Debt Collection Across the EU – Key Differences and Similarities

For international businesses, navigating the diverse landscape of debt collection across the European Union can feel like a maze. While the EU promotes a single market, the legal and cultural nuances surrounding debt recovery remain distinct. At Sekundi, we understand these complexities and have built solutions to help financial departments like yours streamline the process.

This article provides a comparative look at debt collection across the EU, highlighting the key differences and surprising similarities that CFOs and their teams need to be aware of.

The Big Picture: A Shared Foundation

Despite the variations, all EU member states share a commitment to a fair and legal process. The foundation is built on principles of:

• Due process: Debtors have the right to be informed about the debt and to challenge it.
• Proportionality: Collection efforts must be reasonable and not overly aggressive.
• Legal recourse: Creditors have the right to pursue a claim through the courts if other methods fail.

The enforcement of the European Payment Order (EPO) also provides a streamlined process for undisputed cross-border claims, offering a degree of harmonization.

Key Differences to Be Aware Of

While the principles are similar, the devil is in the details. Here are some of the most significant differences:

1. The Legal Framework: Civil vs. Common Law

The EU is home to both civil and common law systems, which fundamentally shape the debt collection process.

• Civil Law (e.g., France, Germany, Italy): The legal process is often more structured and code-based. Out-of-court collection is common, but formal court proceedings are very detailed. Legal costs can be predictable but the process can be slow.
• Common Law (e.g., Ireland): The system relies more on case law and precedent. This can sometimes offer more flexibility but also less predictability. The process for enforcing judgments can be different.

2. The Role of the Bailiff

The role and powers of bailiffs (or their equivalent) vary significantly. In some countries, they are public officials with strong legal powers to enforce judgments, while in others, they may be private agents with more limited authority.

3. Statutes of Limitations

The time limit for pursuing a debt varies widely. For example, in the UK, the limitation period for simple contracts is generally 6 years, whereas in countries like France, it can be much shorter for certain types of debts. Understanding these deadlines is crucial to avoid a claim becoming "statute-barred."

4. Pre-Legal Requirements

Some countries have strict pre-legal requirements. For instance, sending a formal notice of default via registered mail might be a mandatory first step before initiating legal action. Failing to follow these steps can invalidate a claim.

5. Court Processes and Costs

The cost and complexity of going to court for an undisputed claim vary. In some countries, a fast-track procedure is available, while in others, it can be a lengthy and expensive process. Legal fees, court fees, and the recoverability of these costs differ substantially.

Why Harmonization Isn't Always the Answer (And What We Do About It)

While full harmonization seems appealing, the reality is that these differences reflect deep-seated legal traditions and economic realities. For your financial department, this means a one-size-fits-all approach to debt collection is a recipe for failure.

This is precisely where Sekundi's expertise comes in. We don't just offer a single solution; we provide a platform that adapts to the local nuances of each country. Our tools are built to help you:

• Identify the right strategy: Our system helps you understand the most effective approach for each country, whether it's an amicable settlement or a formal legal process.
• Automate compliance: We embed local legal requirements into our workflows, ensuring that every step, from formal notices to legal filings, is compliant with the relevant jurisdiction.
• Provide transparency: You gain a clear, centralized view of your debt recovery portfolio across all markets, with real-time updates on each case, regardless of the country.

For CFOs and finance teams managing international accounts, understanding the intricacies of debt collection across the EU is not a "nice-to-have" – it's a necessity. By acknowledging the key differences in legal frameworks, statutes of limitations, and judicial processes, you can develop a more effective and compliant strategy.

At Sekundi, we’re committed to simplifying this complexity. Our solutions are designed to empower your team to navigate the diverse EU landscape with confidence, turning overdue invoices into recovered revenue, no matter where your clients are located.

Ready to learn how we can optimize your international debt collection?