Pre-judgment arrest in The Netherlands
Even if a creditor that has no title to enforcement yet, he may attach any assets of his debtor under a so-called prejudgment seizure or conservatory arrest. The attached assets – which may be any transferable asset, such as tangibles, real estate, shares, but also any claim of the debtor on a third party – act as security for the creditor’s claim. The purpose of a prejudgment attachment is preventing the debtor from frustrating recovery by his creditor (by hiding, moving or alienating assets). It goes without saying that an attachment will put 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 has reasonable fear that the debtor – despite the attachment – will alienate the attached assets, he can also request sequestration of the goods.
The most often made attachment is the attachment on a claim, a so-called third party attachment. With a third party-attachment, the creditor seizes all amounts and goods the third party owes to the debtor. The third-party must declare within four weeks of the attachment what he owes to the debtor. Most third-party a attachments are effected under banks (as third parties): the amount attached is equal to the overall (debit) funds 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 that of assets in movable goods or trade stock, attachments of shares in a company, attachments of real estate, ships and aircrafts.
Dutch lawyer filing a petition
In order to effect a prejudgment seizure, the debtor must file a petition at the president of the district court (the preliminary relief judge). A prejudgment attachment can only be made with this permission. A Dutch attorney with the court must file the petition where the debtor or (one of) the third parties is domiciled or where the assets are located, and should (among other things) indicate the grounds for the creditor’s claim, and should also identify the assets on which the creditor wishes to effect an attachment. If the claim is monetary, the creditor must estimate his claim. For specific kinds of attachment, of registered shares, the creditor must prove “fear of embezzlement”. The debtor is, usually, not heard in this stage in order to avoid that the debtor moves his assets away. If the president is, on the basis of the petition, of the opinion that the claim is a prima facie valid and existing, leave is granted to effect all or some of the attachments requested. After the judge has given leave to effect the attachment, the creditor instructs a court bailiff to do so. The bailiff’s makes an official report of the attachment. As most leaves are given ex parte, a conservatory arrest shall come as an unpleasant surprise.
Main proceedings must be instituted
Unless main proceedings are already pending at the time of the court leave, the approval for the prejudgment attachment is given under the condition that the main proceedings (the proceedings relating to the claim for which the attachment was effected) shall be instituted 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 to 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 instituted within the time frame 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. The president has the freedom to require that the creditor has to provide security for costs and damages that may be caused by the attachment, but rarely uses this authority.
Dutch lawyers lifting the attachment
As the (ex parte) attachment may be unexpected, and its consequences may be severe, Dutch Law on Civil Proceedings provides for the possibility that the debtor starts preliminary relief proceedings in order to have the attachment lifted at short notice. The preliminary relief judge can lift the attachments. The attachment will be lifted:
- if the claim for which the attachment was made is a prima facie without merit;
- if the attachment was made without taking formal requirements into account;
- if the attachment is considered to be unnecessary or disproportionate account);
- if the debtor has provided sufficient alternative security (e.g. a bank guarantee, a right of pledge, mortgage, or otherwise – if alternative security is suitable is to be determined by the judge) for the underlying claim.
Attachment may cause liability
An attachment that was effected for a non-existing claim is wrongful; the creditor is then liable for damages and costs. The party that effected 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 defense.
Dutch lawyers in Amsterdam
AMS Attorneys is a law firm in Amsterdam, The Netherlands. The litigation attorneys with AMS have gained a broad experience in advising and litigating for (international) companies and individuals, and have effected many prejudgment attachments for their clients over the years. If you have any question on prejudgment attachments, please feel free to contact us.