EKN expertise settles unpaid debt world­wide

Unpaid invoices requiring debt settlement or recovery are an unfortunate reality for most companies. If the debtor is located in another jurisdiction, collecting the outstanding amount usually becomes far more difficult. However, if the export transaction is covered by an EKN guarantee, the risk of non-payment is covered and legal support is available to assist the exporter, from the first signs of reluctance to pay to court proceedings.

Taking the matter to court should, however, be seen as a last resort, according to Ghanim Matti, Legal Counsel at EKN. “Since debt collection can be a tricky process in many countries, reaching a settlement is always the preferred choice. Enforcing payment by going to court is an aggressive method that reduces the chances of payment compared to a settlement deal with a repayment plan approved by all parties.”

Matti and his team speak from extensive experience: EKN has helped exporting companies and their banks resolve unpaid debts in over 140 countries since 1933. “Recovering unpaid debt abroad is nearly always more difficult than at home, due to different legal frameworks, varying attitudes towards paying your bills on time and other cultural aspects. A payment delay of 60 days is even seen as ‘normal’ in some places.”

EKN prefers to work closely with the exporting company, especially when it has a local presence and can contribute valuable knowledge to the settlement process. EKN, on the other hand, has amassed a wealth of experience. “The fact that we rarely start from scratch allows us to choose the right course of action in each individual case,” says Matti.

Being backed by the Swedish state adds strength. “EKN has the financial muscle and the long-term perspective required to engage in lengthy settlement or recovery processes, which would be difficult for a private enterprise to pursue on its own. Involving the local embassy also adds clout.”

Costly collection

Collecting debt abroad can be an expensive undertaking, but an EKN guarantee ensures that the creditor only needs to contribute the amount corresponding to the guarantee’s deductible.

EKN is ready to assist long before an unresolved debt goes to court, however. “Already at the first sign of payment difficulties related to the transaction covered by EKN, the exporting company must consult with EKN”, Matti says.

If previous payment reminders from the exporter have been ignored, a situation where they have a debt to the Swedish state that won’t go away is perceived quite differently.

Ghanim Matti, Legal Counsel at EKN

When three months have passed since the invoice due date, the exporter may call on EKN to settle an unpaid invoice and pay the percentage stipulated in the guarantee, commonly 95 per cent under the of Guarantee for Loss on Claim. The claim on the debtor is then legally transferred to EKN, which begins the process of negotiating a settlement or initiating recovery. For the exporting company (or its bank), successful recovery means receiving the remaining 5 per cent corresponding to the excess, resulting in zero credit loss.

A phone call or a letter from EKN often goes a long way in rattling the bones of importers in debt. “If previous payment reminders from the exporter have been ignored, a situation where they have a debt to the Swedish state that won’t go away is perceived quite differently,” Matti points out.

Communication nearly always pays off, he argues. “Many buyers appreciate the opportunity to explain why a bill remains unpaid. By maintaining a positive and encouraging stance, you build a good relation and vastly increase your chances of reaching an amicable settlement. Aggressive coercion is rarely the best way to success.”

Asset search may unlock payment

By listening to the counterpart and understanding their predicament, you can ask the right questions and determine the best way forward. “If, for example, the company claims to have no funds available, we can initiate an asset search to verify or refute this statement.”

Matti likens the process of helping the debtor realise the best course of action to a jigsaw. “You have to provide the pieces and then allow the buyer to solve the puzzle on their own and hopefully realise that paying your debts is always preferable.”

The foreign buyer may not even be aware that the exporter has taken out an EKN guarantee, nor understand what such a guarantee entails. Whether it is advantageous to inform the buyer in advance is open to debate. Some buyers may view it as an “escape route”, assuming the seller will be paid regardless, leaving the importer free to pay if or when they choose.

A common resolution is for EKN and the exporter to agree a settlement with the buyer that includes a repayment amortisation plan. “If that too fails, we will pursue the matter in court and, if necessary, initiate insolvency proceedings,” Matti says. “This often will not result in full recovery, but it sends an important message: non-payment is never an option.”