A Guide to Cross-border Debt Collection in Italy

A reliable steady cash flow is essential for companies to enable the business to manage its running costs and other financial liabilities and allow the on-going development of the company through investment and also to be able to address the often unpredictable demands of the market. Late payments must be addressed as quickly as possible to limit the negative impact on the company. 

A UK company doing business in Italy may have incorporated a jurisdiction clause to enable disputes, should one arise, to be litigated in England & Wales, which is one of the most popular jurisdiction and often selected as it is perceived to be unbiased and fair. However, an attempt a settlement by negotiation should always be attempted before litigation. Once an invoice has been exceeded a letter should be sent to the debtor clearly stating the invoice is outstanding and the date by which it should be paid. If your debtor ignores or disputes the invoice it is recommended that the next step, in consultation with experienced cross-border debt collection lawyers, should be to consider alternative dispute resolution (ADR), either mediation or arbitration. ADR allows a dispute to be managed by the parties involved in private with the assistance of a qualified mediator or arbitrator in conjunction with your cross-border debt collection lawyers. ADR is often less costly and time consuming than litigation.  Both parties can be advised and guided by their lawyers.

Alessandra Paduano, an associate, pointed out “Litigation related to cross-border debt collection must be carefully managed with the assistance of an expert cross-border lawyer experienced in managing and executing the enforcement of a judgment in England and Wales in a foreign jurisdiction”. Alessandra further commented “all the criteria and requirements must be for fulfilled to ensure that the creditor is successful in finally obtaining the money outstanding.”

Mediation

Mediation is a process involving a mediator, a trained impartial third party, who assists in resolving conflict by means of specialised negotiation techniques aimed at keeping the discussions calm and focussed. The mediator will make every effort to keep all parties focussed on resolving the conflict in a calm measured manner.  The mediator will recommend a solution to the dispute having heard all sides of the dispute, however, this is not legally binding.

Arbitration

Arbitration is another method of alternative dispute resolution, arbitration is more formal than mediation. There can be one arbitrator or three arbitrators. Arbitration is held in private and the dissenting parties will put their argument to the arbitrator who then makes a legally binding decision which is final but there are limited rights of appeal. 

Should the dispute not be resolved between the parties the next step for the creditor is litigation. 

Litigation – Debt Collection

The initial step is to instruct your debt collection lawyers to issue a letter before action (LBA) to your debtor. This sets out that an invoice remains unpaid and that you expect it to be settled usually within seven days but you can choose the length of time you will wait for payment. If your debtor fails to pay within the seven days you can then issue a claim through the courts with the assistance of your debt collection lawyer.

Your debtor has 14 days to respond to the claim form. If there is no response the court or your debtor acknowledges that they owe the money, the Court can issue a default judgment. If your debtor wishes to dispute the claim, the matter will be argued by each party’s legal representatives before a judge in court who will, after hearing all the facts will make a legally binding judgment.

Enforcement

Once you have a judgment against your debtor if payment is not immediately forthcoming your multi-jurisdictional debt collection lawyer will outline the various enforcement procedures available to you in Italy. Following Brexit the entitlement to enforce judgments in England and Wales across the EU was lost, making it more challenging to obtain enforcement. However, the UK recently signed up to The Hague 2019 Convention which will provide a standardised structure for the recognition and facilitate enforcement of judgments overseas between the UK and the other contracting states. In turn, this will considerably improve the access to justice for both individuals and commercial entities once it has been ratified.

At present recognition of judgments made in England & Wales relies on the Law no. 218/1995, Italian Private International law which states that Art. 64 of Law 218/1995 an English judgment is automatically recognised in Italy provided that such judgment meets seven requirements as below and enforcement relies on ART 67 Law no 218/1995 following rules of summary proceedings and the local Court of Appeal at which the judgment will be enforced and has jurisdiction:

• The claim form must have been correctly served in compliance with English law and the debtor’s rights were not compromised.
• All parties had the opportunity to present their case or judgment was made in default.
• The judgment was final with no appeal pending
• The judgment did not conflict with an earlier judgment in an Italian court
• There are no proceedings before an Italian court started prior to the English proceedings
• The judgment must be given by an English court that is considered to have jurisdiction related to the relevant Italian principles

Alessandra Paduano is an Associate in our Manchester office. She's a solicitor in England and Wales, and a New York attorney. She completed her LLB (Hons) at the University of Abertay Dundee, Diploma in Professional Legal Practice at the Robert Gordon University, and LLM at the University of Dundee. Alessandra expertise extends to a variety of areas. She specialises in personal injury and has extensive experience helping clients who have had accidents at work that have resulted in suffering serious life changing consequences.

Alessandra has a meticulous eye for detail and strong analytical skills, which coupled with her personable approach, allow her to work efficiently and to a high standard. She believes in establishing a good relationship with clients and strives to exceed their expectations. Alessandra understands each client has different needs and ensures that she tailors her advice and approach in acknowledgement of this. 

For more information on collecting debt owed in Italy, please contact Alessandra's clerk Joseph Crick at j.crick@giambronelaw.com or please click here.