Establishing a European Small Claims Procedure
ACCA is pleased to comment on the European Commission’s proposal on the above matter. ACCA is a professional accountancy body with over 100,000 qualified members, based both in the UK and overseas. The majority of our members based in the UK are involved in the SME sector, either as accountants in business or as practising accountants who offer professional services to the SME community. Our interest in this particular matter is accordingly to be viewed in the light of our involvement with this sector.
ACCA supports the aim of the proposed procedure, which is to introduce a simplified procedure for obtaining judgment in respect of small claims within the EU. We would agree that, in the interests of fair treatment for contracting parties and of the proper functioning of cross-border trade, litigation procedures should not be so expensive and complex that creditors are discouraged from pursuing their claims, as the Commission argues is often the case at present. Similarly, the Commission is entitled to take action if there are material discrepancies in the recovery procedures available in different member states such that it is more straightforward and inexpensive to obtain judgment in some member states than others. We therefore support the proposed measure as being consistent with the Commission’s internal market responsibilities.
As for the issue of whether the procedure should be available only for cross-border claims or for all claims (i.e. domestic claims as well), we sympathise with the Department’s view that article 65 of the Treaty does not appear to extend to purely domestic matters. But it would, in our view, be a legitimate single market issue if creditors in any part of the EU were able to obtain more favourable treatment in respect of recovering their debts depending on whether those debts were cross-border or not. Given that the proposed procedure is to be optional, there would be nothing to prevent creditors in purely UK situations from resorting to the existing small claims procedure rather than the proposed European procedure. We would not, therefore, argue against the extension of the new procedure to domestic situations.
If the proposed procedure is to be limited to cross-border claims, it is not likely to have a material immediate impact on UK firms, although it might conceivably provide a small incentive for more SMEs to enter the export market. The 2003 European SME survey, carried out by Lloyds TSB/Kingston University, suggested that there remains a significant difference between the market orientation of UK SMEs as opposed to their counterparts in other member states.
The survey found that UK SMEs generate 42% of their sales revenue from ‘local’ customers, defined as those based within 10 kilometres of the firm. A further 34% of revenue was generated from ‘regional’ trade. Less than 5% of revenue was generated from international trade. This contrasts with the situation in France and Germany, where cross-border trade amounts to around 19% and 11% respectively of SME revenues.
In terms of the actual numbers of SMEs that are engaged in cross-border trade, 70% of the firms taking part in the survey said that they sold none of their products outside the UK; only 6% of firms said that exports accounted for 50% or more of their sales. Again, the picture was different in France and Germany. In France, less than half of firms said they did not conduct any cross-border trade, while 16% of firms said that exports made up over half of their sales. The corresponding figures for Germany were 62% and 9%.
For those minority of UK SMEs that do export, a substantial proportion of their export sales, 32%, derive from customers outside the EU, though 55% come from customers in the Eurozone.
The European Commission’s report ‘Internationalisation of SMEs 2003/04’ found that the highest percentages of exporting SMEs were in Luxembourg, Liechtenstein, Ireland, Switzerland and Iceland, suggesting that the size of the domestic market was an important factor in firms’ exporting decisions. The study found that only about 15% of UK firms conducted any export activity.
The available research therefore does suggest that the UK SME sector as a whole does not stand to benefit directly from the proposed procedure as much as its counterparts in other member states. For those that do engage in export activity, though, the initiative has the potential to offer real benefits and, as suggested above, may act as a small incentive for more SMEs to consider the export market in future.