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Originally published:
Nov-28-2007
Information provided by the law firm of George Y. Yangou & Co., Nicosia, Cyprus
Effective international collections requires more than a well-defined process. A good working knowledge of the business environment, as well as sensitivity to the culture of the countries in which you are collecting, is essential. Nowhere is this more important than when doing business in North Africa.
Negotiations with the debtors in this region are usually friendly but firm. It is often important that collectors' language skills include English, French, and Arabic, allowing them to communicate with debtors in their own language.
Focusing on the country of Morocco, here are several important things to consider as you plan a collection strategy in this region.
Banks and Payments
Several African countries, including Morocco, Tunisia, Algeria and Senegal have strict banking regulations. Banks will not allow international payments to be made unless full documentary proof of the transaction and the beneficiary are provided.
Banks also bar third party payments. It is therefore necessary to prepare appropriate documentation with the beneficiary clearly noted. This documentation should be submitted directly to the buyer (debtor), who will present it to his bank, in order for payment to be made.
Litigation in Morocco
When entering into litigation in Morocco, it is not usually necessary to provide a Power of Attorney. Documents, however, must either be original or, where these are not available, original certified copies that have been notarized. It is best to provide originals where possible.
If the contract with the debtor stipulates that interest will be incurred for late payment, there is a possibility (not a guarantee) that the court will enforce this clause. The contract must be stamped and signed by both parties, however, and filed with the registration office. At the judge's discretion, it is also possible to obtain a refund of legal fees, again, if stipulated in the contract.
Legal action usually commences with notice being served on the debtor, followed by filing of the action and a hearing. If the case is not disputed, it should be resolved, from filing to execution of the judgment, in approximately 8 months.
The statute of limitations in Morocco is five years for commercial claims.
Collection in Morocco
The collection process should begin with a double registered letter requesting payment sent to the debtor’s address. When a fax number is available/traceable, the letters should also be sent by fax. This is generally followed by an initial telephone call to the debtor.
We have found personal visits to be an effective collection strategy, yielding very favorable results. Apart from the immediacy created by a face to face meeting, the debtor is often more willing to enter into negotiations for a settlement and has more trust in the possibility of an amicable settlement as a result of such meetings. Personal visits are also helpful in tracing the whereabouts of debtors, developing new contact details, and obtaining confirmation that the debtor’s company is no longer active.
Using a personal approach allows collectors to keep the relationship between the creditor and debtor on an amicable basis, so they can continue to do business. This requires maintaining a balance between being firm regarding payment while sympathetically considering the debtor’s problems and the reasons for the delay. If the problems are genuine, there is a basis for arranging repayment in installments. If the debtor has a foreign bank account, it’s possible to request a series of postdated checks, but this is not allowed with local accounts.
Once a schedule of installment payments is agreed upon, a written agreement with the debtor confirming the schedule and payment amount and the creditor confirming their acceptance of the schedule should be secured. This documentation is then be forwarded to the bank, which will arrange the installment schedule against invoices. If the debtor does not adhere to the agreed payment schedule, the written documentation will assist in obtaining a quicker judgment if the debt is pursued through legal action.
Recommendations for Selling on Credit in Morocco
Before selling on credit into Morocco or other North African countries:
- Obtain as much credit information on the potential buyer as possible. Require the completion of a credit application, obtain a credit report, and check business references.
- Consider reducing your risk by obtaining credit insurance.
- If you do find yourselves in need of collection assistance, be sure to hire a collection firm with knowledge of both the local languages and culture.
For further information on Morocco, its economy, business climate, etc., view our Country Risk report.
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George Y. Yiangou & Co., an attorney firm headquartered in Nicosia, Cyprus, is utilized by ABC-Amega for legal collections in Morocco, Cyprus, Greece and other countries in the Middle East and Northern Africa. Established in 1981 with offices in Nicosia, Limassol and Athens, the firm specializes in corporate and commercial law, as well as debt collection and other business legal services. Their staff includes bilingual employees and fully qualified lawyers, speaking Greek, English, Russian, French, Italian, German, Spanish, Romanian and Arabic.
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