More and more UK exporters are seeking help to recover debts from the Middle East, as some debtors in the region are rejecting invoices for payment due to the lack of a signed contract.
UK firms should take greater care to ensure they are able to recover debts from counterparties when doing business in the Middle East, according to law firm Lovetts.
“70% of UK exporters to the Middle East fail to sign contracts with counterparties in the region,” Lovetts operation director, Michael Higgins, tells GTR. “This is perfectly fine for clients based in the UK and incorporating terms in general, but Middle Eastern debtors require a signed contract to authorise payment.”
Simon Cook, a partner at Sullivan & Worcester, tells GTR that a tendency to agree business deals informally in the region could make it more difficult for some companies to recover debt owed to them, because of the absence of a signed contract.
“Because of historical practices and sometimes to keep things simple against a cultural background of trusting one’s business partners, some operators in the Middle East prefer to agree deals on a handshake or with limited written contractual arrangements in place,” says Cook.
“If firms don’t have something written formally by way of a contract: if they were just providing services and getting paid as-and-when, perhaps based on invoices alone for example, that wouldn’t necessarily be an unusual way of doing business.”
For Cook, it’s feasible that some debtors might use this as a means to get out of making payments. “They know it’s difficult for counterparties to prove that money is payable if there’s no written contract, or at least unclear terms, and firms could easily leave themselves open to this sort of thing.”