If a debtor owns assets in the Netherlands a creditor may safeguard recovery of its claim by obtaining a prejudgement attachment on the debtor's property. The prejudgement attachment can serve as a simple, fast, inexpensive and effective solution for the creditor to secure his claim. This is an overview of the possibilities provided by Dutch law.
Download the article (pdf).
What is a prejudgement attachment?
Dutch courts may grant a creditor a prejudgement attachment which attachment freezes the debtor's assets until a final, binding decision is obtained regarding the creditor's claim. The prejudgement attachment serves two purposes: (1) preventing the debtor from frustrating recovery by the creditor; and (2) pressuring the debtor to enter into a settlement agreement.
What can be the subject of prejudgement attachment?
Anything that belongs to the debtor could be subject of a prejudgement attachment, including (1) money held in a bank account, (2) assets in the possession of the debtor; (3) shares in a company; (4) real estate; (5) vessels; (6) airplanes; (7) assets held by a third party (and owned by the debtor); and (8) any property alleged to belong to the creditor.
The prejudgment attachment only covers the (alleged) claim of the creditor and an additional amount (10% over amount in excess of EUR 5 million) for interest and costs. The maximum amount covered by the attachment is determined in the court's preliminary judgment.
When can a prejudgement attachment be obtained?
The creditor can submit his petition for the prejudgement attachment even before initiation of the main proceeding on the merits of his claim. However, if the court decides to grant permission to carry out the requested attachment, the creditor has a statutory obligation to initiate the proceeding against the debtor in a relatively short period determined in the court's order. (The main proceeding need not be a proceeding in Netherlands but it can take place before a court abroad or arbitration as well.) In practice, this period could be between two weeks and three months but definitely not less than eight days. The period may be extended by the court upon the creditor's well-motivated request.
In case the creditor fails to fulfil his obligation within the set time period, the attachment lapses automatically and the creditor could be held liable for the damages suffered by the debtor due to the attachment.
How can the prejudgement attachment be obtained?
In order to obtain permission from the preliminary relief judge, the creditor must submit a petition that includes: (1) the details of the claimant; (2) the amount of the claim; (3) the grounds and evidence for the claim; (4) the asset to be attached; (5) the reasons why the debtor has not paid and will not pay; and (6) the proportionality of the requested attachment. For these preliminary relief proceedings, legal representation is mandatory.)
The court will grant the prejudgement attachment within a few days, in principle without substantive review and solely on the basis of the creditor's petition without hearing the claimant or the defendant ("ex parte"). In certain cases, however, the court may wish to hear the parties before deciding. The court may also oblige the creditor to provide the debtor with security (usually in the form of bank guarantee) that could cover the debtor's counter claim in the case of an unlawful or wrongful attachment.
The advantages of the prejudgement attachment
The prejudgement attachment is almost immediately granted without substantive review by the court. The prejudgement attachment remains in force until the proceeding on the merits of the creditor's claim ends with a final and binding decision. If the creditor's claim is awarded, the prejudgment attachment becomes executable and the creditor may lay claim to the attached assets of the debtor. Hence, prejudgement attachment can serve as an effective, fast, relatively simple and inexpensive method for the creditors to secure the payment of their claims.
The disadvantages of the prejudgement attachment
If the claim for which the attachment was granted is rejected in the main proceeding, the prejudgement attachment lapses automatically and the creditor can be held fully liable for all the damages that the debtor had to suffer as a result of the attachment.
Moreover, since the attachment lapses automatically if the debtor becomes insolvent as well, the prejudgment attachment is only effective in the cases of debtors who are able to pay but refuse to do so, or may attempt to hide their assets.
The relationship between the prejudgement attachment and the European Account Preservation Order ("EAPO")
On the surface the prejudgement attachment and the EAPO share a number of similarities as both of them aim to safeguard recovery of the creditors' claims by attaching the debtors' assets even before any proceeding on the merits could begin. However, the EAPO can be demanded only in relation to pecuniary claims in civil and commercial matters in cross-border cases and the EAPO can only lead to the attachment of the debtor's bank-accounts. Moreover, according the relevant EU regulation, the EAPO is available to the creditor only as an alternative to preservation measures under national law.
For more information about the liability of managing directors towards creditors, please contact Bas van Zelst or Jasper Leedekerken.