International debt collection - Euler Hermes€¦ · debt collection procedures in each country, helping to sup-port decisions and manage expectations when trading internationally

Economic Outlookno.1213 December 2014

Special Reportwww.eulerhermes.com

Internationaldebt collectionThe Good, the Bad and the Ugly

Economic Research

Economic Outlook no. 1213 | December 2014 | Special Report Euler Hermes

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Economic ResearchEuler Hermes Group

Economic Outlookno. 1213Special Report

Contents

The Economic Outlook is a monthlypublication released by the EconomicResearch Department of Euler HermesGroup. This publication is for the clientsof Euler Hermes Group and available onsubscription for other businesses andorganizations. Reproduction is authorised,so long as mention of source is made.Contact the Economic Research Depart-ment Publication Director and Chief Eco-nomist: Ludovic Subran Macroeconomic Research and CountryRisk: David Semmens (Head), FrédéricAndres, Andrew Atkinson, Ana Boata,Mahamoud Islam, Dan North, DanielaOrdóñez, Manfred Stamer (Country Econ-omists)Sector and Insolvency Research:Maxime Lemerle (Head), Farah Allouche,Yann Lacroix, Marc Livinec, Didier Moizo(Sector Advisors), Antoine Martin (Con-sultant)Support: Lætitia Giordanella (Office Man-ager), Sarah Bosse-Platière, Claudia Huis-man, Sergey Zuev (Research Assistants)Editor: Martine Benhadj Graphic Design: Claire Mabille Photo credit: Allianz, ThinkstockFor further information, contact theEconomic Research Department ofEuler Hermes Group at 1, place desSaisons 92048 Paris La Défense Cedex– Tel.: +33 (0) 1 84 11 50 46 – e-mail:[email protected] > EulerHermes Group is a limited companywith a Directoire and SupervisoryBoard, with a capital of EUR 14 509 497,RCS Paris B 388 236 853 Photoengraving: Imprimerie Adelinet –Permit December 2014; issn 1 162–2 881◾ December 2 , 2014

3 EDITORIAL

4 OVERVIEW

4 International debt collection:A three-step approach

6 Euler Hermes’ Unique CollectionComplexity Score

7 Five takeaways for sound debt collectionworldwide

8 COLLECTION COMPLEXITY 2014

10 THE FIVE COMMANDMENTS FOR INTERNATIONAL DEBT COLLECTION

10 Rule #1: Never underestimatethe business context

13 Focus Talking about payment…

13 Rule #2: When facing late payers,negotiation with teeth is one's best friend

15 Focus Ownership protection agreementsmay help

16 Rule #3: Beware of toothless courts

17 Zoom Regional and local perspectivestowards late payment

19 Focus Unsupportive courts — Selectedexamples

20 Rule #4: Insolvent debtors? Hurry beforeit is too late

21 Zoom Regional perspectives: From effortsto run-aways

22 Rule #5: The sooner, the better

24 OUR PUBLICATIONS

26 SUBSIDIARIES

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Euler Hermes Economic Outlook no. 1213 | December 2014 | Special Report

EDITORIAL

Fifty shades of collection

LUDOVIC SUBRAN

Let's face it, whether your business is domestic or interna-tional in nature, collecting debt is often a daunting task whichone would always prefer to avoid. Of course, collection isabout persuasion but there is more to it and, often, goingthrough successive layers of proceedings may be necessary.Persuasion, intimidation, whip-cracking judges are as manyreasons why I wanted to draw a parallel between interna-tional debt collection and Fifty Shades of Grey the interna-tional best seller (coming soon to cinemas!). Sometimes,you wonder why companies do that to themselves; it cannotbe corporate BDSM, right? But the reality is unfortunately al-ways the same: The longer one waits, the greater the dangerof never collecting the debt. Prevention is key, so is gettingprofessional help when needed. You certainly do not wantto face toothless courts or enter a weird judiciary game whereyou will have to put a lot of money and energy with an un-certain outcome. Knowing the cardinal sins (and the com-mandments) of debt collection in countries where you op-erate is a must. And go figure, there are as many ways tocollect your dues as there are countries in the world. In thisreport, we analyzed 44 countries and let me tell you, thereare 44 shades of collection practices! From Australia’s ab-sence of fast-track proceedings to Argentina’s excessive pay-

ment terms, it never seems easy. From Belgium to Brazil,amicable arrangements are always preferred over legal ac-tions. Another interesting point is that when people ask whysome countries are still labeled as emerging countries whenthey have growth rates that are ten times what advancedeconomies are experiencing, it is also about how the privatesector’ safety net is woven. From payment practices to courtsand insolvency proceedings, a country’s attractiveness isbased on its reputation and how easy to work with it appearsto the world. Of course, demand is everything and if thereare buyers, why not go but the risks you take - when you areunsure about the ‘how to’ collect your dues – can put offmany CEOs and shareholders. The good news is that all coun-tries are trying to make efforts to sanitize their commercialjustice and help international companies get a fair treatmentlocally. Yet, a good dose of elbow grease is always necessaryby specialists, preferably. In the end, you do not want thisnightmare to last too long, there is always a fine line betweenpleasure and pain.

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OVERVIEW

International debt collectionThe Good, the Bad and the Ugly

ANTOINE MARTIN, MAXIME LEMERLE, LUDOVIC SUBRAN

+ How does international debt collection work?+ How complex is collecting debt around the world?+ What are the dos and don’ts of debt collection?

International DebtCollection: A three-stepapproach

International debt collection is neverthe same. Its complexity depends onmany factors including one’srelationship with its client. Eventhough there is a country-specific legalbackdrop for collecting your dues (seesummaries of Euler Hermes’ countrycollection profiles that appear in themargins of this report), collection canbe summarized in three steps.

Step one: Amicable pre-legal negotiationNegotiating to obtain payment may be difficult, time con-suming, costly and frustrating, but this is an essential phasewhen collecting debt. First, negotiation may be the best wayto preserve existing business relationships because discussingissues and finding compromises is often an efficient alter-native to contentious routes. Second, negotiation is often ademanding exercise (in terms of both time and money), butit will always be less costly than commencing legal proceed-ings which always remain complex.

ARGENTINA

+ The payment behavior ofdomestic companies is poorand the average DSO is overallexcessive.

+ Procedural delays and costsare high and, considering theinability of domestic courts tocope with the caseload in atimely manner, commencinglegal action without having firstconducting debt collectionpre-legal action is overall oflittle value.

+ Debt renegotiationmechanisms have been put inplace but in practice, when thedebtor has become insolvent,liquidation remains the defaultprocedure even though it isnever in the interest ofunsecured debtors.

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Step two: Legal actionHaving said this, pre-legal action may also be-come a frustrating exercise because compro-mises may lead to debt instalments as well asto debt write-offs, whilst negotiations offers littlemeans to constrain the debtor to pay. Thus,when amicable attempts lead to a dead end, le-gal action may be the next step. First, assessing whether the debtor company isstill in activity and whether it is solvent is a pre-requisite prior to commencing litigation pro-ceedings. Indeed, collecting debt from insolventdebtors is a challenge and it requires commenc-ing complex proceedings which may last foryears without any result being guaranteed.Second, if going to court is always about havingone’s rights enforced, the process is always con-straining and various levels of complexity applyfrom one country to another. For instance, al-though legal insecurity is inherent notwithstand-ing the country, the rule of law perception may

vary, courts may be more or less independentand, needless to say, the duration and cost ofproceedings may vary significantly.

Step three: InsolvencyLet's be clear: the longer the proceedings, thegreater the chances of realizing that a debtorhas not paid other debts and the greater thechance of realizing that it has actually becomeinsolvent too.Against this worst case scenario, various mech-anisms have been put in place to deal with in-solvent companies. However, although eachtype of proceeding has a specific purpose (res-cuing viable companies, liquidating others torealize the debt through the sale of the com-pany's assets), in practice companies reachingthe insolvency stage rarely survive. Furthermore,the recovery rate in insolvency cases is usuallyvery low: by contrast with debts secured throughspecifically designated assets, most business ▶

AUSTRALIA

+ The payment culture ofAustralian companies and theaverage DSO are overall goodbut standard payment termsare beyond 30 days whilst thelaw provides no framework onlate payments, late paymentinterest and collection costs.

+ The court system iscomplexified by the country'sfederal structure and providesno fast track proceedingssusceptible of facilitating thesettlement of undisputableclaims. The courts areotherwise efficient, but delaysand costs tend to be significantwhilst enforcing foreignjudgments may prove difficult.

+ Recourse to legalproceedings when the debtoris insolvent is complex andexpensive, and the chances ofrecovering the debt are verylow.

OurMethodology

The Euler Hermes CollectionComplexity Score and Ratingprovide a simple assessment ofdebt collection procedures ineach country, helping to sup-port decisions and manageexpectations when tradinginternationally.

The score is a measure of the level of complexityrelating to debt collection procedures within eachgiven country from 0 (least complex) to 100 (mostcomplex). To simplify cross-country comparisons,we summarized the level of complexity in a four-modality rating system: Notable (score below 40),Significant (score between 40 and 50), Major (50to 60) and Severe (above 60). The score and ratingare combining expert judgment by Euler Hermes'Collection specialists worldwide and over 40objective indicators relating to three areas:

Local payment practicesThe local payment habits and regulatoryframework overseeing payments. Based onthe availability of financial information,payment methods, payment terms, dayssales outstanding figures, local paymentbehaviour and the legal framework relatingto late payment interest and collectioncosts.

