The European Parliament has approved a proposal by the European Commission to modernise the current European rules on insolvency.  The new rules would ensure that cross-border insolvency procedures become more efficient and effective, creating a business-friendlier environment in Europe and promoting economic growth. The rules apply where a debtor undergoes an insolvency procedure included in appendix A to the regulation. For the Netherlands, this will be bankruptcy, suspension of payments, or the debt restructuring scheme for natural persons.

Introduction

The eurozone crisis and the fallout taking place in Greece are keeping Europe on edge. An increasing number of analysts anticipate a new recession. Perhaps you, too, are wondering how the situation will affect your business, especially your international contracts. Below is a short outline of potential issues that we think are relevant. We have approached these issues from the perspective of doing business, or planning to do business, with foreign parties that run a higher than average risk of being "hit" by the current economic situation.

Potential issues

On Friday 21 October 2011, the Bankruptcy Court in the Southern District of New York handed down an important decision, confirming that foreign (groups of) companies can use Chapter 11 without any significant threshold as to their nexus with the United States. This may be good news for corporates that seek to use Chapter 11 for restructuring their business or capital structure.

It is now clear that even very limited property in the U.S. is sufficient to qualify for a reorganisation through Chapter 11.

The Supreme Court recently issued an interesting ruling in an insolvency case where receivables that had been validly pledged to a bank were unlawfully collected by a bankruptcy trustee. The question was whether the damages claim of the bank against the bankrupt estate would take priority over the foreclosure and settlement costs, including the bankruptcy trustee’s salary.

Today, the draft bill on the continuity of companies II (Wet continuïteit ondernemingen II) went into public consultation. The bill is based on a proposal in 2013 by Ruud Hermans and Reinout Vriesendorp of De Brauw Blackstone Westbroek and was discussed with experts from stakeholders. The bill provides for a restructuring procedure inspired by international restructuring practices, in particular English scheme of arrangement and US Chapter 11 proceedings. The bill provides for one of the most significant amendments of the Dutch Bankruptcy Act in decades.

Dutch insolvency practice is increasingly looking for possibilities to effectively restructure failing companies rather than liquidate them in order to safeguard creditors’ interests, and preserve jobs and economic activity. In line with international developments, pre-packs are on the rise and consultation on a bill to regulate pre-packs is currently on-going.

De Hoge Raad heeft recent uitgesproken dat bij het stellen van zekerheid in het kader van het aangaan van een nieuwe kredietrelatie geen bewijsvermoeden geldt dat betrokken partijen wetenschap van benadeling hadden. Dit maakt het in beginsel niet eenvoudig een dergelijke zekerheidsstelling te vernietigen op grond van de faillissementspauliana.

The Dutch Supreme Court on 11 July 2014 handed down a decision that improves the position of licensees in case of bankruptcy of a Dutch licensor, and of other parties deriving a right of use from a Dutch counterparty that goes bankrupt.

In recent years Dutch banks have established a practice of creating undisclosed rights of pledge (stil pandrecht) on all current and future receivables of their borrowers in an easy way and without the borrower's involvement. In the Supreme Court's ruling of 3 February 2012 (HR 3 February 2012, LJN BT6947), this practice was unsuccessfully put to the test by a bankruptcy trustee, who contested the alleged right of pledge of ING Bank on receivables of its bankrupt client.

A recent judgment of the Amsterdam Court of Appeal marks the latest trend in Dutch law to strengthen the position of the debtor in the context of pre-judgment attachments. The Court of Appeal gave effect to the full disclosure principle that stipulates that the creditor, in its request for leave to make pre-judgment attachments, should properly inform the court of the merits of its claim and the dispute with the debtor.