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31 March 2015
The question of whether Dutch companies can seize the assets of third parties domiciled in other EU member states has come under the spotlight following the entry into force of the revised EU Brussels I Regulation on January 10 2015. The regulation provides uniform rules throughout the European Union on international jurisdiction and the recognition and enforcement of civil judgments.
Dutch procedural law provides an effective means by which to obtain security in advance of main proceedings against a debtor. Such security can be obtained by seizing assets of the debtor on the basis of a pre-judgment attachment order. The order is usually granted ex parte and can also be served on third parties. The attachment order blocks any payments by the third party to the debtor. If the money is held in a bank account, the entire sum in the account at the time when the attachment is served will be seized while a decision in the main proceedings is awaited.
Pre-judgment attachment orders are widely used by Dutch and foreign creditors to collect claims. Such an order can be used to obtain security or to exert pressure on the debtor to make payment, and thus avoid starting main proceedings against the debtor. Other legal systems have comparable provisional measures (eg, the German arrest order and the English freezing order).
It is established procedure in domestic cases that a Dutch creditor can seize assets of a debtor held by Dutch third parties. But can a Dutch garnishment order be extended to other member states and thereafter be served on third parties?
The revised Brussels I Regulation introduced an important change to the rules on the recognition and enforcement of civil judgments. Under the new regulation, claimants are no longer required to obtain a declaration of enforceability in the member state of enforcement in order to enforce an EU judgment.
The regulation also introduced another important change in relation to provisional and protective measures. Under the former Brussels I Regulation, recognition and enforcement of a provisional measure in another member state was deemed virtually impossible. Provisional measures granted in ex parte proceedings could be enforced in another member state only if:
In other words, enforcement of a third-party attachment order in another member state was practically useless, because informing the debtor of a possible garnishment order before actually serving it on a third party would lose the element of surprise, and thus increase the possibility of the debtor disposing of its assets before the order was served.
However, the revised Brussels I Regulation has removed the requirement to notify the debtor beforehand of a pending request for an attachment order. Moreover, under the revised regulation, an ex parte attachment order can have cross-border effect, provided that the judgment is served on the debtor before enforcement of the attachment order. This condition of service before enforcement creates an opening to enforce a garnishment order, while at the same time preserving the element of surprise.
To illustrate how this might work in practice, imagine that a claim is lodged against a Dutch company. The claimant knows that the company's parent organisation is based in Germany. From its annual accounts, the claimant knows that the parent company owes a debt to its Dutch subsidiary arising from an inter-company loan of €131,000. The claimant can ask the Dutch court to grant a garnishment order to seize the assets of the Dutch company and can also apply for a third-party attachment order to be levied on third parties, including the German parent company. The Dutch court can grant both attachment orders.
After the petition has been granted, the creditor intends to serve the third-party attachment order on the German parent company. The claimant will first transmit an authentic copy of the petition to the enforcement authorities in Germany, with a request to enforce the third-party attachment order. The German enforcement authorities will check the conditions for enforcement pursuant to the revised Brussels I Regulation and will demand proof of service of the petition to the Dutch debtor.
At this point, a Dutch bailiff will serve the petition on the Dutch debtor. Immediately thereafter, the bailiff will inform the German enforcement authorities accordingly and ask them to begin enforcement of the order without delay. If service of the petition and enforcement of the third-party attachment in Germany take place on the same day, the much-coveted element of surprise.
To retain the element of surprise, smooth coordination between the authorities serving and enforcing the judgment is essential. This may be difficult to achieve in some jurisdictions; but in the Netherlands, things are simpler because the authority to serve and enforce is vested in the same officials – for example, private bailiffs working under instructions from their clients.
Successful coordination is possible only if both service and enforcement authorities are private bodies and – if a limited amount of third parties are involved – preferably domiciled in one foreign member state.
The revised Brussels I Regulation allows ex parte attachment orders to circulate throughout the European Union. This is a positive development for claimants seeking swift collection of claims, either in one jurisdiction or in cross-border cases. However, it remains to be seen whether this opportunity will be realised in practice. Much will depend on the extent to which the Dutch courts are prepared to grant third-party attachment orders against third parties domiciled in another member state. Dutch case law contains only one example of a cross-border attachment order being granted, in a 1990 dispute involving a Portuguese debtor. However, the Dutch courts are increasingly willing to order parties to lift seizures in other member states, which is the flipside of granting a cross-border attachment order.
The new approach to ex parte provisional measures in the revised Brussels I Regulation, together with the entry into force in 2017 of the European account preservation order on attachment orders applicable to foreign bank accounts, may provide some stimulus in this regard.
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Bart-Jan van het Kaar