Local court proceedingsThe complexity and efficiency of courtproceedings - measure of the regulatoryenvironment, chances of success, fast-trackproceedings, default judgments, the formallegal action process, ownership protection,alternative dispute

Local insolvency proceedingsThe existence of effective insolvencyproceedings - taking into accountinsolvency proceedings, priority rules andcancellation of prior transactions

For each country, a visualrepresentation of thecomplexity by area and thefinal rating are shown via afour-point scale andcorresponding symbols.

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Notable Significant Major Severe

NOTABLE SEVERE

▶

Saudi ArabiaUAE

RussiaChina

MalaysiaIndonesia

MexicoSlovak Republic

ArgentinaThailand

ColombiaMorocco

IndiaCzech Republic

BrazilHungary

PolandItaly

TurkeyUSA

ChileIsrael

AustraliaSingapore

Hong KongCanada

RomaniaDenmark

GreeceJapan

PortugalUK

FranceNorwayFinlandIreland

New ZealandNetherlands

BelgiumSpain

SwitzerlandAustria

GermanySweden 31

31343536363636383838394141434444444647495053535353535454555858606060646669697476778089

Collection complexity Overall complexity score, 0=least complex, 100=most complex

Source: Euler Hermes

▶transactions left unpaid would indeed be con-sidered as unsecured debts and would thuscome last in the chain of priorities. In otherwords, financial institutions and tax officeswould see their debts being settled first whilstother creditors would typically be repaid withthe remaining money. If any, that is.The underlying logic behind these three stepsis crystal clear: when time and procedures goon and on, collection complexity increases, costsrise and the risk of dealing with an insolventdebtor grows. Simply put, the longer one waits,the greater the danger of never collecting thedebt.

Euler Hermes’ UniqueCollection ComplexityScore The truth is that the debt collection process is alayer cake of obvious but nonetheless essentialsteps, each characterized by a specific and in-creasing dose of complexity. We developed aunique score which takes into account over 40items related to local payment practices, localcourt proceedings and local insolvency proceed-ings. The methodology (see box) enabled us to

rank 44 countries around the world. We de-signed both a score from 0 (least complex) to100 (most complex) and a summary rating sys-tem (notable, significant, major, severe) to as-sess debt collection procedures in each country.We will update this ranking on a yearly basisand look forward to including more countriesin the scope. In our effort to benchmark bestand worst practices in internal debt collection,we ran into serious difficulties as there are asmany payment practices, court proceedings andinsolvency proceedings as there are countriesaround the world. However, by itemizing ourmethodology to very specific business environ-ment elements - such as whether a debt re-structuration mechanism is available or therecognition of a Retention of Title clause - wemanaged to assess collection complexity to helpcompanies understand what could go wrongwhen they have to be paid.The results are fascinating: Sweden, Germanyand Austria take the lead, while Russia, theUnited Arab Emirates and Saudi Arabia are stilllagging behind when it comes to simplifyingthe life of companies trying to recover theirdues. There is a divide between emerging mar-kets and advanced economies and sometimesvibrant GDP growth did not necessarily entailmore conducive a business environment.

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(i) Never underestimate the business context; (ii) Negotiation with teeth is one's best friend; (iii) Beware of toothless courts; (iv) Collecting debt from insolvent debtors is

a challenge; (v) The longer one waits, the greater the

complexity and risks. +

Five takeaways forsound debt collectionworldwideIn this report, we will go from Argentina to SaudiArabia to China to understand why internationaldebt collection is complex and how to deal withcross border complexity. Based on this research,five simple rules always apply:

▶

AUSTRIA

+ The payment behavior ofdomestic companies is good andthe EU legal framework providesreliable tools when it comes tolate payment issues.

+ The court system is overallefficient and reliable but pre-legal action conducted byspecialists remains the mosteffective method of collectingdebt.

+ Although Austrian insolvencylaw aims at rescuing companiesto increase the chances ofrecovering debts, it provides nolimitations as to how much of thedebt may be written off inrestructuration negotiations andit is rare for unsecured creditorsto recover from insolvent debtorsin practice.

BELGIUM

+ Payment terms in Belgium areslightly higher than 30 days butDSO could be improved and thetransposition of EU rules on latepayment in domestic law is notas demanding as in other EUcountries.

+ Court proceedings are reliableand benefit from EU standards,but enforcing domesticjudgments remains timeconsuming and costly, so thatpre-legal action conducted bycollection specialists remains themost efficient option when itcomes to recovering debt.

+ Although domestic insolvencylaw aims at rescuing companiesto increase the chances ofrecovering debts, it provides nolimitations as to how much of thedebt may be written off inrestructuration negotiations andit is rare for unsecured creditorsto recover from insolvent debtorsin practice.

BRAZIL

+ The payment behavior ofdomestic companies isacceptable but standardpayment terms are very broadwhilst DSO remains excessive.

+ Given the length and cost oflegal actions in Brazil, chances ofobtaining enforceablejudgments in a timely mannerare low and it is preferable toconsider amicable arrangementsand specialist debt collectionmethods as a means to avoiddomestic courts.

+ When it comes to insolventdebtors, recourse to companyrescue mechanisms is increasing,however in practice the chancesof recovering debt remainextremely low.

CANADA

+ Although the paymentbehavior of domestic companiesis good, the law provides nostandard payment terms anddoes not facilitate the debtcollection process so that latepayment conditions (delays,interest rate, collection costs) areleft for the parties to considercontractually.

+ Canada offers an efficientjudiciary system, which mayhowever be complex insofar asdifferent federal and local rulesare applicable. Contractualownership protectionmechanisms commonlyadmitted in many countries arenot recognized by Canadiancourts.

+ Insolvency law providessophisticated mechanisms, buttheir efficiency in recoveringunsecured debt is very limited sothat pre-legal action ought to beconsidered as the best debtcollection opportunity.

CHILE

+ Although the paymentbehavior of domestic companiesis good, the standard paymentterms are very broad (60 to 90days).

+ Courts are trustworthyhowever the system provides nofast track proceedings, whichimplies that pre-legal actionconducted by collectionspecialists is the most efficientway to obtain payment withoutcommencing formal litigation inwhich legal costs and delayswould be disproportionate.

+ Debt renegotiationmechanisms aiming at rescuingcompanies have been put inplace but these are never usedand liquidation remains thedefault proceeding when itcomes to dealing with insolventdebtors, therefore the chances ofcollecting unsecured debtthrough insolvency courts areinexistent.

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Country collection complexity COLLECTIONcomplexity

2014

ECONOMIC RESEARCH TEAM

Source: Euler Hermes, as of December 2, 2014

Notable Significant Major Severe

MAJORThailand

ColombiaMorocco

IndiaCzech RepublicBrazilHungaryPolandItaly

TurkeyUnited States

IsraelChile

13

SIGNIFICANTAustralia

SingaporeHong KongCanadaRomaniaDenmark

GreeceJapan

PortugalUK

10

SEVERESaudi Arabia

UAERussiaChinaMalaysiaIndonesia

MexicoSlovak Republic

Argentina

9

NOTABLEFrance

NorwayFinland

IrelandNew ZealandThe NetherlandsBelgium

SpainSwitzerland

AustriaGermany

Sweden

12

Overall collection complexity

9


ratings in 2014

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The five commandmentsof international debt collection

Why is international debtcollection complex, and howto deal with cross bordercomplexity? Five rules apply:(i) Never underestimate thebusiness context; (ii)Negotiation with teeth is yourbest friend; (iii) Beware oftoothless courts; (iv)Collecting debt from insolventdebtors is a challenge; (v) Thelonger one waits, the greaterthe complexity and risks.

Never underestimate thebusiness contextThe context in which foreign trade partners do business is amust-know and must be considered in the first place, priorto doing business abroad.

Various data sources can help assessing where one setsfoot, and sources such as the World Bank produce freelyaccessible data as to the business environment of mosteconomiesFor instance, the Doing Business project measures the easeof doing business across 189 countries by looking at theavailability of business regulations, the ease of creating acompany, to access electricity, obtain loans, enforce contracts,

Rule #1

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dicators may draw one's attention to potentially forthcomingbusiness difficulties at the company level.

It first goes without saying that inquiring on a partner'scredit situation and financial health prior to doing busi-ness may save the trouble of struggling to get paid lateronVarious difficulties may however appear. Some countriessuch as Russia, Saudi Arabia, Mexico or Italy are for instanceknown for a tendency of business owners to hide behindscreening companies or to disappear when things turnwrong, whilst China imposes no restriction on a companydirector to start a new business after shutting down another

IndiaArgentina

BrazilIndonesia

ChinaMorocco

RussiaGreece

ItalyTurkey

HungarySaudi Arabia

RomaniaCzech Republic

BelgiumChileIsrael

MexicoSlovakia

ColombiaSpain

PolandFrance

JapanNetherlands (the)

ThailandPortugal

UAEAustria

SwitzerlandMalaysia

CanadaGermany

IrelandSweden

AustraliaFinland

UKUSA

NorwaySouth Korea

DenmarkHong Kong

New ZealandSingapore 2

34567891011131416182021222526272931323334373940414244484954555661627190114120124142

Ease of doing business - World Bank indicators Ranking of countries from 1 (best) to 189 (worst)

Source: World Bank, 2014 Survey

Saudi ArabiaIndia

MoroccoTurkey

UAEArgentinaIndonesia

ChileRussia

HungaryBrazilChina

GreeceRomaniaThailand

SwitzerlandMalaysia

PolandSlovakia

ColombiaItaly

New ZealandMexico

Hong KongIsraelSpain

FranceIreland

Czech RepublicSingapore

SwedenAustria

AustraliaUK

Netherlands (the)BelgiumPortugal

DenmarkNorwayCanada

South KoreaUSA

GermanyJapan

Finland 12345689101112131416171920212223242527282930313236414546525355646573758392109113137163

