Jurisdiction in cross-border debt collection
Jurisdiction addresses the question of which country’s court is competent to handle a legal case when the parties are located in different countries.
So what are the jurisdictional rules applicable to cross-border debt collection cases?
Debt collection is actions directed against a debtor to induce him to pay his claim to the creditor.
The starting point is when an invoice falls due and the creditor, as a consequence, sends a collection notice to his customer.
No court is involved in the process at this stage. The creditor manages the claims activities himself or takes help from a third-party debt collector.
Since there are no legal decisions from a court involved in this phase, no issues of jurisdiction are relevant.
What is relevant is instead issues regarding whether the debt collector has permission to recover the debt in the debtor’s country. (Which is often not the case when the debtor is located in another country)
But if the debtor does not pay, then the creditor must proceed legally (and turn to court) in order to get paid, whether the claim is undisputed or disputed.
In these cases, the issue of jurisdiction becomes relevant. Which country’s court should the creditor use?
That question must be investigated in each case.
However, as a rule of thumb in a dispute between two commercial parties, if they themselves have not agreed on the jurisdiction applicable, the courts in the debtor’s country have jurisdiction in the matter.