How will Brexit impact on High Court Enforcement and business debt as a whole?
The uncertainty surrounding the Brexit vote, and its implications for the UK are facing a crescendo. Every facet of the UK’s economy will be affected in some shape or form by a deal or no deal outcome.
So, in these uncertain times it is right that we should consider the impact of Brexit on being able to transfer a judgment to the High Court and then enforce it in any part of the United Kingdom and further afield into the European Union.
For our research on the implications of a “no deal Brexit” and Brexit at large, we found this article today in the Daily Telegraph a thought provoking and simple outline of the possible impact if the UK leaves the EU with no deal in place – see https://bit.ly/2FygN9E.
The big picture of course is how are businesses going to be able to maintain flow of cash in the face of Brexit?
We encourage businesses to dig into this vital aspect of their forecasting to see if any of it is coming from an EU customer. If it is, a question should be how is that relationship, and the payment of invoices going to work after the deadline? Is the UK business going to be able to supply the EU business in the same way? Are more checks going to be put in place, so trading becomes more difficult, and worse could the EU customer look to another supplier in the EU trading block to buy the same goods or services without the challenges of buying from a UK supplier? The effect of all of this is of course the UK business suffers from a loss of business and consequently revenue, which in turn spirals into a downturn in business and eventually cashflow. At that point, the UK’s businesses own creditors may act to recover their own cash, leading down the path of claim, judgment, and enforcement.
Conversely if a UK business relies on an EU business as part of its supply chain, and the EU business cannot supply in the same way as it did pre-Brexit, then the UK business may suffer from not being able to supply its customer base with goods and or services. A UK business in this situation may see a downturn in trading, and consequential loss in cash flow. Again, this can spiral into one or more creditors taking action against the UK business to recover its cash, with the same consequences outlined above.
This all seems bleak, and we certainly don’t wish to be unnecessarily gloomy. Our position is that just like any other change in business environment, people should plan for change, and develop their contingency plans for the worst or best scenarios – and everything in between.
Depending on where a business sits in the two situations outlined above, and no doubt there are many other situations we have not anticipated, business leaders should be making plans to ensure their cashflow through these uncertain times is protected. Cash is the lifeblood of any business, and Brexit is an unknown threat. So, by planning for the worst impact, or hard Brexit – through to soft Brexit, having a plan for cashflow in this transition period is sensible and necessary. Even if you don’t think your business will be directly affected, it’s still worth thinking through about how your business receives its cash and is any part of that pipeline affected by trading with the EU.
Ultimately if cashflow is safeguarded then the need to issue a claim, enter a judgment, and enforce it, will be avoided.
As for the wider impact of Brexit on the United Kingdom and its borders with the EU, we will have to see what the impact will be on the transfer of judgments between the UK and EU countries which of course includes Eire with its border to the UK.
Let’s not be under any illusion, the enforcement of court judgments between England and Wales, Scotland and Northern Ireland is not exactly straightforward and frankly should have been streamlined using technology to transfer court judgments. But it hasn’t and as far as we can see the systems in place today won’t change as a result of Brexit. We suppose that is of some comfort!
Enforcement of a judgment in the EU just adds another layer of complexity. In our view, whilst policy makers may feel the enforcement process has been a success, the fact is that filling out the paperwork to transfer the judgment is only the tip of the iceberg in terms of achieving a successful outcome, which means having a network of enforcement agents across the EU who work with the same approach, and the same standards. This is still very much a work in progress for all countries.
What we can say with some certainty is that for EU countries wishing to enforce in England and Wales we believe the English and Welsh system provides a proven model to get the best outcome for payment of a court judgment. The transfer and enforcement of judgments into the High Court through the action department in the High Court in London is as good as it can be and is well supported. EU businesses can then convert their EU judgment into a Writ of Control using the services of High Court Enforcement Officers to compel payment.
But the other way around, when a UK business wants to transfer to one of the member states outside of UK borders, the situation is in our view much less straightforward for all the reasons rehearsed above. The paperwork is largely the same, but the actual enforcement capability of EU states is fraught with red tape and delay. In fact, playing into the hands of Brexiteers, the historical ties between the UK and its old Empire serve us well today in terms of language, legal system and culture. Transferring a judgment to Australia, New Zealand, or another Commonwealth country, is in some ways easier than transferring a judgment to the EU.
Evidence in support of this contention is scarce, but in one article we found, it was said that only 6% of “citizens questioned” were aware of the European Payment Order (see https://bit.ly/2AEZksT). The article addresses the different approaches taken by EU Member States back in 2016, and of course now with Brexit on the horizon there is going to be no improvement.
The bottom line is that no one anticipated the impact of Brexit, least of all on the enforcement of court judgments. As it is, creating that system across the EU is still an ongoing project, which is now, like many aspects of commercial life, thrown up in the air.
We shall continue to follow the impact of Brexit on this key area of Shergroup’s own business in the weeks and months ahead. Our comments will no doubt change as the impact of Brexit unfolds. No one can predict the economic impact and therefore the ability to eventually enforce. What we can say is that businesses today do know their supply chains and their customers. We encourage businesses to dig a little deeper into their cashflow predictions to anticipate the impact of the changing market. Once this is done a business should still be able to plan for the various scenarios of a hard or soft Brexit.
Whilst we don’t expect this article to be of much comfort, one thing we can say to our followers and client community is – we are all in the same boat! For our part we will do what we can to assist businesses on both the UK and EU side to make sense of the changes when it comes to enforcement and use our contacts and experience to maintain as much consistency and confidence in the enforcement of court judgments as possible.
Do you wake up every morning hoping your children stay safe at school?
‘HOPE’ is NOT a viable strategy for keeping your children safe at school!
What law or enforcement problem are you facing? Fill out this form to get in touch.