Ease of resolving insolvency - World Bank indicators Ranking of countries from 1 (best) to 189 (worst)


settle insolvency issues, etc. In parallel, the Enterprise Surveysproject similarly considers multiple business environment-related issues, including access to finance, corruption levels,infrastructure or workforce availability, competition, etc.across 135 countries.Having said this, the findings provided in such institutionalsources may sometimes be difficult to interpret and shouldthus be cross-verified with other sources. According to theBank, for instance, while no more than 7.4% of business own-ers and top managers (in 4,420 Russian firms interviewedfrom August 2011 through June 2012) apparently identifiedRussian courts as a major constraint when doing business inthe country, 70.3% of the interviewees however declaredthat domestic courts lacked fairness and impartiality whilstbeing corrupted. This potential incoherence may also befound when looking at China where, although no more than1.3% of business owners and top managers (in 2,700 Chinesefirms interviewed from November 2011 through March2013) identified Chinese courts as a major constraint whendoing business in the country, 43.6% of the intervieweesnonetheless declared that domestic courts lacked fairnessand impartiality whilst being corrupted. These estimateswould seem contradictory, but our research would tend toconfirm that China and Russia would rank amongst the mostcomplex countries in terms of collection work.

In addition to these institutional assessments which overallfocus on business development at a macro-level, various in-

Limited domesticcompany financial info.

Payment terms>30 days

HighDSO

Payment meansare not a guarantee

Poor paymentculture

55%

55%

57%

66%

70%

Payment-related complexityTop 5 difficulties for collectionNumber of countries in %


▶

CHINA

+ Although traditions towardspayment obligations are worthnoticing, DSO remain excessivewhilst late payments are notefficiently regulated. In fact,the law imposes no restrictionon Chinese traders to start anew business after shuttingdown a company withoutsettling its debts.

+ The court system is overlycomplex and suffers from alack of transparency, highprocedural delays and costswhilst enforcing courtdecisions against domesticcompanies may proveimpossible.

+ The insolvency framework isoverly complex, unreliable andunused.

COLOMBIA

+ The paying behavior ofdomestic companies is fairlycorrect but DSO remainexcessive and late paymentsare frequent.

+ The court system lackstransparency and significantprocedural costs and delaysare significant so that courtproceedings overall ought tobe avoided.

+ When it comes to insolventdebtors, collecting debt is agenuine challenge and, overall,negotiating payment duringthe pre-legal action phaseremains the most efficientalternative.

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business without settling its debts. Elsewhere, financial in-formation on domestic companies may sometimes be diffi-cult to obtain because regulations impose no obligation onnon-listed companies to disclose their financials (Canada,Switzerland, Hong Kong, etc.), or because companies simplytend to ignore strict regulations on the matter (Turkey,Poland).In countries such as Greece, Brazil, Thailand or Hungary, al-ternatively, obtaining financial information on domestic com-panies is not a major issue, however determining to whatextent the said information is trustworthy and reflects thecompany’s reality would be challenging.

The corporate structure of a business partner may alsohave a significant impact on debt recovery possibilities(liability limitation, corporate veil & screening compa-nies)The very objective of setting up a legal entity to conductbusiness is to separate the liabilities flowing from the businessactivities from the business owners' responsibility. Hence, inpractice, except when the company management is visiblyfaulty, obtaining payment for the business' debts is an im-possible task when a liability limitation framework has been

put in place. In addition, many countries tend to impose nominimum capital requirements on limited liability companiesand thus provide no guarantees to business partners that acompany has a sufficient safety net to absorb unforeseenlosses.

Payment behaviors vary from one country to anotherPayment behaviors have a major impact on debt collectionand dealing with businesses in Northern Europe (Sweden,Norway, Finland, and Netherlands), Canada, Japan or Chile(where late payments are publicly recorded and thus havean impact on credit histories) would often be a guaranteeas companies in these countries are known for paying ontime. The payment behavior of companies in Russia or SaudiArabia, by contrast, is extremely poor, whilst companies inIreland, Italy or Greece are generally known for taking theirtime when it comes to paying bills. Similarly, large businessesin the U.S. or in the UK would increasingly tend to extendterms without further discussion with their suppliers, for-getting that a period of credit is a privilege, not a right.

Screeningstructures &

liability limitations

Reliabilityof financials

Respectof discloserobligations

Transparency issues


Cash

M

anagement

Payment attitude

DSO

Payment behaviors


Corruption

Unfairness

Bias

Opacity

Impartiality

Transparency

Judicial complexity


▶

CZECH REPUBLIC

+ The payment culture ofdomestic companies isgenerally good but when itcomes to settling bills somedelays must be expected.

+ The court system iscomplex and is criticized for alack of transparency andindependence. In addition,legal proceedings tend to beoverly lengthy and costlywhilst enforcing courtdecisions may also beproblematic.

+ When the debtor hasbecome insolvent, debt-renegotiation mechanismsare inefficient and liquidationis the default procedure sothat the chances of collectingthe debt are extremely poor.

DENMARK

+ The payment behavior ofdomestic companies hasmargin for improvement butthe EU legal frameworkprovides reliable tools when itcomes to let payment matters.

+ Courts are reliable but thesystem provides no fastproceedings susceptible ofgenuinely facilitating thecollection process when theclaim is undisputable. Delaysand costs otherwise remainsignificant when a claim isdisputed, and EU standardproceedings are not fullyapplicable in the country.

+ Although domesticinsolvency law aims atrescuing companies toincrease the chances ofrecovering debts, it providesno limitations as to how muchof the debt may be written offin restructuration negotiationsand it is rare for unsecuredcreditors to recover frominsolvent debtors in practice.

FINLAND

+ The payment behavior ofdomestic companies is goodand the EU frameworkprovides reliable tools when itcomes to late payment.

+ Courts are reliable andefficient but enforcementproceedings may be timeconsuming, especially whenthe debtor's assets are difficultto locate. Thus, recoveringdebt through pre-legalcollection methods remainsthe most efficient solution.

+ Although insolvency lawaims at rescuing companiesfacing financial difficulties inorder to increase repaymentpossibilities, mostreconstruction proceduresspread over years (or fail) thusleaving the creditors with noor very little dividends, whilstliquidation procedures leavevery little recovery chances tounsecured creditors.

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Contracts matterThis may sound a self-evident truth but, even though this isnot systematic in practice, ensuring that business is con-ducted under the framework of a contract is essential. First,when no regulatory framework is in place or when the ex-isting framework relies on contractual freedom, not relyingon a contract means that no rules apply. Second, althoughnot negotiating a contract may seem like a time- saver, whenthe time to demonstrate the existence of a debt comes, nocontract means that it will be very difficult to prove that tradeterms have been infringed, particularly when the burden ofproof is on the demanding party.

When facing late payers,negotiation with teeth isone's best friend

Fact: payments are normally deemed late once the due datehas expired. There is however no consensus as to how duedates ought to be fixed and two schools actually provide di-verging possibilities.

Contractual freedom v. legal interest rates: May thebest winCollection attempts on a global scale may be very complexbecause most countries provide no particular rules as to howmuch time ought to be left to a debtor prior to consideringthat an invoice is due.Generally, contractual freedom is considered as the mainsource of market self-regulation and complete liberty is leftfor the parties to decide on this point. Problematically, con-tractual freedom only partially protects the creditor and, of-ten, a debtor with significant influence would enjoy a defacto possibility to take liberties with deadlines. A creditorplaced in an inferiorit situation would, in turn, typically haveno choice but to accept this situation to preserve its com-mercial relationship with the debtor. Otherwise, the only wayto constrain the debtor to pay would be to go to court, butthis would usually be too late whilst additional costs (anddelays!) would be borne by the creditors.

Court system is complex

Court system lacks transparency& independance

Court system lacks specialised judges

No fast track proceedings available

No regional framework offeringharmonized fast track proceedings

Procedural delays & costs are high

No default judgments availablewhen the debtor ignores the claim

Courts take longer to dealwith international claims

Restrictive appeal proceedings

It is overall unreasonableto commence ordinary legal action

43%

43%

39%

45%

48%

55%

55%

50%

66%

59%

Court proceedings-related complexityTop 10 difficulties for collectionNumber of countries in %

Source: Euler Hermes ▶

Talking about payment…

FOCUS

▶ Payment culture and payment habitsare complementary though distinctconcepts. On the one hand, 'paymentculture' describes the tendency ofcompanies to pay on time. On the otherhand, 'payment habits' would rather referto the amount of time (Days SalesOutstanding or DSO) necessary to obtainpayment in a said country.

▶ For instance, payment ought to occur(by law) within 30 days in Italy and 60days in Greece but would tend to occurrespectively within 100 days (increasing)and 109 days (decreasing) on average.Thus, whilst payment habits arequestionable in both countries, thepayment culture is improving in Greece

and worsening in Italy. In Israel, similarly,the average DSO is around 91 days so thatthe payment habits must be taken intoaccount, however delays remain limited inpractice so that it can be fairly said thatdomestic companies tend to play by therules.

