Contract Laws In Middle East Present Payment Challenge To UK Businesses

Lovetts Plc, the commercial debt recovery law firm has seen a marked increase in businesses seeking its help to recover debts from the Middle East.

Middle Eastern debtors operate on the basis that if there is no signed contract then invoices will be rejected for payment. Many debtors in the Middle East are now using this as an opportunity to avoid payment to UK suppliers.However, unknown to many UK Companies, Middle Eastern debtors can prepare a summary paper outlining all events, for a bid committee to consider. The bid committee, which includes Government Ministers, approves payments when no contract is present by signing the summary paper.

The key factor in obtaining their approval is that there must be sufficient evidence to show that terms of business have been incorporated as if a contract was present.

While this process should ultimately result in payment, the process can be time consuming, adding months and sometimes years to the waiting time for payment to be made.

In a recent case handled by Lovetts, the UK firm had no signed agreement with a company in Egypt, and had been trying in vain for 3 years to recover the debt before approaching the pre-legal overseas team at Lovetts for help.

Lovetts established contact with senior personnel at the firm in Egypt and provided a paper trail to show the debt was due. A bid committee was requested for the case to be heard which subsequently approved the debt and payment was secured of over £40,000 on a no collection no fee basis.

Michael Higgins, Operations Director at Lovetts says: “The way Middle Eastern debtors operate has caught many UK firms unawares. It is imperative that businesses exporting goods and services to the Middle East, ensure they have a contract drawn up that is signed by both parties. Seek the help of your legal team or debt recovery experts with experience in overseas debt to ensure the contract is watertight. It’s vital that contract laws such as this do not become a barrier to overseas trade.”

4 August 2014