A basic principle of Dutch insolvency law is that a bankruptcy order by the court takes (retroactive) effect from 0:00 on the day on which the court issues the order.(1) As a result, a debtor can no longer dispose of its assets and a sole creditor may not receive any payments as from that moment. The rule aims to protect the bankruptcy estate for the benefit of all creditors. This leads to many practical problems. One is a situation in which the debtor gives payment instructions to its bank prior to the date of the insolvency, but the funds are credited to the creditor's account after the moment of bankruptcy. Until recently, the main rule was that the receiver in bankruptcy could claw back the transferred funds unless the bank had performed all acts in connection with the payment instructions by 0:00 on the day on which the court gave the bankruptcy order.(2) This rule was heavily criticised in Dutch literature. The Supreme Court recently rendered an important judgment simplifying the rule.(3)
In 1989 the Supreme Court ruled in Vis qq./NMB that a receiver in bankruptcy can claw back transferred funds unless the bank of the debtor had performed all acts in connection with the payment before the date of the bankruptcy order.
As a result of this rule, a distinction was created between a situation:
- where one bank is involved in executing the payments (eg, both debtor and creditor hold accounts with the same bank); and
- where different banks are involved in executing the payments (eg, the debtor and the creditor hold accounts with different banks).
In the first situation, all required acts are performed by the bank when the creditor's bank account is credited with the transferred funds. In the second situation, all required acts are performed by the bank at the moment when the accounts of the different banks held with the Dutch Central Bank are settled. As a result, in the first situation the creditor is more likely to be obliged to repay transferred funds than in the second situation, without any legal justification.
The rule also presents many difficult practical questions - for example, in relation to when the bank is considered to have performed all necessary acts to effect the transfer of funds. Bankruptcy receivers have regarded this practical issue to be an obstacle to the claw-back of funds.
On February 7 2011 Dutch company Maatmetaal gave instructions to its bank (Rabobank) to transfer funds to the bank account held by its lawyers, JPR Advocaten, at ING Bank. Maatmetaal's bank account was debited on the same day. On February 8 2011 Maatmetaal was declared bankrupt and a bankruptcy receiver was appointed. On the same day, JPR Advocaten's bank account was credited with the transferred funds.
This factual matrix was conducive to a challenge of this principle before the Supreme Court. The advocate general also picked up on the opportunity and issued extensive conclusions.
The Supreme Court concurred with the advocate general, who concluded that the legal practice would benefit from the formulation of a clear, unambiguous, easy-to-use rule. An additional reason for such a rule is that the phenomenon of fund transfers - and more specifically, the particular roles that different actors fulfil in such transfers - is unclear. Further technological developments in the area of fund transfers can also be expected.(4) In addition, the Supreme Court clearly agreed with the advocate general's view that the new rule on fund transfers should relate either to the moment at which the debtor's account is debited or to the moment at which the creditor's account is credited. In the Supreme Court's view, the latter is preferable, as the new rule would then be aligned with Article 6:114 of the Civil Code, which provides that a payment by fund transfer is completed at the moment at which the creditor's account is credited.
As a result, the Supreme Court amended its initial rule from Vis qq./NMB to provide that the bankruptcy receiver can claw back transferred funds credited to a creditor's account after the commencement of the bankruptcy even if the payment instructions were given and all acts by the debtor's bank were performed prior to the bankruptcy.
The Supreme Court highlighted two major advantages of the new rule compared to its predecessor:(5)
- It is now irrelevant whether the debtor and creditor have bank accounts at the same bank or at different banks, so the potential unjustifiable outcome of the Vis qq./NMB rule has been eliminated; and
- It is no longer necessary to establish when the debtor's bank has performed all acts required to effect the fund transfer – which can be difficult in practice.
Finally, the Supreme Court indicated that as, for many years, the insolvency practice was based on the old Vis qq./NMB rule, the new rule will not have retroactive effect for closed matters. As a result, the new rule applies only in respect of bankruptcies in relation to which the court has issued a bankruptcy order after the date of the Supreme Court judgment (ie, March 20 2015).
For further information on this topic please contact Jelle Hofland, Ilse van Gasteren, Evert Verwey or Bauke de Vries at Clifford Chance LLP by telephone (+31 20 711 9000), fax (+31 20 711 9999) or email (email@example.com, firstname.lastname@example.org, evert.verwey@CliffordChance.com or email@example.com).
Jelle Hofland, Ilse van Gasteren, Evert Verwey, Bauke de Vries
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