▶ It should also be noted that thepayment culture in many countries maybe (very) good despite significant DSO. Forinstance in Germany, Hungary, China,Portugal, Spain, Romania or Australia,most companies would normallyendeavour to pay on time but, due to alack of banking support, would tend to usecommercial credit as a cash managementmethod and delay payments, thus +

Rule #2

FRANCE

+ The payment behavior ofdomestic companies is correctbut some margin forimprovement remains as theaverage DSO does not matchthe standards set forth inrecent regulations stringentlytransposing EU paymentstandards into domestic law.

+ French courts are fairlyefficient in dealing withdisputes in a timely manner,however once the debtor isdeclared insolvent it becomesextremely difficult to enforce adebt because French lawprotects the debtor companyas long as the insolvencyproceedings are notterminated.

GERMANY

+ The payment behavior ofdomestic firms is good and thecourts are efficient indelivering timely decisionshowever, orchestrated pre-legal negotiation effortsremain the most efficientmeans of collecting debt.

+ The purpose of insolvencyproceedings in Germany haslong been to realize thedebtor's assets to as to repaythe creditor's debt. As a result,liquidation has in practiceremained the defaultprocedure and the systemprovides no genuine support tounsecured creditors when itcomes to collecting debt frominsolvent creditors.

GREECE

+ Late payments in Greece arefrequent and, despiteimprovements being regularlyobserved, the average DSOremains high compared toother EU markets, but this isnot surprising insofar as thelaw has implemented EU ruleson late payment with flexibility.

+ Although the courts are fairlyreliable, the legal processremains slow and enforcementmay be difficult becausedebtors are often well aware ofloopholes in the system.

+ Insolvency law provides adebt renegotiation mechanismbut collecting money at thisstage remains a significantchallenge.

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For this reason, regulators in various countries have estab-lished reference payment standards by law, whether at thecountry level, or on a regional scale. These standards areoften disparate and are not always observed in practice, butthey nonetheless provide a regulatory framework, a basisfor calculating interest rates as well as a negotiation toolwhen payment becomes an issue.

Always negotiate a favorable way-outDebt collection efforts may be simplified when contracts in-clude strict payment terms as well as conditions deemedapplicable should late payment occur.Since the average DSO may differ significantly from the ne-gotiated terms, for instance, imposing payment terms (30days, 60 days, etc.) and payment deadlines allows demon-strating that a specific agreement has been breached whengoing to court is necessary. In addition, legal interest ratesmust be used as a reference whenever a framework is avail-able, whilst contractual rates must otherwise be negotiatedand applied.Having said this, although legal interest rates may be chargedautomatically to the debtor in various countries, in practicemany companies do not take the pain of issuing additionalinvoices so that, rather than being paid to the creditor, interestand costs are often used as a pressure tool whilst conducting

Contractualfreedom

De factoinfluence

Business relationship preservation

Latepayment

Market selfregulation goal

May the best win


collection negotiations. Otherwise, obtaining payment of in-terest would at least require orchestrated negotiation, whilstcourt support (i.e. formal legal proceedings) would often benecessary. In both cases, self-conducted collection work istime consuming whilst recourse to third-party negotiatorsor lawyers has a price. As a result, it is also essential to makesure that the contract sets how late payment interest andcollection compensation shall be settled and who (the cred-itor or the debtor) shall bear the cost of amicable or legalcollection proceedings. The choice of specific payment means may finally have animpact on collection proceedings; whilst negotiations mayalso help reaching an agreement as to how and when own-ership of the goods would shift from the seller to the buyer(see Focus p.17).

Avoid never-ending lawsuitsOverall, whenever this is possible, pre-legal action negotiationshould be considered as the best alternative to legal pro-ceedings which, notwithstanding each country's particular-ities, always remain complex. Often, negotiations wouldentail expenses, debt instalments and debt write-offs, butthese efforts would be less important than legal action-re-lated costs and timescales, whilst reducing the chances offacing insolvencies.

PAYMENT MEANS COULD(INCREASINGLY) HELP

▶ In fact, in nearly half of the 44 countriesconsidered for the purpose of this publication,payment instruments such as cheques or bills ofexchange would tend to be considered as debtrecognition titles. In other words, payment means invarious countries may confirm a debt by making it"certain and undisputed", thus allowing access to fasttrack legal proceedings before domestic tribunals.This trend is far from being generalised, but it isnonetheless increasing and thus suggests thatcarefully negotiating which payment instruments willbe relied upon may have an impact on collectionefforts and should not be underestimated. +

Late payment

Payment termsInterest rates

CompensationNegociation power

Favorable way-out


▶

▶

HUNGARY

+ The conformity of domesticlaw with EU rules on latepayment in Business-to-business transactions does notprotect traders from theuncertain payment behavior ofdomestic companies.

+ When commencing legalaction is necessary, it is worthkeeping in mind that domesticcourts are not known for theirindependence andtransparency, but for thelengthy and costly nature oftheir proceedings. In fact,commencing legal action inHungary would beunreasonable in most casesand pre-legal collection effortsremain the only effectiveoption.

+ Although domesticinsolvency law aims atrescuing companies toincrease the chances ofrecovering debts, it provides nolimitations as to how much ofthe debt may be written off inrestructuration negotiationsand it is rare for unsecuredcreditors to recover frominsolvent debtors in practice.

HONG KONG

+ The payment behavior ofdomestic companies isacceptable but delays arefrequent whilst late paymentsare not regulated by law.

+ Hong Kong courts arereliable and swift in dealingwith business claims, howeverwhen it comes to dealing withinsolvent debtors, the lawprovides no formal proceduresto achieve a restructuring ofthe company’s debts.

INDIA

+ The payment behavior ofdomestic companies is poorand the average DSO is overallexcessive.

+ TThe court system iscomplex whilst extensivedelays and costs make itunreasonable to commencelegal action. Acceleratedproceedings are not availablefor undisputed debts andforeign debt judgments wouldbe enforced with difficulty.

+ The insolvency framework ismade up of severaloverlapping bodies of lawsapplied by conflicting publicauthorities. Thus, it isextremely difficult to seethrough the system.

15


Methods may varybut variousmechanisms havebeen put in placeworldwide to limitthe negative effectsof late payment.

Regional and local perspectivestowards late payment

The Sharia’s legal exceptionCountries in which Shari'ah law appliesshould be mentioned here because theyare a great counter-example to commonpractices. In particular, these countriesnormally forbid the very notion of interest;therefore compensation for late paymentin countries such as the UAE or Saudi Arabiadoes not exist.

Maximum interest rates inSouth AmericaSouth American states have so fardeveloped no common regulationsregarding late payments, but it isinteresting to note that, whilst mostcountries worldwide provide a default'minimum' interest rate (ranging from 6 to15% on average), countries such asColombia and Chile would rather rely on'maximum' rates reaching 20 to 30%. Ratecalculation methods are however based onmultiple indicators and thus remaincomplex to handle.

The strength of EU effortsThe European Union has in time developedthe most sophisticated regional consensuson late payment management.The Recast Directive 2011/7/EU hasrecently replaced Directive 2000/35/EC(which originally created a right of creditorcompanies to charge interest on late

payers) and constitutes a major attempt toharmonise payment terms across the EU.On the one hand, the regulation first statesthat, unless a contract fairly providesotherwise, payment in business-to-business transactions must occur within 60days following the due date (30 days in theabsence of a contractual agreement). Onthe other hand, failure to pay within thistimeframe entitles the seller to charge latepayment interest (at least 8 percentagepoints above the European Central Bank'srefinancing rate) together with a EUR 40flat fee compensating for collection costs,without any recourse to courts beingnecessary.Although the Recast Directive ought tohave been translated into domestic laws byMarch 2013, some countries have so farfailed to meet this requirement. In addition,a certain margin of appreciation has beenleft to the national regulators so that, whentransposed into domestic law, the rulesmay be applied more or less strictly.Nonetheless, only 5 out of the 19 EUmember states considered for the purposeof this paper have strictly implemented the60 days standard, whilst the 14 others havesystematically followed the moreconstraining 30 days rule. Norway, which isnot part of the EU, has nonethelesstransposed the EU standard into itsdomestic law. Overall, regulatory efforts at the EU level,when considered together with the parallel

development of EU-wide harmonised courtproceedings (see below), have a significantimpact. Regional standards not onlyincrease regulatory security in MemberStates, they also set up a regional and localcomparative benchmark. First, the EU zoneas a whole stands out as a rather business-friendly zone (payment termsstandardisation, late paymentacknowledgment, collection costscompensation, procedural venues) incomparison with other regions in which nosuch standards exist. Second, whenimplemented in a demanding manner (30days terms instead of 60 days for instance),the EU framework gives Member States asignificant comparative advantage. Hence,regional policies have impacted ourperception of domestic regulatorystandards and improved the collectioncomplexity ranking of certain lowperforming countries (Italy, Czech Republic,Poland) by up to five places. Similarly, it isinteresting to note that countries such asthe U.S. which have not put any latepayment regulation framework in place,despite their constraining federal structure,would gain by harmonising certain businessand collection-related standards. This pointis so significant that the existence of suchstandards in the U.S. would rank it in the'significant complexity' group rather thanthe 'major complexity' group (see map). +

ZOOM

16


Beware of toothless courtsFact: having recourse to courts may be necessary if negotia-tion attempts have led to a deadlock, however major timeand cost inequalities may be noticed whilst comparing courtproceedings worldwide. When courts have no teeth, com-mencing legal action in certain countries should be simplyavoided, thus turning orchestrated negotiation and persua-sion into the only efficient debt-collection method.

