Contractors' Questions: How to get paid for work my ex-client is using?

Contractor’s Question: I carried out IT consultancy services for a Belgian company over a period of five months in 2014. They were always late in paying my fee, and the expenses I incurred while working in Belgium, the UK, my home office and elsewhere. 

As a result of this poor payment practice, and due to a lack of cooperation, I terminated my relationship with the business two months ago. But two invoices I’ve sent this Belgian company are still outstanding. Worse still, the company is using my reports/designs to continue their work, and these designs/reports were carried out during the period of non-payment. I do have a written consultancy services agreement with the company which states the law of the contract is the Belgian law. How can I protect my designs and recover my unpaid fees?

Expert’s Answer: Working for companies domiciled overseas can be a very rewarding proposition, both professionally and financially but it isn’t without its own unique risks.  When an issue like this arises it can add an extra level of complexity to any recovery action, as your company has voluntarily placed itself under the jurisdiction of a foreign court.

For the purposes of this response, we will assume that withdrawal of services was done in accordance with the terms of the contract and that the invoices are free of any genuine query.

First the bad news: the fact that the contract states Belgian law applies means you are unable to use a European Enforcement Order (EEO) to secure a judgment in English courts that can subsequently be enforced against your client in Belgium. This is a relatively common procedure, introduced by the EU to allow the issue of proceedings in the creditors jurisdiction, with any award then transferred to the debtors’ jurisdiction for enforcement. 

However it isn’t all bad news, as we have found that EEOs can be somewhat cumbersome, expensive and unsuitable for certain kinds of cross-border disputes. In fact, it’s a mechanism that we as a company prefer to avoid as it is often considerably cheaper and quicker to instruct local counsel than it is to pursue an EEO. In our experience, you could expect to have a claim issued and decided in a Belgian court in two to three months, whereas an EEO can take considerably longer to secure and transfer for enforcement.

As such, you have three basic options to secure payment for the work you provided:

Option 1: Find a reputable debt collector or lawyer in Belgium

Instructing a debt collector or lawyer based in your debtors’ country is often the best way to go about recovering an unpaid invoice, as a fully licensed local agent familiar with the legal and legislative landscape is much harder to ignore. The use of a local agent will also clearly demonstrate that you take payment seriously and are prepared to take the necessary steps to recover what is due.

The downside to this approach is that you are responsible for sourcing your own lawyer or collection company in Belgium and that as well as any potential language and legal barriers; you also have to ensure that they are fully licensed, experienced and reputable or you run the risk of losing more money to an unscrupulous or unlicensed company that is likely to be far more experienced in avoiding payment than your current debtor.

Option 2: Find a reputable UK debt collector with a partner in Belgium

From a practical point of view, this is the cheapest and fastest way to take action against an overseas debtor. You simply hand the file over to a UK company, who then deal with their Belgian counterparts on your behalf. This means the creditor avoids any language barriers or legislative pitfalls as this is all handled by the UK collection company.

But just like with hiring an agency in Belgium, the creditor needs to be sure they are dealing with a reputable and experienced company and crucially, that the company really does have a relationship with another debt collection company or Lawyer in your debtors’ country. 

Many unscrupulous agencies will claim to have offices or affiliates in far flung places merely to increase their perceived prestige, when in actual fact they only use a local lawyer for legal action (at a massive mark up on any agreed rate), or worse still attempt collection purely from within the UK.

When it comes to choosing a UK agency you should always try and get a personal recommendation from a colleague in your industry, or failing that look for an agency recommended by a trusted trade association or professional body.

Option 3: Take legal action ‘in-house’ and issue proceedings in Belgium

We have included this as an option, as it is perfectly possible for a UK-based company to issue proceedings in Belgium. But practically, there are a number of not insignificant hurdles that must be cleared. Belgian courts share many of the same qualities as their French counterparts given they are both based on the Napoleonic code, but even for someone experienced with the French system, the differences can be significant.

For claims in excess of €1860.00 between commercial entities, you would issue in the Commercial Court and this would be heard by a Judge in the district your debtor is based or has their Registered or Head Office. Documents used as evidence would need to be translated in to either French or Dutch prior to submission and court documents and directions are also issued in these languages.

Additionally, if an award is secured but no payment is made it then falls to the creditor to engage the Court Bailiff in an effort to recover the judgment. Again, any instruction has to be submitted in either Dutch or French and subsequent reports are also supplied in these languages.

Needless to say, this third option is not an option we would initially recommend and should, in our opinion, only be considered as an absolute last resort.

Good luck with whichever option you choose.

The expert was Adam Home, a manager at Safe Collections, a debt recovery agency that specialises in serving contractors in the UK and overseas.

Editor’s Note: Related Reading –

IT contracting in Belgium – Money & Tax

Contracting abroad: a legal guide for IT contractors

All that glitters overseas to IT contractors may not be gold

Wednesday 18th February 2015