Does your Business have outstanding Debt in Spain?

Regardless of the fact that the United Kingdom left the European Union in 2020 trade between the UK and Spain is still substantial. The Office of National Statistics (ONS) latest report states that Spain is the UK’s eighth largest trading partner accounting for 3.4% of its total trade, amounting to £59.1 billion in the previous four quarters to the end of 2023

Inevitably British businesses will experience unpaid outstanding invoices within that level of trade. The current economic climate being experienced in the UK has put considerable pressure on all companies and recovering any outstanding debts accrued is always an unwelcome challenge.

Giambrone & Partners’ highly experienced dispute resolution and litigation lawyers point out that cross-border debt collection between the United Kingdom (UK) and Spain can involve complex legal issues, in the post-Brexit period. The importance of instructing a law firm with a multi-jurisdictional capacity is vital. Giambrone & Partners has offices throughout Spain with English-speaking multi-jurisdictional lawyers.

Sergio Filonenko Kibu, an Associate, commented “A key factor is which jurisdiction in the original contract between the parties was chosen in the event of a dispute. England and Wales is a very popular jurisdiction due to the fact it is perceived as being unbiased.” Sergio further pointed out “Cross-border trade should always be supported with carefully drafted robust contracts including clauses aimed at protecting the business should a contentious issue arise. Clauses stating that a form of alternative dispute resolution (ADR) must be followed initially as well as a jurisdiction clause enabling businesses to pre-select the jurisdiction provides some degree of control over a dispute and the way it is to be managed.”

If the inclusion of such clauses has been overlooked it may be possible to instruct a cross-border litigation lawyer to approach your debtor in an attempt to negotiate a solution through ADR. This is in the best interests of all parties and will show that you are making all reasonable efforts to attempt to achieve a resolution without recourse to the courts. If a negotiated resolution can be achieved there is a greater chance of preserving the business relationship.

If all steps to resolve the dispute by a negotiated settlement fail, then there the only course of action that remains is to have the matter dealt with through the courts once the applicable law and jurisdiction has been established. A letter before action should be issued providing one last opportunity for the debtor to pay the outstanding debt before court action.

Once a successful court decision has been achieved you are then faced with enforcement of the judgment. Britain’s exit from the European Union has made this process significantly more complex and time-consuming. Brussels I Regulation (recast) and Lugano Convention ceased to apply. There is more than one approach, enforcement can be achieved either by The Hague Convention on Choice of Court Agreements (2005) or the domestic law of Spain. The Hague Convention, comparable to the Brussels Regulation and both the Spanish and UK courts should honour the jurisdiction clause in the contract and enforce any judgment arising from court action. However, enforcement under The Hague Convention depends on the jurisdiction clause being exclusive.

It is strongly recommended that the enforcement procedure should be managed by experienced expert cross-border lawyers and must followed meticulously as any breaches can result in the judgment being unenforceable and the creditor can be faced with legal costs and no satisfactory conclusion.

Sergio is an Abogado (qualified Spanish lawyer) and is admitted to practise in England & Wales as a Registered Foreign Lawyer (RFL). He is an associate based in the London office.

If you have an outstanding debt contact us at clientservices@giambronelaw.com or click here.