Courts' trustworthiness and efficiency are not a givenand if absent, should raise concernsNeedless to say, whether domestic courts in the host countryare independent and transparent (not to mention the levelof recognition of the rule of law) has an impact of the ob-tention of a favorable and timely decision. This is particularlytrue when cross-border litigation is initiated against a do-mestic party and the court is possibly biased.Relatedly, whether a claim is to be dealt with by general ju-risdiction courts or by specialized courts may have a signifi-cant impact as all judges, especially in the least developedsystems, are not equipped to deal with complex commercialdisputes. Multiple layers of jurisdiction and federal judicialsystems may further increase the complexity of court pro-ceedings. These parameters would normally have an impact on pro-cedural delays (and costs) which may become significant orexcessive, thus making certain legal actions unreasonable.In Mexico or China, for instance, only claims in excess of USD20,000 to 30,000 would normally be brought to court. Fur-thermore, when delays become a problem, debtors wellaware of time issues will often rely on appeal proceedingsto further extend timescales and costs at the claimant's ex-

pense. In a minority of countries such as Russia, Indonesiaor Argentina, courts will actually deny rendering summary(default) judgments despite the deliberate failure of thedebtor to appear in court, thus forcing the demanding partyto conduct a full trial anyway.Enforcement is the judicial system's armed wing. Only, itdoes not necessarily work. It may be delayed because thedebtors' may be difficult to find, because proceedings arenot particularly efficient (Saudi Arabia, China, Mexico, Brazil,Argentina, India, Thailand, Czech Republic, etc.), remainuntested (UAE), or because domestic courts are known forrefusing to enforce decisions provided that are favorable toforeign companies (China, see Focus, p.19).

Plan for a Plan BSaying that a 'Plan B' won't be necessary is really differentfrom saying that no 'Plan B' is available. Therefore, prior todoing business in a foreign country, verifying whether alter-natives to lengthy proceedings exist is essential.

TIMEFRAMES

▶ Legal proceedings may be fairly quick when adebt is not disputed, however when a full lawsuitmust be commenced time variations may be verysignificant, ranging from less than a year up to adecade depending on the complexity of the caseand the ability of courts to process the file. Inaddition, disputes characterised by a foreignelement would often require more time thandomestic proceedings due to translation delays.Often, malicious debtors well aware of suchprocedural particularities would thus extendproceedings in order to postpone payments asmuch as possible (Slovakia, UAE, etc.). +

Insolvency framework is particularly complex,unclear or inefficient

No out-of-court/amicable& informal mechanisms available

No debt restructuration mechanism available

Debt restructuration mechanismavailable but unused or pointless

No debt write-off limitation/loss potentially higher than 75%

No limited impact of RoT agreements

No chance to recover the debt in practicewhen insolvency proceedings have commenced

Liquidator not able to request cancellationof suspect transactions

89%

95%

7%

45%

39%

14%

14%

36%

Insolvency-related complexity Top 8 difficulties for collectionNumber of countries in %


▶

▶

Rule #3

INDONESIA

+ Domestic law regulates theissue of late payment, and thecurrent payment behavior ofIndonesian companies (whichhas improved in recent years)is be somewhere betweenacceptable and good.

+ Legal action in Indonesia isusually lengthy, costly anddecision may be haphazardwhilst the appeal processprovides debtors with anopportunity to further delaythe proceedings, thereforeconducting orchestrated debtcollection efforts is the bestoption.

+ The insolvency frameworkhas been improved over thelast years so that the amount ofinconsistent decisions havebeen reduced, but in practicethe insolvency system is still tobe tested.

IRELAND

+ Despite domestic rules onpayment terms being in linewith the latest EU standards,Irish debtors are not in a stateof emergency when the timecomes to settle monies owedand the average DSO isexcessive.

+ Domestic courts are fairlyefficient in dealing withdisputes in a timely manner,however once the debtor isdeclared insolvent it becomesdifficult to recover debtsbecause renegotiationmechanisms provide nolimitation as to how much ofthe debt may be written off,whilst priority rules inliquidation proceedings makeit unlikely for unsecuredcreditors to receive any part ofthe proceeds.

ISRAEL

+ Payment terms in Israel areregulated by contract ratherthan by law, therefore theaverage DSO remainsexcessive and the payingbehavior of domesticcompanies has significantmargin for improvement.

+ Israeli courts havingsignificant difficulties in copingwith the caseload, significantdelays, costs and difficultiesmust be expected whencommencing legal action.Cross-border disputes wouldrequire further patience.

+ Various insolvencyproceedings are available butin practice the chances ofcollecting debt when thedebtor has become insolventremain poor.

17


Retention of Title (RoT)agreements may seemirrelevant and excessivelyspecific, but the topic meritattention.

Ownershipprotection agreements may help

> In theory, RoT provisions aim atpreserving the seller's ownership over anasset until payment has occurred. Inpractice, they are however used in variousways from one country to another becausethe law in each country has been drafted (orinterpreted) with a specific intent. In France,for instance, ownership transfer wouldoccur with the approval of an agreement, sothat property would typically be passed onto the buyer with a hand shake, even thoughthe price has not been paid yet. In suchcircumstances, the RoT would not betriggered to take the goods back (becausethe seller is no longer the owner) but toobtain payment or, if the debtor has turnedinsolvent, to obtain priority on the debtor'sestate. In Germany, by contrast, contractsonly create an obligation to transfer goods,

whilst the transfer of property would onlyoccur after payment has been made. Inother words, sellers in Germany would beentitled to repossess goods left unpaid for,even though the said goods have beentransformed and/or re-sold becauseownership remains with the original selleruntil the price is paid.

> The comparison is relevant to collectionissues because the way a RoT is admittedand enforced could have a significantimpact on whether or not a debt could berecovered. First, numerous countries (U.S.,GCC countries, Russia, Mexico, Hong Kong,etc.) would simply not give force to RoTagreements. Second, other countries wouldgive power to RoT agreements. However,they would discard their ability to repossess

goods (thus essentially recognising theirability to grant creditors a priority over otherdebts during insolvency proceedings) orthey would give little importance to priorityissues (Israel for instance). Thus each givinga de facto primacy to banks (as securedcreditors) against unsecured creditors.

> Having said this, if ownershipprotection clauses play a significant rolein obtaining payment (or in repossessinggoods), it shoud be recalled thatregistration may be necessary (Poland,Portugal, New Zealand, Israel, etc.) whilst,unless the debtor agrees to avoidproceedings, having the clauses enforced bycourts remains a prerequisite. +

FOCUS

PAYMENT

OWNERSHIPTRANSFER

PRIORITY

Ownership Protection

18


First, fast track proceedings may be available provided thatthe debt is certain and undisputed. However such mecha-nisms might not always be efficient (Mexico), would remainuncommon in Asian countries, and are simply inexistent incertain countries such as the U.S.Alternative Dispute Resolution mechanisms such as media-tion (a neutral third party is appointed to help achieving acompromise) or arbitration (the third party decides for theparties) may also be relied upon even though the practice isnot always widespread when it comes to settling debt-relateddisputes. For instance, although most disputes would be set-tled prior to commencing formal legal action in the U.S. orin Northern Europe, ADR would otherwise be commonly usedas an escape route where courts are not efficient enough(Argentina, India, Indonesia, Israel, Hungary, Portugal, Poland,Morocco, Malaysia, etc.), where courts cannot be trusted(Saudi Arabia, Russia), or where preserving confidentiality isa priority. A contractual agreement drafted to this effectwould be a sine qua none condition, but ADR methods might

not always be efficient (Turkey) whilst many jurisdictions(such as Russia, China, Mexico, Czech Republic, etc.) wouldsimply not allow such proceedings.

Act local, think globalSimilarly, contracts may be drafted to allow recourse to aforeign law or to foreign tribunals, but foreign decisionsneed to be enforced against the debtor, by the courts of thehost country through a sometimes complex 'exequatur' pro-cedure (i.e. the foreign judgment must be recognized bydomestic courts in order to be enforced against debtorsfalling under their jurisdiction).Most tribunals would, in the best case scenario, preserve acertain degree of exclusivity, but judgments rendered in for-eign countries would often be recognized and enforced pro-vided that the issuing country is party to a bilateral or multi-lateral agreement with the issuing country (reciprocity rule).The Commonwealth countries are for instance known fortheir cooperation in enforcing judgment on a reciprocal basis

Foreignforum

RECIPROCITY

RECOGNITION

ENFORCEMENT

Act local, think global


▶

ITALY

+ The payment behavior ofdomestic companies is poorand the average DSO is overallexcessive even though theregulations on late paymentsare more constraining than theapplicable EU rules.

+ Procedural delays and costsare high whilst enforcing courtdecisions may prove a realchallenge. Thus, commencinglegal action without firstestablishing a pre-legalcollection strategy with teeth ismost unreasonable.

+ When the debtor isinsolvent, debt renegotiationmechanisms have been putinto place but they remainmostly unused in practice.Liquidation (bankruptcy)therefore remains the defaultroute, but leaves little (if any)chances for unsecuredcreditors to recover their debt.

JAPAN

+ The payment culture inJapan is excellent however inpractice excessive DSO andsignificant payment disparitiesmay be witnessed from onesector to another.

+ Although domestic courtstend to be fairly efficient indelivering timely decisions,recourse to tribunals is time-consuming, expensive andcomplex. Therefore,conducting well orchestratedpre-legal collection actions isessential.

+ Similarly, collecting debtfrom insolvent debtors isoverall a challenging exerciseand, even though insolvencyproceedings could yield 'some'dividends, these would spreadover years and generatesignificant costs.

MALAYSIA

+ Even though the paymentbehavior of domesticcompanies is good, the lawprovides no framework whenit comes to late payment. As aresult, interest rates andcollection costs must beconsidered as part of thecontract but would overalltend to have little impact.

