, which enables a creditor in a participating EU member state to apply for a European Account Preservation Order (EAPO) to freeze funds in a debtor’s bank account in any participating state before, during and after the proceedings. It is therefore impossible to obtain an EAPO for an account in England & Wales, but a competent Dutch court can issue an EAPO for accounts outside England & Wales in a participating state (all other EU states, except for Denmark). For a preservation of funds on a bank account in England & Wales you will need to follow the regular route (non-EAPO) and apply for an interim injunction with the English court (under English law and or the Brussels Regulations).
3. Enforcing a Dutch court decision in England & Wales
An English court decision is directly enforceable in England & Wales (see next paragraph). A Dutch court decision, however, first needs to be recognised and become enforceable. Here the Brussels Regulations also apply.
Under the Brussels I Regulation (for proceedings started before 10 January 2015) you will need to request the High Court to register the Dutch court decision and obtain an exequatur (a declaration of enforceability). Your application must be accompanied by an authenticated copy of the judgment, a translation, and an EU standard certificate from the foreign court. This certificate will set out details about the decision and state that the judgment is enforceable in The Netherlands. Once the High Court has made a registration order which has been served, the debtor has the right to appeal within 1 month. After this period or when an appeal has failed the same rules apply when enforcing an English decision.
Under the Recast Brussels I Regulation (for proceedings initiated on or after 10 January 2015) an exequatur is no longer required. The creditor only needs to obtain an EU standard certificate from the Dutch court where the decision was issued with certain details about the judgment and certifying that it is enforceable. This certificate can be served directly on the debtor in England & Wales and then the same rules apply for an English court decision. Make sure, however, to provide the debtor with a translation of the court decision when asked.
The debtor will only be successful in making an application for refusal of enforcement under both Regulations when this would be manifestly contrary to public policy in England & Wales, in the event of a default judgment when the claim form was not served sufficiently in time, where the decision is contrary to an earlier judgment, or in case of a conflict with certain rules of the Brussels Regulations.
There is a specific option under a separate EU Regulation 805/2004 for the enforcement of uncontested foreign court decisions (claims admitted, settled or not objected to in court, or where the debtor did not appear after initially objecting to the claim in the proceedings). In these circumstances the creditor can request the foreign court to provide a European Enforcement Order Certificate (EEOC), which will be granted when the decision is enforceable in the foreign state, complies with the rules of the Brussels Regulations on exclusive jurisdiction and is based on proceedings which meet certain minimum requirements (earlier non-compliance may be remedied by the court issuing the certificate). This option can be used instead of
- the Brussel I Regulation (so for proceedings initiated before 10 January 2015) to avoid obtaining an exequatur; and
- the Recast Brussel I Regulation, which has its own certification process, as the EEOC need not be served on the debtor and the possibilities to oppose the certificate are more limited. The debtor can only request the issuing foreign court to rectify or withdraw the certificate when the conditions mentioned above are not met or because the decision is contrary to an earlier judgment.
4. Enforcement methods in England & Wales
When your court decision is enforceable in England & Wales, you may choose from the following recovery methods:
Taking control of goods: where the creditor will request the court for an order to take control of and sell the debtor’s goods.
Third party debt order: where the court will issue an order to freeze and seize funds of the debtor held by a third party (for example money on bank accounts).
Attachment of earnings: where the court orders that a part of the salary of the debtor will be paid to the creditor by the employer until the debt is fully paid.
The previous orders are relatively easy to obtain. The following are more complicated:
Charging order: where the court will grant an order for a charge over a beneficial interest in certain assets preventing the debtor from selling those assets.
Insolvency proceedings: where the debt owed (or the total of several debts) exceeds £750 for companies or is equal to or exceeds £5,000 for individuals, the creditor may file for a winding-up order or a bankruptcy order. However, when opting for insolvency proceeding, you should – amongst others – consider that any available funds will be distributed among all creditors taking into account any existing preferences and charges over goods, which can make recovery harder to accomplish.
Finally, in exceptional cases the court may grant an order for the appointment of a receiver by way of equitable execution (to enforce the debt on property in which the debtor has an equitable (beneficial) interest), a writ of sequestration (sequestration of property until the debtor complies with a court order) or an order of committal (where the debtor will go to prison in the event of non-compliance with a court order).
Before starting any of the enforcement options above, you should always check whether the debtor is insolvent or subject to insolvency proceedings or arrangements with other creditors, as this may impose practical or statutory restrictions on the enforcement of your claim.
5. Alternative legal proceedings
There is a specific cost-effective procedure under EU Regulation 861/2007 for small claims with a maximum value of €5,000 (the limit since 14 July 2017) (the ESCP). Jurisdiction of the relevant court is determined in accordance with the Brussels Regulations. In England & Wales, an EU standard claim form and the evidence (translated) in English should be submitted to the County Court. After some checks the court will serve the claim form on the debtor, who has 30 days to respond. If the debtor claims that the value of the initial claim exceeds the €5,000 limit and the court so agrees, the proceedings will exit the ESCP and continue as an ordinary claim, unless the creditor wishes to withdraw the claim. The proceedings are usually conducted without a hearing. The court normally provides a judgment within 30 days of the debtor’s response and issues (upon request) an EU standard certificate with details of its decision.
Where you expect that your money claim will be uncontested, you may opt for the European Order for Payment (EOP) under EU Regulation 1896/2006. The court’s jurisdiction will be determined in accordance with the Brussels Regulations. In England & Wales, applications for an EOP are made through standard EU forms (translated) in English. In most cases, the application will be processed without a hearing. The court usually issues an EOP within 30 days of the application (when all requirements are met). The debtor then has the right to oppose the EOP within 30 days of the date of service of the order to him. If the debtor decides to contest the EOP, the creditor may either choose to go ahead, in which case the matter will proceed as an ordinary claim, or to withdraw proceedings. However, where the creditor has requested a transfer from the EOP proceedings to the ESCP in the event of an opposition and the claim does not exceed the ESCP limit, the application will be further dealt with under the ESCP.
The ESCP certificate or irrevocable EOP will enable you to directly enforce the decision in the EU (except for Denmark) without the need for an exequatur or the possibility to challenge its enforceability unless the order is contrary to an earlier enforceable court decision.
There is another option for recovery without initially going to court: the statutory demand. This is a formal written demand for the payment of a debt within 21 days. When served with the demand the debtor may decide to pay the debtor to request the court to set it aside. The court may set the demand aside when there appears to be a counterclaim which at least equals the creditor’s claim, where substantial grounds exist for disputing the claim, where the creditor holds a security for the claim or on other grounds that the demand should be set aside. A failure of payment within 21 days or to have the judgment set aside is deemed to be evidence of an inability to pay in insolvency proceedings.
The UK and the EU have agreed on a transition period (until 31 December 2020) provided they can come to a framework for the future relationship before Brexit (29 March 2019). During the transition period, most EU law will continue to apply. In the absence of a framework agreement after Brexit in principle all EU legislation will no longer apply and there will be a fall back on less favourable domestic law. Generally, English law contains more or less similar provisions to establish jurisdiction. This is more complicated when it comes to enforcement (since this is based on reciprocity). The UK government has indicated that it will apply the Hague Convention on Choice of Court Agreements (but its application is limited). A 1967 bilateral convention between The Netherlands and the UK on the recognition and enforcement is still in force and may provide a basis for the enforcement of Dutch court decisions in England & Wales (although its provisions are stricter than the current EU regulations).