The attachment of assets prior to the commencement of legal proceedings (conservatoir beslag) is a well used method in the Netherlands for securing the creditor’s claim. Attaching the debtors assets (e.g. moveable assets, real estate, shares, bank accounts or claims on third parties) will deprive the debtor of his right to dispose of or encumber the assets. One of the main questions however is: how should the creditor’s claim be calculated for the purposes of making pre-judgment attachments (the Claim)? Is it merely based on invoiced amounts for example? Or is already accrued contractual interest also taken into consideration? To what extent are future interest and (legal) costs taken into account?
The answers to these questions are important since the amount of the Claim firstly determines which amount is secured by the pre-judgment attachments. It also determines the creditor’s position vis-à-vis other potential creditors. In the event that several creditors have made (pre-judgment) attachments to the debtors assets, the proceeds of the assets in a forced auction sale will be divided pro rata amongst the creditors. Furthermore, if the debtor wishes to have the attachments lifted he will have to provide “sufficient security” (voldoende zekerheid, article 705 (2) Dutch Code for Civil Procedure (DCCP)) to the creditor. The Claim is then an indication of the amount of security the debtor will need to provide.
A group of District Court judges has attempted to clarify the above mentioned questions in a national directive (Beslagsyllabus) which contains guidelines for applying the DCCP provisions relating to attachments. With respect to the calculation of the Claim, it follows from the Beslagsyllabus that the Claim consists of (i) the “principle sum” as claimed by the creditor (gestelde hoofdsom); and (ii) a fixed percentage of the “principle sum” to (partially) cover future interest and (legal) costs.
Unfortunately the “principle sum” is not properly defined in the Beslagsyllabus. There are therefore (at least) two ways in which “principle sum” could be interpreted. On the one hand one could argue that it only refers to the creditor’s main claim, unpaid invoices for example. On the other hand it could also be argued that the “principle sum” includes not only the unpaid invoices but also the (contractual or statutory) interest accrued up to the date on which the petition is filed.
There is a lot to be said for the latter interpretation, since the first one would put creditors who have an older claim at a disadvantage as they would never be able to obtain sufficient security for their claim. Consider the following situation: (a) a creditor has a claim of EUR 1 million based on outstanding invoices; (b) the contractual interest is a monthly interest of 5%; and (c) the creditor waits some time before filing a petition to be able to make pre-judgment attachments because settlement talks are taking place. One year after the interest becomes due and payable, the creditor’s claim will have already risen to more than EUR 1,5 million – and this does not even include future interest and legal costs. If one were to base the calculation on the second interpretation, the creditor would be able to obtain security for EUR 1,8 million, whereas the first interpretation would result in a secured Claim of merely EUR 1,2 million.
In a recent (unpublished) judgment the District Court of Amsterdam ruled that the “principle sum” mentioned in the Beslagsyllabus only includes the creditor’s main claim, e.g. unpaid invoices. It does not include accrued interest. The District Court of Amsterdam acknowledges however that this interpretation will indeed be at the disadvantage of creditors who have an older claim. This is the reason why it applies its own (unpublished) policy, according to which interest accrued over a year before the petition is filed can be added to the creditor’s claim. For example: if interest becomes due and payable as of 1 January 2016 and the creditor files a petition requesting leave to be able to make pre-judgment attachments on 1 July 2017, the creditor may add the accrued interest from 1 January 2016 up until 1 July 2016 to the claim.
It is therefore worth noting that, although it is relatively easy to make pre-judgment attachments in the Netherlands, the amount which is secured by the attachments may not be as high as you may have expected. It will be interesting to see if one day the Dutch Supreme Court will be able to comment on whether or not the application of the Beslagsyllabus and/or the District Court of Amsterdam’s policy actually results in sufficient security for creditors.