Retention of title clause: what it does when you sell abroad

Retention of title clause: the short answer

A retention of title clause says that you stay the legal owner of the goods you deliver until the buyer has paid for them in full. It is also called a reservation of title clause or a Romalpa clause. If the buyer does not pay, the clause can let you take back goods that are still identifiable and unsold.

When the buyer is in another country, the clause is only as strong as the law where the goods end up. The EU Late Payment Directive requires member states to respect a retention of title clause that was "expressly agreed between the buyer and the seller before the delivery of the goods", but only "in conformity with the applicable national provisions designated by private international law" (Directive 2011/7/EU, Article 9(1)). That is why exporters pair it with three more clauses: choice of law, jurisdiction or arbitration, and late payment interest.

This guide explains how each clause works across borders. It is general information, not legal advice: have your terms checked by a lawyer in your country and, for large customers, in the buyer's country.

How a retention of title clause works

The clause delays the moment ownership passes. Under English law a seller may "reserve the right of disposal of the goods until certain conditions are fulfilled", and then "the property in the goods does not pass to the buyer until the conditions imposed by the seller are fulfilled" (Sale of Goods Act 1979, s.19(1)). German law reads a retention of title the same way: ownership passes on the condition that the price is paid in full (Eigentumsvorbehalt, the German retention of title, BGB §449(1)).

Common types of clause

Example wording

"Ownership of the goods passes to the Buyer only when the Seller has received payment in full of the price of the goods [and of all other sums the Buyer owes the Seller]. Until then the Buyer holds the goods for the Seller, keeps them separate and identifiable, and allows the Seller to enter the premises where they are stored to recover them if payment is overdue."

This is example wording only. The bracketed all monies part is not valid everywhere, and whether you may enter the buyer's premises depends on local law.

What makes it work in practice

• Agree it before delivery. Put the clause in the signed contract or in terms the buyer accepted before the first delivery, not only on the invoice.
• Keep the goods identifiable. Serial numbers, batch numbers and delivery notes that match your invoices.
• Act when payment is late. Goods that have been resold, used or mixed are hard to get back.

Does retention of title work when the buyer is abroad?

Partly. Two different laws are involved. The sales contract follows the law the parties chose. Ownership of the goods usually follows the law of the country where the goods are. German law states the rule directly: "Rechte an einer Sache unterliegen dem Recht des Staates, in dem sich die Sache befindet" (rights in a thing are governed by the law of the state where the thing is, Article 43(1) EGBGB). So a clause written under your home law can be judged under the buyer's law once the goods arrive there.

The UN Convention on Contracts for the International Sale of Goods (CISG) does not settle it either. It governs the contract, but "it is not concerned with ... the effect which the contract may have on the property in the goods sold" (CISG, Article 4(b)). The CISG has 97 parties; the United Kingdom is not one of them (UNCITRAL status table).

How five markets treat retention of title

If the buyer becomes insolvent

Retention of title matters most when a buyer cannot pay at all. Inside the EU, opening insolvency proceedings against the buyer "shall not affect sellers' rights that are based on a reservation of title where at the time of the opening of proceedings the asset is situated within the territory of a Member State other than the State of the opening of proceedings" (Regulation (EU) 2015/848, Article 10(1)). A claim to your goods in an insolvency goes to the insolvency practitioner and is work for a local insolvency lawyer, not for debt collection.

The four clauses that keep collection possible

A retention of title clause protects the goods. The other three protect the money claim: which law applies, where you can sue and what the buyer owes on top when it pays late.

Choice of law clause

In the EU, "a contract shall be governed by the law chosen by the parties", and the choice "shall be made expressly or clearly demonstrated by the terms of the contract or the circumstances of the case" (Rome I Regulation, Article 3(1)). Without a choice, a sale of goods is governed by the law of the country where the seller has its habitual residence, and services by the law of the service provider's country (Article 4(1)(a) and (b)). The governing law also decides "prescription and limitation of actions" (Article 12(1)(d)), so it sets how long you can chase the debt: see our table of limitation periods for commercial debt.

Jurisdiction or arbitration clause

Inside the EU, if the parties agree that the courts of a member state have jurisdiction, those courts have it, and "such jurisdiction shall be exclusive unless the parties have agreed otherwise". The agreement must be in writing or evidenced in writing, or follow the parties' established practice or a known usage of the trade (Brussels Ia Regulation, Article 25(1)). Without a clause, a seller of goods can also sue in the member state where the goods were delivered or should have been delivered (Article 7(1)(b)).

Outside the EU, a court judgment travels less easily. The Hague Convention of 30 June 2005 on Choice of Court Agreements covers exclusive choice of court clauses between its parties (HCCH status table). Arbitration is the other route for buyers in countries without such a treaty. Our guide to enforcing a judgment abroad shows which route works where.

Late payment interest clause

Business customers in the EU owe statutory interest of the reference rate plus at least eight percentage points and a fixed €40 for recovery costs when they pay late (Directive 2011/7/EU). In the UK, statutory interest for business to business transactions is "8% plus the Bank of England base rate" (GOV.UK), plus a fixed sum of £40, £70 or £100 depending on the size of the debt (Late Payment of Commercial Debts (Interest) Act 1998, s.5A). A clause that names the rate removes the argument later. Check the rate for your buyer's country in our guide to late payment interest by country.

Checklist before you ship on open terms

1. Put all four clauses in the signed contract or in terms the buyer accepted, before the first delivery.
2. Set payment terms that match the risk of the buyer and the country: see our guide to payment terms.
3. Match delivery notes, serial numbers and batch numbers to your invoices.
4. Note the due date and the limitation date for each invoice, under the law that governs the contract.
5. Send reminders and a final demand on time: use our demand letter templates.
6. Hand over an unpaid invoice while the goods and the money can still be traced.

When a buyer abroad does not pay

Most cases are settled in the amicable phase, before anyone goes to court. The clauses above decide what happens if they are not. A typical path for an unpaid export invoice:

1. Reminders and a final demand. See what to do about unpaid invoices and our demand letter templates.
2. A licensed local partner in the buyer's country. A collection agency or law firm that knows local law contacts the buyer: see how commercial collection and B2B debt collection work.
3. A court route if the buyer still refuses. Inside the EU, the European payment order covers undisputed cross-border claims; outside it, see enforcing a judgment abroad.

Local rules on reminders, interest and court procedure are on our country guides, for example Germany, France, Italy, the United Kingdom and the United States.

How Debitura fits

Debitura gets unpaid B2B invoices paid across borders, in 180 countries. We match your case to a vetted local partner in the debtor's country, based on the type of debtor, the claim and how partners perform on our platform. The partner, a licensed collection agency or law firm, works the case under local law, and you follow every step on one platform.

One Standard Debt Collection Agreement covers pre-legal collection of undisputed unpaid invoices in every country we serve. There is no upfront cost: you pay a success fee only when money is recovered, from 6% in Europe and 7.5% elsewhere, depending on claim size and the debtor's country (see pricing). Legal action is optional, quoted separately and only starts if you accept the quote.

Selling goods abroad on open account? See debt collection for manufacturing and B2B e-commerce, the steps in how it works, and our guide to international debt collection.