Payment problems are one of the biggest risks in international business. Performing well as a supplier is no guarantee of timely payment. In our practice, we advise Dutch entrepreneurs who wait for months for payment from foreign customers. With smart contractual agreements—preventing the problem—you significantly reduce the risk. How do you structure your contract so that payment becomes a procedural matter rather than a negotiation?
What is the legal problem?
International payments run through various routes, currencies, and jurisdictions. Collecting a debt abroad is costly and time-consuming. In the event of the buyer's bankruptcy, you are often at the back of the queue. Without collateral, guarantees, or contractual incentives, your position is weak. A contract that only specifies the payment term offers little protection against non-payment.
What does the law say?
Within the EU, Directive (EU) 2011/7/EU on combating late payments applies. In the Netherlands, this is implemented in Article 6:119a of the Dutch Civil Code (commercial interest) and Article 6:96 of the Dutch Civil Code (collection costs). For B2B claims, commercial interest (8 percent above the ECB refinancing rate) and minimum collection costs of 40 euros accrue automatically after 30 days, unless otherwise agreed, up to a maximum of 60 days.
For retention of title, Article 3:92 of the Dutch Civil Code applies. The Vienna Sales Convention governs payment in Articles 53-65. ICC UCP 600 applies to letters of credit. At EU level, Regulation (EU) 1896/2006 offers the European payment order for undisputed cross-border claims.
What risks do companies face?
You risk losing the entire claim in the event of bankruptcy or fraud. International proceedings can easily cost more than the claim. Cash flow problems arise due to late payments. Currency fluctuations can further erode margins. Without clear contractual agreements regarding interest, costs, and security, you rarely receive full compensation for the damage. Retention of title may operate abroad under different conditions than you expect.
Practical example from our practice
We advised a Dutch exporter who supplied installations to a Turkish customer on credit. The customer failed to pay and went bankrupt. Without a letter of credit, down payment, or retention of title in a form effective under Turkish law, the exporter lost 380,000 euros. Upon renegotiation, we included: a 30 percent down payment, an irrevocable letter of credit for the balance, retention of title under Turkish law, and export credit insurance with Atradius DSB. Subsequent deliveries were paid in full and on time.
What can you do?
Where possible, work with a down payment, letter of credit, or bank guarantee. Include explicit payment terms, interest, and collection costs. Arrange retention of title in the form valid in the country of delivery. Agree on rights of suspension and termination in the event of non-payment under Article 6:262 of the Dutch Civil Code. Take out export credit insurance for large deliveries. See also our article on Bank Guarantees in international transactions.