Claiming Late Payment Interest and Compensation from non-UK debtors

A UK creditor can usually claim Late Payment Interest and Compensation from a debtor outside the UK. 

• The Late Payment Act applies where the law of the contract is English. The law of the contract may be English either under normal rules or because the contract says so.

• The Act does not apply if the parties have chosen English law as the law of the contract but there is no “significant connection” between the contract and the UK.

•  “Significant connection” is not defined. We think a “significant connection” would include one of the parties being in the UK or that a good part of the contract was to be performed in the UK.

• Remember, that if you are in England and the debtor is outside the UK, you can’t always take proceedings in England. This is the case even where English law applies to the contract and you are claiming under the Late Payment Act. You need a clause giving the English courts jurisdiction to guarantee that you can take proceedings in England.

• The Act can apply to a contract where the parties have chosen a foreign law. In this situation the Act would apply if the law of the contract would have been English apart from the choice and the contract has no significant connection with any other country. This seems to limit the Act’s application to English parties choosing a foreign law for a contract to be performed in England.

• The Late Payment Act is the UK implementation of a European directive. If the law of the contract is not English, and the Act does not apply, then the creditor will be able to recover whatever late payment interest and compensation the law of the contract allows.