A company which has acquired claims through legal merger cannot instantly enforce judgments related to those claims. Pursuant to Section 431a Dutch Civil Code of Procedure (DCCP; Wetboek van Burgerlijke Rechtsvordering) the acquiring company can only start or continue such enforcement from the moment the bailiff has served notice of the transfer to the debtor. This can be a great administrative and financial burden for the acquiring company, especially if large claim portfolios are involved. Therefore, the Amsterdam District Court, on the initiative of an acquiring company which was confronted with this issue, posed the following preliminary questions in this respect: (i) does Section 431a DCCP apply in the event of a legal merger, and (ii) if so, what are the legal consequences if this provision is not complied with. In its decision dated 30 October 2015 (ECLI:NL:HR:2015:3197) the Dutch Supreme Court answered these questions as follows.
The Dutch Supreme Court’s response to the first question is clear-cut: yes, it does. The rationale behind Section 431a DCCP is to provide legal certainty: it should be clear who the debtor has to make payments to in order to be released from the payment obligation or who he should approach for settlement negotiations. Section 431a DCCP complements the substantive rule laid down in Section 6:142 paragraph 1 Dutch Civil Code (DCC; Burgerlijk Wetboek) that upon the transfer of a claim the new creditor also acquires the accessory rights, such as the right to enforce the judgment awarding the claim. Following the legislative history of Section 431a DCCP and 6:142 DCC, these complementary rules apply to both transfer of claims by general title as well as by particular title. Legal merger is an example of transfer by general title. The Dutch Supreme Court decided there is no good reason to exempt transfer by general title from the applicability of Section 431a DCCP.
Regarding the second question, the Dutch Supreme Court first of all held that noncompliance with procedural rules regarding attachment or execution only results in the attachment or execution becoming invalid if the interests that the procedural rule intends to protect are actually impaired. With respect to procedural rules on writs this was already laid down in Section 66 DCCP. It is now clear that this flexible view on invalidity also applies to procedural rules on attachment or execution. This reflects an overall trend to take a less formal approach towards civil procedural law.
Consequently, the Dutch Supreme Court held that in general the interests protected by Section 431a DCCP will not be impaired, if (a) the acquiring company has notified the debtor in writing (including e-mail) of the transfer of the power to enforce the judgment and (b) the legal merger is published. Element (a) protects the debtor’s interest to know who he has to pay in order to be released from the payment obligation or who he should approach for settlement negotiations. Element (b) provides comfort to the debtor and third parties with respect to the validity of the transfer of the claim. Within the context of Section 431a DCCP this would be reviewed by the bailiff involved. Considering the safeguards included in the statutory procedure on legal merger, upon publication the merger has reached its final stage and the transfer of rights by legal merger can be regarded as valid. There is no (further) need for the involvement of a bailiff. It should be noted, however, that the Dutch Supreme Court leaves room for a debtor and/or third parties to argue that their interests have been harmed, even though element (a) and (b) above have been fulfilled. Indeed, the underlying rule says that in the event of noncompliance the execution will only remain valid if the protected interests are not actually impaired.
Considering that claims next to legal merger can also be transferred through demerger or an asset deal, it is worth mentioning that the Advocate General suggested a general approach on the legal consequences of noncompliance with Section 431a DCCP. The Advocate General considered that the interests protected by this provision are generally sufficiently safeguarded if the original creditor (possibly together with the new creditor) notifies the debtor of the transfer of the right to levy execution. In other words: if element (a) is fulfilled, the relevant interests will generally not be impaired. Whether the Dutch Supreme Court would give up element (b) for the sake of a general approach remains unclear at the moment. It should be noted, however, that the approach adopted by the Dutch Supreme Court is not necessarily limited to legal merger cases. Given that the rules regarding demerger are largely similar to those regarding legal merger, it may be expected that the Dutch Supreme Court’s approach also applies to demerger cases. This cannot be said for an asset deal, however. Such transaction is not surrounded by formalities constituting element (b). For that reason in such cases the question whether noncompliance with Section 431a DCCP led to actual impairment of the relevant interests has to be answered on a case-by-case basis.