International Commercial Collections: A Practical Guide
International Commercial Collections: The Three-Currency Problem Nobody Talks About
When a German manufacturer sells €350,000 in precision components to a Brazilian distributor, and the distributor doesn't pay, the obvious problems surface immediately. Different legal system. Different language. 9,000 kilometres of distance. These are the challenges every article about international commercial collections discusses.
But there's a problem underneath that nobody mentions: the currency problem. Specifically, three currencies are in play — the invoice currency, the debtor's operating currency, and the currency your legal costs will be denominated in. Exchange rate movements during the 6-18 months it takes to resolve a cross-border dispute can swing the recovery value by 10-20%.
This isn't a footnote. It's a structural feature of international commercial collections that changes how you should approach every cross-border claim.
Why International Collections Are Different (Beyond the Obvious)
The standard explanation — different laws, languages, and cultures — is accurate but incomplete. The deeper structural differences:
Information asymmetry is extreme. When a domestic debtor stops paying, your credit team can check local registries, call mutual contacts, and assess the situation relatively quickly. When an international debtor stops paying, you're often operating blind. Is the company still solvent? Has management changed? Are they in restructuring? The answers require local intelligence that most creditors don't have.
The debtor's calculation is different. An international debtor knows something important: the creditor faces jurisdictional friction. Filing suit abroad is expensive, slow, and uncertain. The debtor may be calculating — correctly or not — that the foreign creditor won't pursue the claim aggressively enough to justify the cost. This calculation changes when a local agent enters the picture, but only if that agent is genuinely local.
Enforcement is the real bottleneck. Getting a judgment is one thing. Enforcing it across borders is another. Within the EU, Regulation 1215/2012 (Brussels I Recast) provides mutual enforcement, but even this requires local procedures. Outside the EU, enforcing a foreign judgment can require a separate recognition proceeding — essentially re-litigating the enforceability question in the debtor's jurisdiction.
The Three-Phase Framework
After 25 years of cross-border collection across 40+ countries, we've found that successful international commercial collections follow a consistent pattern, regardless of jurisdiction:
Phase 1 — Intelligence and Amicable Contact (Days 1-45)
Before sending a demand letter, investigate the debtor. This means confirming the company's current status and registered address in the local commercial register, checking for insolvency filings or restructuring proceedings, identifying the current decision-makers (they may have changed since the original sale), and assessing the general financial health of the company through local credit databases.
Then initiate contact through a local agent in the debtor's country. The first communication should be by phone — in the debtor's language — followed by a formal written demand through the locally appropriate channel (registered letter, burofax, raccomandata, depending on the jurisdiction).
This phase resolves approximately 50-65% of international commercial claims, depending on the debtor's jurisdiction and the age of the debt.
Phase 2 — Escalation and Negotiation (Days 45-120)
If the debtor doesn't respond or commits to a payment plan and then defaults, the approach shifts. The local agent escalates with more frequent contact, formal legal demand letters from a local attorney, and — where available — pre-litigation mechanisms like credit bureau reporting.
This phase also includes structured negotiation. Many international debts settle for less than the full amount, particularly when the claim is old or the debtor's financial position is stressed. The question isn't “will we recover 100%?” but “what's the optimal recovery given the cost of further action?”
A structured settlement at 75% after 90 days is almost always better than a 100% judgment after 18 months of litigation — especially when you factor in legal costs, management time, and the time value of money.
Phase 3 — Legal Action (When Justified)
Litigation should be a strategic choice, not an emotional one. The decision framework: Is the claim value large enough to justify legal costs in the debtor's jurisdiction? Below €25,000-€50,000, the economics rarely favour litigation for international claims. Is the debtor solvent? A judgment against an insolvent company is worthless. Confirm the debtor can pay before spending money to prove they should. Is the evidence quality sufficient? Cross-border litigation requires documentation that meets the debtor country's evidentiary standards. And what is the enforcement path? Identify the debtor's assets and the enforcement mechanism before filing.
When litigation is justified, use local counsel in the debtor's jurisdiction. The attorney should be able to explain the specific procedure, the expected timeline, and the realistic cost range before you commit.
The EU Toolkit
For intra-EU claims, two procedures significantly reduce cross-border friction:
European Payment Order (Regulation 1896/2006). File a standardised form in your own country's court for uncontested cross-border claims. If the debtor doesn't oppose within 30 days, the order is enforceable across the EU without separate recognition proceedings. Court fees are minimal (often €50-200).
European Enforcement Order (Regulation 805/2004). For uncontested claims, this regulation allows a judgment from one EU country to be certified as a European Enforcement Order and enforced directly in another EU country — no exequatur required. This eliminates the most time-consuming step in cross-border enforcement.
Both mechanisms are underutilised by creditors and their advisors. They don't replace local collection — the amicable phase remains the most cost-effective approach — but they provide a powerful enforcement backstop.
The Currency Decision
Back to the three-currency problem. When you have a cross-border claim, consider:
Invoice in which currency? Future contracts should specify the currency and include a clause allocating exchange rate risk. For existing claims, the debt is denominated in the invoice currency — but the debtor may negotiate payment in their local currency.
Legal costs in which currency? If you litigate in the debtor's country, legal fees are in the debtor's currency. A weakening debtor currency reduces your legal costs but also reduces the real value of what you recover.
Recovery timing. The longer the collection takes, the more exchange rate exposure you accumulate. This is another argument for speed — not just because debts decay, but because currency risk compounds.
Building a System, Not Fighting Fires
The companies that manage international receivables well don't treat each unpaid invoice as a separate crisis. They have a system: standard contract terms that include jurisdiction clauses, governing law, and interest provisions; a threshold for escalation (typically 60 days past due) that triggers automatic referral to their collection network; relationships with local agents in their key markets, established before they're needed; and regular aging analysis that identifies at-risk accounts before they become delinquent.
International commercial collections isn't a service you buy when something goes wrong. It's an infrastructure you build because you sell across borders. The collection capability should match the sales capability — same markets, same languages, same jurisdictions.
Your debtor is international because your business is international. That's not a problem. It's a feature that requires the right infrastructure.