+ Despite recent efforts, thecourts' independency andtransparency still have marginfor improvement and lawsuits-which can be very slow -ought to be avoided wheneverpossible.

+ In the absence of anefficient and working debtrestructuration scheme,debtor insolvency would onlybe dealt with throughliquidation proceedings whichgenerally leave little (if any)recovery chances tounsecured creditors.

19


(courts in Singapore would tend to deny giving force to judg-ments issued by non-Commonwealth courts).Having said this, many countries would simply not allow re-course to foreign forums (Russia, China, Saudi Arabia, Colom-bia), fail to enforce foreign judgments (UAE, Malaysia, India),or simply provide no venues for recognition of demands (In-donesia, Thailand). Chinese courts would for instance provideno such possibilities except for decisions issued in HongKong.Again, supranational arrangements have been set up to fa-cilitate litigation proceedings worldwide and should thus beused when cross-border disputes are at stake, or whendebtors have assets spread in various countries.In particular, the EU zone provides for expedited proceedings,judgment recognition methods and judgment enforcementmethods. For Instance, provided that the debt is undisputed,courts in the EU are competent under Regulation1896/2006/EC to issue European Payment Orders enforce-able in all European Union countries (except Denmark) with-out recourse to exequatur proceedings. Judgments renderedby courts in the EU would otherwise be enforceable in any

Member State through a European Enforcement Order (un-der Regulation EC No. 805/2004), whilst decisions up to EUR2,000 would be similarly enforced through the EuropeanSmall Claims Procedure (under Regulation EC 861/2007).Overall, exequatur procedures will no longer be required inEurope from January 2015 (as provided in Recast RegulationEC 1215/2012), but these will remain the normal route toenforcement everywhere else.As far as arbitral decisions are concerned, most countriesare signatories to the New York Convention on the Recogni-tion and Enforcement of Foreign Arbitral Awards of 1958.Therefore, arbitral decisions ought to be fairly enforceablebut difficulties may nonetheless appear (AUE, China, Chile,and Greece).

Unsupportive courtsSelected examples

> Obtaining and enforcing ajudgment against a Russian debtor oughtto be a fairly straightforward procedure aslong as the debt is certain and undisputed,however things may otherwise becomecomplex. In particular, when recourse to aforeign court is considered (to avoiddomestic courts, or when a foreign claimantis acting against a Russian debtor fromabroad), proceedings may turn into an uglydeadlock because foreign jurisdictionagreements have long been interpretedcreatively by Russian courts which have

regularly assumed full jurisdiction overdisputes considered in foreign forums andhave rendered judgements on the meritsinstead of merely recognising and enforcingforeign decisions.

> Similarly, courts in SaudiArabia or in the UAE would typically ignoreany decision rendered by a foreign court orenforcing a foreign law (incompatible withSharia’s principles) even though a specificagreement has been reached as part of acontract.

> Chinese courts provideanother example of unsupportivenesssince enforcing a (domestic or foreign)court judgment or an arbitral awardagainst a Chinese debtor in China mayprove impossible. In practice, conductingproceedings before domestic courts wouldmost likely be a waste of time (and money)so that the best solution would rather be toobtain enforceable decisions throughHong Kong courts, under the'Arrangement on Reciprocal Recognitionand Enforcement of Judgments in Civil and

Commercial Matters' (REJA) of 2006.Indeed, Hong Kong has an efficient legalsystem independent from the Chinesecourts, and REJA allows Hong Kong courtsto enforce decisions in Mainland China. Asa result, Hong Kong has long been thepreferred jurisdiction for contractsinvolving foreign and Chinese parties andremains the best venue to enforcedecisions in China. +

FOCUS

▶

20


Insolvent debtors? Hurrybefore it is too lateObtaining repayments when the debtor's bank account hasrun empty is possibly the most challenging exercise and theworst case scenario when it comes to collecting debt. Variousmechanisms have been put in place to improve recoverychances but, in practice, Rule #5 applies: the sooner, the bet-ter.

BasicsThe common way of dealing with insolvent debtors is oftento file a declaration of insolvency with courts, in order to ob-tain payment for debts from the sale of the debtor's assetsafter lengthy liquidation proceedings (also known as bank-ruptcy or winding up proceedings from one country to an-other) have taken place.Normally, a debtor would be deemed insolvent when unableto pay its debts as they fall due (the illiquidity test in Russiafor instance comes along with a RUB 100,000 / USD 2,900unpaid debt threshold) and/or when liabilities become ex-cessive in comparison with the company's assets (balancesheet test).

Debt renegotiation mechanisms: Company rescue &debt write-offsIn practice, collecting debt when the debtor's money is goneoften remains an impossible task. Legal proceedings are of-ten extremely complex and typically, notwithstanding con-

Switzerland

Korea, Rep.

New Zealand

Netherlands

Denmark

Finland

Belgium

Japan

Singapore

Norway 1

4

3

4

4

4

3

3

3

3

Cost of procedure - World Bank indicators Top 10 countries with the lowest costCost (% of estate)


Thailand

Israel

Saudi Arabia

Italy

China

United Arab Emirates

Indonesia

Slovak Republic

Morocco

Mexico 18

18

18

18

20

22

22

36

22

23

Cost of procedure - World Bank indicators Top 10 countries with the highest costCost (% of estate)


▶

▶

Rule #4

MOROCCO

+ The average DSO inMorocco remains excessiveand the paying behavior ofdomestic companies isdegrading.

+ The judiciary is a multi-layered system which remainsunder influence and iscriticized for its lack oforganization, efficiency andtransparency. Therefore,commencing legal actionwould be unreasonable inmost cases whilstenforcement judgmentswould be difficult.

+ Various insolvencyproceedings are available inMorocco but these remaincomplex, slow and mostlyinefficient it comes tocollecting debt.

+ In all circumstances,entrusting collectionspecialists with a strongknowledge of the local marketremains the wiser approach.

MEXICO

+ The law provides noframework on standardpayment terms and latepayment, therefore interestand collection costs may onlybe obtained before the courts.The DSO is significant and thetendency to disappear whenthings turn wrong is worthnoting.

+ The court system iscomplexified by its federalstructure, but it is moreproblematically known for alack of transparency andindependence. Businessdisputes are not dealt with byspecialized judges and inpractice the fast trackmechanisms which couldfacilitate proceedings whenthe claim is straightforwardcannot be relied upon. Overall,procedural delays and costs aresignificant and pre-legal actionremains the most efficientmeans of collecting debt.

+ The debt restructurationprocess is not efficient at all,and proceedings may last foryears (ex. Mexicana). As aresult, liquidation is in practicethe default procedure whenthe debtor becomes insolventand the chances of collectingdebt through this channel areinexistent.

21


ceedings against the debtor for a given period of time. There-fore, when such mechanisms are available, debtors wouldhave major incentives to initiate restructuration proceedings.In addition, although certain countries provide specific limi-tations as to how much of the debt may be written-off (upto 50% in Spain for instance), in most circumstances the par-ties are free to decide how much of the debt will be repaid,and in which proportions. In other words, if debt restruc-turation mechanisms could in theory give creditors a chanceto get a greater part of their debt than through liquidationproceedings, nothing in practice indicates that unsecuredcreditors would indeed come out victorious. In fact, it wouldbe fair to say that the average recovery rate for unsecuredcreditors in most countries would range between 5 and 10%of the debt, if not less.

tractual agreements granting a particular priority to a specificcreditor, banks and tax authorities hold secured or prefer-ential debts which have priority over classic (unsecured)debt which are considered last in the chain and paid only ifsufficient money remains.As a result, a consensus has emerged in the last decades onthe idea that saving viable companies and renegotiatingtheir debts may be more efficient (i.e. yield more repaymentin the long term) than merely stopping their activities andselling their assets to obtain immediate though limited cash.Known as the 'London Approach', this school of thought hasspread worldwide, leading to the well-known 'Chapter 11'restructuration procedure in the U.S., and to similar mecha-nisms in many countries (see BOX). In practice, however,such mechanisms often remain inexistent (Saudi Arabia,Hong Kong, Malaysia, etc.), untested (UAE, Indonesia), un-used (Russia, China, Hungary, Poland, Argentina, Chile, etc.)or inefficient (Netherlands, Norway, France, Mexico, CzechRepublic). But, once an insolvency petition is filed with thecourts, creditors and debtors would nonetheless be givenan opportunity to draft and agree on a debt restructurationand repayment plan, under the control of court officials. Inmost countries where such mechanisms exist, however,moratoriums are put in place to stay debt-enforcement pro-

The development of debt restructurationmechanisms is increasing worldwide buthas not been generalized. In Asia and theMiddle East, for instance, efforts arecurrently made but results remainuncertain.

Regional perspective:From progress to run-aways

> Asian countries provide an interestingcase study of insolvency regulatory efforts.For instance, if restructuration mechanismsare fairly efficient when it comes torescuing viable companies in Thailand, thecomplexity of insolvency rules in Malaysiahave made the system inefficient andunused, whilst the insolvency framework inIndonesia is new and largely untested.> Insolvency frameworks in GCCcountries would also tend to be a problem.The company rescue culture is for instanceinexistent in Saudi Arabia where no debt-restructuring proceedings are available,whilst the mechanism set up in the UAE is

recent and remains largely untested. Thisnotable absence of restructurationopportunities may in part be explained by atendency to consider that debt repaymentis a matter of personal honour. Thus, it iscommon in these countries that creditors,instead of relying on insolvencyproceedings, file criminal complaints andfetch money through a direct route (boardmembers in the UAE may be heldpersonally liable for debts). Believe it ornot, but when an insolvent debtor may besentenced to a prison term, a recurrenttendency to disappear when things turnwrong seems to surface. +

ZOOM

▶

THE NETHERLANDS

+ The paying behavior ofdomestic companies isexcellent; however the rulesimplementing the latest EUDirective on late payments areless demanding than the EUstandards.

