Even if a creditor has not yet obtained a right to enforcement, that creditor may attach any assets of his debtor under a pre-judgment attachment or conservatory arrest. The attached assets – which may be any transferable asset, such as tangibles, real estate, shares, as well as any claim of the debtor on a third party – act as security for the creditor’s claim. The purpose of a pre-judgment attachment is to prevent the debtor from frustrating recovery by his creditor (by hiding, moving or alienating assets). It goes without saying that an attachment puts serious pressure on the debtor. The debtor will not be allowed to dispose of any attached asset, even if this would be in the usual course of the debtor’s business. If the creditor reasonably fears that the debtor – despite the attachment – will alienate the attached assets, the creditor can also request sequestration of the goods.
A third party attachment is an attachment by a creditor on a claim of the debtor’s. With a third party attachment, the creditor attached all amounts and goods the third party owes to the debtor. The third party must declare within four weeks of the attachment what it owes to the debtor. Most third party attachments are levied on bank accounts held by banks (as third parties) and the amount attached is equal to the total balance in the bank account as per the moment of the attachment (irrespective of the amount of the creditor’s claim).
All assets of the debtor are subject to attachment: if an asset is transferable, the asset can also be attached. Specific procedural rules apply to many specific attachments, such as on assets in movable goods or trade stock, on shares in a company, on real estate, ships and aircraft.
In order to levy a pre-judgment attachment, the creditor must file an application with the temporary relief judge of the district court. A pre-judgment attachment may only be levied with the leave of the court. A Dutch attorney must file the application where the debtor or one of the third parties is domiciled or where the assets are located, and indicate the grounds for the creditor’s claim, as well as identify the assets which the creditor wishes to attach. If the claim is monetary, the creditor must estimate its claim. For specific types of attachment, e.g., of registered shares, the creditor must prove “fear of embezzlement”. The debtor is usually not heard in court at this stage in order to prevent the debtor from moving assets elsewhere. If the temporary relief judge, on the basis of the application, is of the opinion that the claim is prima facie valid and existing, leave is granted to attach all or some of the debtor’s assets. After the judge has given leave to attach, the creditor instructs a court bailiff to execute the attachments. The bailiff then files an affidavit of having attached the assets indicated. As most leaves to attach are given ex parte, a pre-judgment attachment or conservatory arrest almost always comes as an unpleasant surprise for the debtor.
Unless main proceedings on the merits are already pending at the time of the court’s leave to attach, the approval for the pre-judgment attachment is given under the condition that the main proceedings (the proceedings relating to the claim for which the attachment was levied) must be initiated within a certain time period (not less than 8 days, but usually 2 to 6 weeks). Apart from one exemption – that of the saise foraine – an attachment does not create jurisdiction of the Dutch courts in the main proceedings. The competent court in the main proceedings should be established in accordance with the applicable rules and could therefore be a non-Dutch court, or an arbitral tribunal. If the main proceedings are not initiated within the timeframe required, the attachment lapses. Preliminary relief proceedings may qualify as main proceedings, mediation and expert determination will not. During the course of the main proceedings, the attached assets remain frozen; the debtor may not sell them, and the creditor has to respect the attachment. Ignoring the attachment is a criminal offence. Though a preliminary relief judge has the freedom to require that the creditor provide security for costs and damages that may be caused by the attachment, the judge rarely exercises this authority.
As the (ex parte) attachment may be unexpected, and its consequences may be severe, the Dutch Code of Civil Proceedings provides that the debtor may initiate preliminary relief proceedings in order to have the attachment lifted on short notice. The preliminary relief judge can lift an attachment when:
• the claim for which the attachment was levied is prima facie without merit
• the attachment was levied without taking formal requirements into account
• the attachment is considered to be unnecessary or disproportionate
• the debtor has provided sufficient alternative security (e.g., a bank guarantee, a right of pledge, mortgage, or otherwise – whether alternative security is suitable is to be determined by the judge) for the underlying claim.
An attachment that was levied for a non-existing claim is wrongful; the creditor is then liable for damages and costs. The party that levied the attachment is then strictly liable for all damages suffered by the attached party. The fact that the preliminary relief judge granted the pre-judgment attachment is not a valid defence.
AMS, based in Amsterdam, the Netherlands, is conveniently located near Schiphol Airport (10 minutes by car or train). Our team of litigation lawyers provides legal services in the Netherlands for clients around the world and has in-depth advisory and litigating experience acting on behalf of Dutch and international corporates and private individuals. We have successfully obtained leave to levy or lift many pre-judgment attachments and conservatory arrests for clients over the years.