According to the Dutch Supreme Court, an English trustee in bankruptcy can rely on Article 25(1) of the EU Insolvency Regulation to obtain recognition and enforcement of a disclosure order obtained in the United Kingdom pursuant to the UK Insolvency Act 1986 in other EU member states, such as the Netherlands. The prohibition embodied in Article 18(3) of the regulation does not prevent an English trustee from obtaining recognition and enforcement of such a disclosure order.
The legal background of this judgment(1) is based on Articles 18 and 25 of the regulation. Article 18 states that a trustee in main proceedings may exercise all powers conferred on him or her by the laws of the member state in which he or she is appointed in another member state, provided that:
- he or she complies with the national laws of the other member state, particularly in relation to the realisation of assets; and
- he or she does not use coercive measures or attempt to make decisions or rulings on legal proceedings or disputes.
Article 25(1) of the regulation states that any judgments rendered by the court in which main insolvency proceedings were opened and which relate to the course and/or closure of insolvency proceedings, and any judgments deriving directly from insolvency proceedings and which are closely linked to them (even if rendered by a different court), shall automatically be recognised and enforceable in all other member states without further formalities.
In the case at hand the English trustees in bankruptcy were appointed in December 2008, after a bankruptcy order had been made against an individual who carried on business as a sole trader. The trustees suspected that assets belonging to the bankrupt debtor were or had been located at the premises of Dutch company Handelsveem, which had provided warehousing services. The trustees applied to Huddersfield Country Court for an order requiring Handelsveem to provide disclosure pursuant to Section 366 of the UK Insolvency Act. On July 15 2009 the English court made a Section 366 order requiring Handelsveem to provide to the trustees a list of stock belonging to the bankrupt debtor that was stored at Handelsveem's premises from January 1 2008 to December 31 2008. In September 2009 the trustees obtained an order from the special provisional judge of the Rotterdam District Court, granting leave to the trustees to enforce the Section 366 order in the Netherlands. The provisional judge applied Article 25(1) of the regulation, subsequent to which Handelsveem appealed the decision, first to the Rotterdam District Court, which dismissed the appeal, and then to the Supreme Court.
Handelsveem's application to the Supreme Court was based on two arguments:
- The Section 366 order was not a judgment deriving directly from insolvency proceedings commenced in relation to the bankrupt debtor as referred to in Article 25(1) of the regulation.
- The trustees had acted in conflict with Article 18(3) of the regulation, as the order gave the possibility to exercise coercive measures in the Netherlands without a grant of execution or a form of control by a Dutch court.
In regard to Handelsveem's first argument, the Supreme Court ruled that the Section 366 order fell within Article 25(1) of the regulation. The Section 366 order was a judgment that derived directly from the insolvency proceedings in relation to the bankrupt debtor, and was closely connected with those proceedings. In fact, the English court's jurisdiction to grant the Section 366 order derived directly from the UK Insolvency Act and was an order that could be granted only during or in relation to bankruptcy proceedings. In addition, in deciding whether a judgment fell within the scope of Article 25(1) of the regulation, it was irrelevant whether a similar order could have been sought and obtained under Dutch law.
As for Handelsveem's second argument; the Supreme Court ruled that Article 18(3) was an exception or limitation to the main rule of Article 18(1) that the trustee in bankruptcy of another member state can exercise all powers which are conferred on him or her by the law of the member state in which main insolvency proceedings have been opened. The limitation in Article 18(3) to the rule in Article 18(1) entails that these powers may not imply the use of coercive measures. The prohibition of the use of coercive measures applies only to the powers to use such measures that are derived directly from the lex fori concursus (ie, the law of the state in which proceedings have been opened).
The prohibition on using coercive measures did not apply in this case, in which the trustees exercised their powers in another member state on the basis of a judgment that was recognised and enforced in another member state on the basis of Article 25(1) of the regulation. It did not prevent the trustees from requesting the Dutch court to grant leave to enforce the Section 366 order, if necessary with coercive measures under Dutch law. In other words, according to the Supreme Court, Article 18(3) did not apply to this case.
This decision sets a precedent that will be helpful to trustees in bankruptcy and other office holders seeking recognition and enforcement in other member states of judgments made under the law of the member state where insolvency proceedings were opened, as long as they derive directly from these proceedings and are closely linked to them, or that otherwise come under the scope of Article 25(1) of the EU Insolvency Regulation.
For further information on this topic please contact Frans van Koppen at NautaDutilh's Amsterdam office by telephone (+31 20 71 71 000), fax (+31 20 71 71 111) or email ([email protected]). Alternatively, please contact Oete Vonk at NautaDutilh's London office by telephone (+44 20 7786 9100), fax (+44 20 7588 6888) or email ([email protected]).
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(1) Supreme Court March 18 2011, NJ 2011, 238, www.rechtspraak.nl, LJN BP1404.