+ In practice, although thecourts are reliable, negotiatingpayment instalments is oftenthe most efficient way to avoidunnecessary costs and havingrecourse to a specializedcollection agency may oftensuffice to obtain payment.

+ When the debtor hasbecome insolvent, debtrenegotiation mechanisms areavailable but remain inefficientand unused whilst the mostbankruptcies are terminatedwithout any payments ofdividends to unsecuredcreditors.

NEW ZEALAND

+ Late payments in NewZealand are not regulated sothat interest and collectioncosts would essentially dependon the court.

+ Courts are fairly efficient indelivering timely decisions,however favoring amicableand pre-legal methods isalways advisable. In fact, thesooner the better as, if thedebtor becomes insolvent, thechances of recovering the debtwill reduce in time.

NORWAY

+ The payment behavior ofdomestic companies is areference and domestic courtsare fairly efficient in dealingwith disputes in a timelymanner.

+ Having said this, negotiationand compromises areconsidered as a pre-requisiteto legal action and obtainingeffective support in this regardis important.

+ Indeed, when time goes on,chances are that bad payerswill become insolvent. In suchcases, recovering the debtbecomes mostly impossiblebecause debt renegotiationschemes are not effectivewhich the priority rules setforth in liquidationproceedings make it unlikelyfor unsecured creditors toreceive any part of theproceeds.

22


collection efforts may often benefit from regional frameworkswhich, beyond common prejudices, are not a mere matterof politics.Finally, if time is money, extensive delays may be tantamountto severe cash management problems. Hence, the longerone waits, the greater the chances of finding that the buyerhas become insolvent or has disappeared. Only, insolvencymechanisms in most countries lead to poor results as far asunsecured creditors are concerned and the odds of collectingdebt from buyers through debt restructuration or liquidationproceedings are null.

Let’s wrap it up: collecting debt is always a complex task,no matter what, no matter how. Thus, orchestrated pre-legal collection efforts are key and, overall, the sooner thereaction the better. +

The sooner, the better

As explained throughout, complexity stems from three mainfactors: payment customs, court tortuousness, and insolvencyhazards. As the attached charts demonstrate, these threemajor sources of complexity tend to fluctuate from onecountry to another. In France or Germany, for instance, courtsare reliable and proceedings are fairly efficient, so that theinsolvency of the debtor would constitute the main perilonce collecting debt. In China, the UAE or Saudi Arabia, bycontrast, the complexity weighting significantly differs be-cause the court system would seem to be as unreliable asthe insolvency system.

Nonetheless, the above may be summarized as follows. First,the risk related to payment customs may be limited by in-quiring about a country’s payment culture (would domesticbuyers traditionally pay on time?) and payment habits (whatis the average duration to obtain effective payment?). In ad-dition, negotiating a favorable way-out is always worthwhile,and ensuring that contractual terms are agreed upon is es-sential in case payment is late. In this regard, a broad rangeof mechanisms such as payment instruments, contractualownership agreements and interest rates may be put inplace, although specifics may differ from one country to an-other.Second, pre-legal negotiations would in most circumstancesyield more results than formal legal action and, even thoughthe courts are efficient in many countries, negotiating a fa-vorable outcome would usually be a time and money saverbecause court systems vary and great disparities may beflagged up. As our map shows, commencing legal proceed-ings in numerous countries would be simply foolish unlessimportant amounts are at stake because courts may be in-efficient or unsupportive. Having said this, international debt

▶

POLAND

+ The payment behavior ofdomestic firms overall remainspoor and the average DSO isoverall excessive, despitedomestic regulations on latepayments being moredemanding than EU standards.+ Legal action in Poland is longand unpredictable, thereforeformal proceedings shouldonly commence when allamicable and pre-legalcollection opportunities havebeen exhausted. + Collecting debt frominsolvent debtors is achallenging task and, althoughdebt renegotiationmechanisms have been set up,they are rarely relied upon andliquidation proceedingsremain the defaultproceedings in practice.

PORTUGAL

+ Payment terms and latepayment are regulated inPortugal in accordance withthe applicable EU rules,however the standards put inplace are within the softer inEurope. As a result, DSO remainexcessive.+ The court process is a majorcomplication when it comes tocollecting debt and it seemsadvisable to first conductnegotiation with teeth with thesupport of collectionspecialists. When recourse tocourt is needed, AlternativeDispute Resolution methodsand foreign courts (EUjudgments will be fairlyenforceable in Portugal) maybe worth considering in orderto avoid inefficient domesticcourts.+ Despite reforms conductedin 2012 to increase companyrescue possibilities, insolvencyproceedings often lead to theliquidation of the company andit is rare for unsecured debtorsto recover their debt.

ROMANIA

+ Although Romania'sregulations on late payments aremore demanding than EU ruleson the matter, the payingbehavior of domestic companiesremains questionable.+ Legal proceedings are longand costly, therefore havingrecourse to arbitration or to aforeign (European) forum isworth considering because botharbitral awards and decisionsrendered in EU countries arefairly enforceable.+ Before commencing legalactions of any kind, however, it isessential to conduct thoroughpre-legal actions. Indeed, whentime goes on, chances are thatbad payers will becomeinsolvent. In such cases,recovering the debt becomesmostly impossible.

Rule #5

23


RUSSIA

+ The paying behavior of domestic firms is poorand chances are that the business partner hasdisappeared or is in fact hiding behind complexlegal structures. Payment terms are not regulatedand interest on late payment does not make partof local traditions.

+ Courts may be fairly efficient when a debt iscertain and undisputed, but legal proceedingsmay otherwise be complex (no defaultjudgments, no fast track proceedings above EUR6,000 even if the debt is certain and undisputed)and cannot be avoided through AlternativeDispute Resolution methods (which is not reliedupon) or through foreign courts (since Russiancourts apply extremely strict jurisdictionalexclusivity rules).

+ Insolvency proceedings ought to be avoided. Adebt renegotiation mechanism is in theoryavailable but it is left unused in practice.Liquidation is therefore the default procedure,but unsecured debtors would in practice havevery limited chances of recovering their debt.

SAUDI ARABIA

+ As with all GCC states, late payment is commonin Saudi Arabia. In practice, the law does notregulate late payment, whilst late paymentinterest are simply prohibited and collection costscannot be recovered from the debtor unless aspecific agreement has been concluded by theparties. As a result, debtors will often try tonegotiate discounts of debts in exchange forprompt payment.

+ Local legal action is overall very slow, costly anduncertain because the courts are not bound by asystem of precedent and have considerablediscretion in applying Sharia’s principles tospecific circumstances. In addition, several weeksor months may separate each hearing and thecourts hardly abide by time managementrequirements.

+ Insolvency laws in the Middle East are not assophisticated as in other regions of the world andthe inexistent company rescue culture in SaudiArabia illustrates this tendency.

SINGAPORE

+ The paying behavior of domestic companies isgood and the DSO is correct, however the lawprovides no guideline as to how late paymentsshould be handled and contracts thus remain theonly reference when business relationships turnbad.

+ Legal action overall remain expensive eventhough the court system is fairly efficient.

+ The Insolvency framework is in line withinternational standards however in practice, as inmost countries, collecting debt from insolventdebtors would prove to be a genuine challenge.

SLOVAK REPUBLIC

+ The payment behavior of domestic companiesis fairly good but has degraded lately despite EUstandards on late payment being transposed intodomestic law.

+ The legal system suffers from a persisting lackof trust in the Rule of Law, whilst the legal processis overly slow (not to mention a tendency ofdomestic debtors to use the system so as to delaylegal proceedings and enforcement attempts asmuch as possible).

+ Debt restructuration mechanisms may helpcollecting debts, but recovery chances wouldoverall remain extremely limited (null) whenlegal proceedings have been delayed and thedebtor has become insolvent.

SPAIN

+ The paying behavior of Spanish companies isfairly bad and commercial credit (late payment)constitutes an underlying feature of commercialexchanges in Spain.

+ The judicial process in Spain is very slow, so it isusually preferable to conduct efficient andorchestrated debt collection efforts prior toconsidering legal action (which often leadsdirectly to insolvency proceedings).

+ When the debtor has become insolvent,collecting debt becomes extremely complicated,especially as far as unsecured creditors areconcerned.

SWEDEN

+ The payment behavior of domestic companiesis a reference and domestic courts are fairlyefficient in dealing with disputes in a timelymanner, however collecting debt throughnegotiation remains the most effective option

+ Recovering the debt becomes mostlyimpossible when the debtor becomes insolventbecause debt renegotiation schemes would allowwriting off up to 75% of the debt, whilst thepriority rules set forth in liquidation proceedingsmake it unlikely for unsecured creditors to receiveany part of the proceeds.

SWITZERLAND

+ The payment behavior of domestic companiesis a reference and domestic courts are fairlyefficient in dealing with disputes in a timelymanner, however collecting debt throughnegotiation remains the most effective option.

+ Indeed, even though mechanisms designed toincrease debt renegotiation and company rescuehave been put into place, liquidation would seemto remain the default procedure at this time, thusleaving little chances for unsecured creditors tocollect debts from insolvent debtors.

