In another case from this occasional series Chauntelle Wright considers the issue of foreign debt and limitation. The scope of the article is England and Wales.
Q. My client has attended with a debt incurred in Dubai. When working in Dubai in 2006 she had a credit card with Emirates Bank that she thinks had approximately 2000 dirhams on it (about £380). She returned to the UK and has made no payments to the bank since doing so; but she is unsure whether she cleared the debt before leaving Dubai. Over the years, the Emirates Bank has occasionally contacted the client about money owed but she has never responded. Emirates Bank has now employed English debt collectors to collect 186,000 dirhams (about £35,000). My client is aghast at the amount claimed. We wrote to the debt collector and argued that the debt is statute barred but the debt collection company deny this and are threatening legal action against the client in the UK.
Can my client ignore this threat because court action is statute barred?
A. No. Unfortunately it is not as straightforward as applying the Limitation Act 1980 just because the client is in the UK. The English courts will apply the laws of other countries in cases where the governing law of the contract is the law chosen by the parties. In your case there is likely to be a specific clause in a written agreement signed by both parties that the law of the United Arab Emirates (UAE) will apply. The limitation period for the UAE is 15 years.
Even where there is no express clause, the courts will consider whether the law governing the contract will be that of the country where the credit was provided or where the creditor has its principal place of business (unless the loan was advanced through a branch in the UK). If your client took out the credit in the UAE and the banks’ principal place of business is there then the law of the UAE is likely to govern that agreement. This position is similar with limitation periods. If an English court applies the law of another country, it will also apply that country’s limitation period.
The Foreign Limitations Act 1984 (FLPA) will apply: http://www.legislation.gov.uk/ukpga/1984/16/section/1
Application of foreign limitation law.
(1) Subject to the following provisions of this Act, where in any action or proceedings in a court in England and Wales the law of any other country falls (in accordance with rules of private international law applicable by any such court) to be taken into account in the determination of any matter —
(a) the law of that other country relating to limitation shall apply in respect of that matter for the purposes of the action or proceedings; and
(b) except where that matter falls within subsection (2) below, the law of England and Wales relating to limitation shall not so apply.
(2) A matter falls within this subsection if it is a matter in the determination of which both the law of England and Wales and the law of some other country fall to be taken into account.
Section 2(1) of the Act does create an exemption to the basic rule by excluding s1 to the extent that the foreign limitation period would conflict with public policy and under s2(2) ‘there is such a conflict where the application of s1 would cause undue hardship’. In such a case, the Limitation Act 1980 will apply to the agreement.
Your best option may be to consider the exemption. Your client clearly has issues with the amount claimed. It may be argued that the other party should able to provide a clear and substantial breakdown of the amount claimed and the reasons for the delay in bringing a claim. There may be prejudice caused to the client by the delay in that the client will probably be unable to provide copies of paperwork and memory may have been affected by lapse of time. Where interest and charges have accrued (which is likely to explain the large amount claimed) if the claim had been brought in a more timely manner the client could have paid or defended the claim before the debt escalated. She could argue that she will suffer hardship by the application of the UAE 15 year limitation period rather than our shorter 6 year limitation. In view of the amount of the claim and potential for costs of an unsuccessful defence she will need advice from a solicitor specialising in this area of law.
Chauntelle Wright works for Citizens Advice and is Adviser Subject Editor.
This article was first published in Issue 174 of Adviser magazine (March/April 2016)