STEVE ZWICK DŘsseldorfIn the good old days--or the bad old days, depending on your perspective--a man could get himself dandied up at a fine Italian tailor, gorge himself on tea and crumpets in a classy London hotel, telephone his sweetheart back in Poughkeepsie, N.Y., skip town before the bills arrived and still hold his head high at the country club in Dallas. Only a few debt collectors understood the vagaries of international law well enough to chase deadbeats around the world through legitimate channels, so jet-set bill jumping became a kind of Russian roulette. Five out of six creditors would simply pin the bill to the wall and vow never to serve Poughkeepsians again. But the sixth might just hire an underworld type to break our hero's fingers.
Nowadays the long arm of even the most unsophisticated creditor reaches legitimately from Bengal to Berlin to Beijing through the World Wide Web. This puts teeth into the Hague Legalization Convention, the treaty designed to make international debt as collectible as the domestic variety, as a German tourist recently found out when he tried to scam a free car rental in New Zealand. "Many of the German debtors are really surprised when they hear from us," says German lawyer Andreas Langner, who tracked the man down and got the money. "I believe they usually hoped it would be too difficult for a creditor in New Zealand to follow his claims to Germany." There are still a few countries that don't subscribe to the Hague Legalization Convention, but these are becoming fewer all the time.
One change that's made cross-border debt collection less difficult is economies of scale. The increase in international trade has led to an increase in international debt, which means collection experts can afford to specialize. "Very often the laws of a foreign country are subject to the court proceedings in Germany," Langner says. "This requires an excellent knowledge of German international civil law, a very good knowledge of the existing international treaties concerning civil actions, and some basic knowledge of the applicable foreign law. It takes some energy to become expert in these fields, but it's worth it."
Langner got into the game six years ago when an Austrian mail-order company needed help with German debtors, but business really picked up in 1996. "That's when we opened our English-language website and entered key words in all the search engines," he says. "Our international business has doubled every year since." And he's not alone. In France, Eric Ermantier has been averaging one new client per month since opening a "debt-hunters" site two years ago.
By linking his site to Langner's, as well as to sites of lawyers in other countries, Ermantier has become part of an informal lawyer network that has evolved alongside collection agency consortiums like TCM Group, which was established in Australia in 1987 and now has affiliated companies in 47 countries. Ermantier recently opened an office in Geneva, and Langner has an office in India, where a recent industry study says e-trade and software companies are being stuck with unpaid cross-border bills at the highest rates in the world.
All this cross-border networking and office opening has taken some of the risk out of international trade. "A few years ago I would turn down most international accounts, now I solicit them," says James Green, general counsel for Chicago-based investment brokerage ZAP Futures. "If an offshore trader tries to play games, I need qualified lawyers who know how to domesticate a complex legal judgement in his home country and then perform the forensic accounting necessary to uncover hidden assets there. With the Internet, it's easier to find such qualified individuals, so my risk profile is lower and international dealing goes more smoothly."
Most cases are still company to company, and cross-border collection amounts to less than 5% of all collections worldwide. But that's changing. "Because of the new technology, people are ready to deal internationally," says Kurt Obermaier, head of the Federation of European National Collection Associations. "At this point, most of the [retail] buying is done on credit card, but people are opening up to the idea of buying on credit in other countries without credit card protection." If you're thinking of ripping off the system, however, beware: a creditor in Rome is more likely than ever before to send your unpaid bill to a collector in Poughkeepsie, and the threshold above which it is almost certain to go to court is down to around $400--and getting lower all the time.