THAILAND

+ The paying behavior of Thai companies is fairlygood but regulations are limited when it comesto late payments.

+ Although domestic courts are fairlyindependent, the rule of law perception hasmargin for improvement, procedural delays andcosts may be an issue and enforcing courtdecisions may be challenging. Overall, recourseto courts should be avoided and conductingorchestrated collection actions is ratheradvisable.

+ Collecting debt from insolvent debtors is oftenextremely difficult, especially when the debt isnot secured.

TURKEY

+ The paying behavior of domestic firms hassignificant margin for improvement and normalpayment terms may seem excessive. In fact, as aresult of a long payment duration trend, the valueof unpaid receivables has grown considerablysince the last 3 years.

+ Domestic courts lack independence, the rule oflaw perception is moderate, and the chances ofobtaining debt payment through legal action islower than through strong negotiation efforts.

+ Debt renegotiation proceedings before thecourts are not generalized when it comes toinsolvency issues and liquidation remains thedefault proceedings even though liquidative sellsrarely yield efficient results and may thus not bein the creditors' best interest.

UNITED ARAB EMIRATES

+ The paying behavior of large domesticcompanies is correct, however dealing with smalland medium size businesses may represent asignificant risk of non-payment. Since insolventdebtors may be sentenced to a prison term,indeed, their tendency to disappear when thingsturn wrong is significant.

+ The legal framework is complex and the courtstend to lack independency and reliability whilstprocedural delays and costs may be prohibitive.

+ Insolvency law does not provide much supportwhen it comes to debt recovery: a debtrenegotiation mechanism has been put in placebut in practice it remains largely untested andliquidation prevails, thus leaving no chances ofrecovery to the creditors.

UNITED STATES

+ The payment culture of domestic companies isbecoming uncertain and, in the absence of aharmonized framework on late payments,payment terms remain a mere contractual issueand the average DSO would tend to be excessive.

+ The court system is complexified by a federalstructure in which ownership protectionmechanisms are not recognized and where nosimplified proceedings are available to settle thesimplest files. As a result, significant delays andcosts must be expected whilst enforcement maybe difficult.

+ When the debtor becomes insolvent,collecting debt becomes a complex task. First, thebankruptcy system remains pro-debtor and,although it is often said that making a companyinsolvent is a significant way to obtain payment,in practice bankruptcy reorganization isresource-draining. In addition, most statesprotect the debtors' personal assets and there istherefore a possibility for a corporate bankruptcyto be listed as “no asset” cases. This means thatafter liquidating the debts, the likelihood of anydistribution to creditors is zero.

UNITED KINGDOM

+ The average DSO in the UK has decreasedlately, however the payment culture of domesticcompanies is becoming increasinglyquestionable.

+ Courts are efficient in delivering timelydecisions but pre-legal action efforts oftenremain the most effective: the longer the legalproceedings the greater the chances of facinginsolvency issues.

+ The insolvency framework is oriented towardsthe protection of the creditor's rights, but anemphasis has been made on the need to rescueviable businesses. Such proceedings wouldhowever not guarantee that the debt would berecovered as in practice there are no limitationsas to how much of the debt may be written offduring renegotiations. Furthermore, liquidationproceedings would rarely yield any of theproceeds to unsecured creditors.

24


Economic ResearchEuler Hermes Group

Economic Outlookand otherpublications

Already issued:

no. 1193 ◽ Macroeconomic, Risk and Insolvency Outlook Europe: Still looking for a second wind

no. 1194 ◽ Business Insolvency Worldwide Corporate insolvencies:The true nature of the eurozone crisis

no. 1195-1196 ◽ Macroeconomic, Risk and Insolvency Outlook The world at a crossroads

no. 1197 ◽ Global Sector Outlook Reconciling economic (dis)illusions and financial risks

no. 1198 ◽ Special Report The Mediterranean: Turning the tide

no. 1199 ◽ Macroeconomic and Country Risk Outlook Half-baked recovery

no. 1200-1201 ◽ Business Insolvency Worldwide Patching things up: Fewer insolvencies, except in Europe

no. 1202-1203 ◽ Macroeconomic and Country Risk Outlook Top Ten Game Changers in 2014: Getting back in the game

no. 1204 ◽ Global Sector Outlook All things come to those who wait: Green shoots for one out of four sectors

no. 1205-1206 ◽ Macroeconomic and Country Risk Outlook Hot, bright and soft spots: Who could make or break global growth?

no. 1207 ◽ Business Insolvency Worldwide Insolvency World Cup 2014: Who will score fewer insolvencies?

no. 1208-1209 ◽ Macroeconomic, Country Risk and Global Sector Outlook Growth: A giant with feet of clay

no. 1210 ◽ Special Report The global automotive market: Back on four wheels

no. 1211-1212 ◽ Business Insolvency Worldwide A rotten apple can spoil the barrel Payment terms, past dues, non-payments and insolvencies: What to expect in 2015?

no. 1213 ◽ Special Report International debt collection:The Good, the Bad and the Ugly

To come:

no. 1214 ◽ Macroeconomic and Country Risk Outlook

Economic Outlookno.1210 August September 2014

Special Reportwww.eulerhermes.com

The globalautomotive marketBack on four wheels

Economic Research

Business Insolvency Worldwide

Economic Outlookno. 1207May 2014

www.eulerhermes.com

InsolvencyWorld Cup 2014: Who will score fewer insolvencies?

Economic Research

Business Insolvency Worldwide

Economic Outlookno. 1211-1212October-November 2014

www.eulerhermes.com

A rotten applecan spoil the barrelPayment terms, past dues, non-paymentsand insolvencies: What to expect in 2015?

Economic Research

Macroeconomic, Country Riskand Global Sector Outlook

Economic Outlookno. 1208-1209June-July 2014

www.eulerhermes.com

Growth: A giantwith feet of clay10 industry short stories exposemacroeconomic fragility

Economic Research

https://www.youtube.com/watch?v=JOpXeJdVvCA

25


◽Spain: Cautiously taking the bull by the horns > 2014-10-08 (En)◽Chinese exports 2014-2015: Another US300bn > 2014-10-07(En)◽Russia and the West: Tough Love? > 2014-09-12 (En)◽Non-payments in Italy: It’s not over… yet! > 2014-09-04 (En)◽Don’t cry too much for Argentina > 2018-08-08 (En)◽ Fertilizer: The seed growing secretly > 2014-08-05 (En, Fr)◽ Road transport: Labor costs explain the large gap in profitability inEurope > 2014-07-08 (En, Fr)◽The European electricity market under strong pressure > 2014-07-05(En, Fr)◽Thailand: Another coup challenges the country’s economicresiliencel > 2014-06-06 (En)◽2014 World Cup : more inflation than growth in Brazil > 2014-06-06(En)◽Tire industry on a roll >2014-04-17(En, Fr)◽Putinomics: Tightrope walking > 2014-04-10(En)◽Renzimania: Will charm survive tough reforms? >2014-04-09 (En)◽The reindustrialization of the U.S.: A 2014 update > 2014-04-02 (En)

EconomicInsight

◽Angola > 2014-09-25◽Australia > 2014-09-25◽Austria > 2014-09-25◽Bahrein > 2014-09-25◽Belarus > 2014-09-25◽Bolivia > 2014-09-25◽Bosnia & H. > 2014-09-25◽Brazil > 2014-09-25◽Cameroon > 2014-09-25◽Congo PR > 2014-09-25◽Costa Rica > 2014-09-25◽Dominican Republic>2014-09-25◽Ecuador > 2014-09-25

◽Estonia > 2014-09-25◽Finland > 2014-09-25◽Guatemala > 2014-09-25◽Hong Kong > 2014-09-25◽Indonesia > 2014-09-25◽Jordan > 2014-09-25◽Kazakhstan > 2014-09-25◽Lebanon > 2014-09-25◽Mongolia > 2014-09-25◽The Netherlands > 2014-09-25◽Pakistan > 2014-09-25◽Qatar > 2014-09-25◽Russia > 2014-09-25◽Vietnam > 2014-09-25

CountryReport

WeeklyExport RiskOutlook

◽Textile & Clothing in Germany: A two-geared reality > 2014-10-31 (En)◽Textile & Clothing in Italy: Bronze medal on the international podium, but facing obstacles > 2014-10-31 (En)◽Italian car sector: Time to do an oil change > 2014-10-22 (En)◽U.S Automotive > 2014-10-03 (En)◽U.S. Construction > 2014-10-03 (En)◽Italian steel at a crossroads > 2014-09-30 (En)◽Der Automobilweltmarkt: Wieder auf allen vier Rädern > 2014-09-19 (De)◽Agrifood in the Netherlands The bumpy road continues > 2014-09-18 (En)◽Construction in Germany: Betongold at a turning point? > 2014-08-07 (En, De)◽Construction in South Korea: not out of the woods yet > 2014-08-07 (En)◽Machinery and Equipment in Italy: Preparing its comeback > 2014-06-23(En)

IndustryReport

http://www.eulerhermes.com/economic-research/economic-publi-cations/Pages/Weekly-Export-Risk-Outlook.aspxN

TheEconomicTalk

N

http://www.eulerhermes.com/economic-research/economic-publications/Pages/Weekly-Export-Risk-Outlook.aspx

26


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Euler Hermes Economic Outlookis published monthly by the Economic Research Departmentof Euler Hermes Group1, place des Saisons, F-92048 Paris La Défense Cedex e-mail: [email protected] - Tel. : +33 (0) 1 84 11 50 50

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