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Welcome / Blog Archive / English / 2019-08-doc4 Netherlands puts ‘international insolvencies’ back on legislative agenda

2019-08-doc4 Netherlands puts ‘international insolvencies’ back on legislative agenda


On 27 August 2019, the Dutch Minister for Legal Protection (‘Rechtsbescherming’) did send his 11th letter on progress concerning several acts for the overall recast of the Dutch Bankprty Act to Dutch Parliament. On the 5th and last page it introduces the subject ‘International insolvencies’. The following is provided, I quote: ‘An insolvency adjudicated outside the European Union is in principle not recognized in the Netherlands and therefore has no effect on assets located in the Netherlands. An amendment to the Bankruptcy Act is being considered, whereby parts of the UNICITRAL Model Law on cross-border bankruptcies are included in the Bankruptcy Act. It regulates, among other things, (i) the applicable law, (ii) the recognition (enforcement) of foreign insolvency proceedings and (iii) the consequences of that recognition. I intend to put together an expert group to further explore this.’

Well, that is just as short as it is interesting, as it is a subject the Dutch government has been near to silent about for over a decade.

The first line (‘no recognition’; ‘no effects’) is at odds with a much discussed Yukos judgement of the Dutch Supreme Court of September 2013 (in a non-EU case) clarifying that in that case the appointed Russian trustee (Mr Rebgun) may in principle exercise the power to sell the debtor’s assets located in the Netherlands, that has conferred on him under the foreign (Russian) lex concursus. The Court goes into quite some details to explain the Russian trustee’s position. The result of the case is that – outside the scope of the European Insolvency Regulation – a foreign insolvency office holder can effectively exercise its powers in the Netherlands, provided that his actions follow from the lex concursus (in this cas Russian law) and these actions respect all existing individual creditors’ attachments on assets located in the Netherlands. The foreign IP can act in the Netherlands without prior court decision on for instance recognition of its foreign proceeding or relief (as is required under the UNCITRAL Model Law), or for instance an exequatur. The only defence interested parties have is the submission that an action of the foreign IP is against Dutch public policy. The Yukos judgment therefore results in its effects in universality: the Netherlands is open for foreign insolvency proceedings. Be it as it is, the important message is that an expert group will be appointed to ‘explore’ the matter.

I remember that a Dutch draft proposal (‘Title X’), as part of a draft Proposal of 2007 to overhaul the whole Dutch Bankruptcy Act wished to follow the Uncitral Model Law, be it with a different structure, and provisions unaligned with those of the Model Law. Foreign, non-Dutch judges and IPs had difficulty in recognising the system. What it did do was to include filling of a gap in the Model Law itself (it does not provide for rules for applicable law). The Dutch Draft of 2007 suggests to copy the rules of law applicabe of the EU Insolvency Regulation. The expert group is, respectfully, advised not to feel a hostage of the ideas of 12 years ago.

As I blogged earlier, the Model Law is certainly not outdated, however it was the fruit of the 90s, now however over 20 years old. I think national legislation on international insovency law (i) should also take into account more recently developed concepts and themes, such as registration of insolvency decisiones, rules for data protection, the main insolvency practitioner’s power to give a unilateral undertaking (in order to prevent opening of proceedings in another state), technology-driven developments in cross-border communication, professional and ethical rules for insolvency practitioners in their actions outside their own jurisdiction or rules for recognition of for instance decisions on director’s disqualification. See blog/2017-11-doc7-some-remarks-on-the-model-law.

Furthermore – my advice would be – the expert group working on a national exploration should consider to (ii) also examine most recent UNCITRAL Model rules relating to annex actions and the group enterprise insolvencies, (iii) investigate experiences in recent practice by speaking at lenght with Dutch IPs having actual (and still ongoing) experiences in fresh Brazilian (Oi) and Indian cases (2016 case, see, and the recent Jet Air case), (iv) speak to colleagues from e.g. Australia, Singapore and New Zealand, and learn from the obstacles they met rather recently when implementing UNCITRAL’s ideas in their national lagislation, and (v) investigate what the best way would be to give effect to restructuring negotiations and plans, in the vicinity of insolvency, coming from outside Dutch’ territory.

As it is ‘exploration’, no ‘legislation’, it certainly is worth considering to include non-Dutch experts in such a group. After all, the non-Dutch world will have to work with the results of it. Exciting times ahead! Those involved in the exploration should be wished all the best.