In the continuation of the series of articles on insolvency and bankruptcy law in the Netherlands, we will introduce you to cross-border insolvency in more detail, since today the tendency to register companies in offshore jurisdictions with assets in other states, as well as in the context of the general globalization of business and its going abroad the question of cross-border insolvency raises sharply.
The interview is conducted with Dutch insolvency lawyers Ruben Liuvenburg and Michelle Bindels.
Recognition of foreign proceedings
Under what circumstances do the courts of your jurisdiction recognize the legality of a foreign insolvency proceeding?
In accordance with Article 16 of the EU Regulation on Insolvency Procedures (1346/2000), the institution of insolvency proceedings in a Member State (with the exception of Denmark) and its influence are directly recognized in the Netherlands.
In the absence of a treaty, convention or regulation on international insolvency law, the consequences of insolvency proceedings initiated in other jurisdictions (except the EU) are only recognized to a limited extent in the Netherlands. According to Dutch case law and legal doctrine, the main point is that a foreign insolvency proceeding is exclusively territorial in nature. Consequently:
- foreign bankruptcy does not apply to the assets of the debtor located in the Netherlands;
- the forced suspension of the bankrupt is not applied; and
- individual lenders are not allowed to file a claim with a Dutch court to recover debt from the debtor’s assets.
Over the past ten years, Dutch bankruptcy law has exemplified the gradual reduction of restrictions on the recognition of foreign bankruptcy proceedings. In the case of Yukos (Supreme Court, September 13, 2013, ECLI: NL: HR: 2013: BZ5668), the Supreme Court clarified the amount of recognition of the insolvency case of a foreign entity in the Netherlands.
Provided that the decision made by the foreign court does not contradict Holland’s state policy, and if there is no proceedings on the insolvency of the debtor in the Netherlands, the foreign bankruptcy manager can manage and dispose of the property located in the Netherlands, including transfer of assets and transfer of proceeds to property of a foreign bankrupt entity, provided that the bankruptcy manager is authorized to perform these actions on the basis of the application of the insolvency right (lex concursus [1]). However, any arrests imposed on property in the Netherlands by individual creditors prior to the transfer must be taken into account. A bankruptcy insolvency representative of a foreign entity or similar official may act in the Netherlands without a preliminary court decision, execution of a court decision made by a judicial authority of another state or judicial recognition of a foreign proceeding, provided that the insolvency right (lex concursus) allows such actions .
Forced dissolution of foreign companies
What are the powers of Dutch courts to order the cessation of the activities of foreign companies operating in your jurisdiction?
In accordance with the EU Regulation on Insolvency Procedures (1346/2000), Dutch courts have the right to institute proceedings on the insolvency of foreign companies that operate primarily in the Netherlands. In accordance with domestic insolvency law, the jurisdiction of Dutch courts is determined primarily by the debtor's legal address. If the debtor does not have a legal address in the Netherlands, but operates in the Netherlands, then the district court within which the company office is located has jurisdiction over the affairs of such an entity in accordance with the Bankruptcy Law of 1893.
Place of business
How is the principal place of business in your jurisdiction determined?
In accordance with the Insolvency Regulation, the place of business is the place where the debtor conducts business on a regular basis in the interests of his business, which may be established by third parties. There is a rebuttable presumption that the principal place of business of the debtor - legal entity is located at the registered office of that person.
Cross-border cooperation
What is the general approach of the courts of your jurisdiction to cooperate with foreign courts in the management of cross-border insolvency cases?
The Netherlands did not adopt the UNCITRAL Model Law (UN Commission on International Trade Law) on cross-border insolvency.
Dutch insolvency law does not contain requirements for Dutch bankruptcy managers in relation to cooperation with bankruptcy managers and courts outside the EU. However, Dutch bankruptcy managers and supervisory judges, as a rule, want to consider on a voluntary basis the possibility of taking specific measures to work together with foreign managers in order to minimize costs and maximize the recovery of funds for joint lenders - for example, by facilitating the exchange of relevant information between parties and international coordination of related activities in the insolvency process.