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The Netherlands Antilles and Aruba

Legislative Issues on Netting, Bankruptcy and Collateral of Securities in the Netherlands Antilles and Aruba. . Topics. General information on Netherlands Antilles and Aruba and their law systemsClose outSet-offFraudulent PreferenceConflict of lawCollateral issues and collateralisation of securities.

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The Netherlands Antilles and Aruba

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    1. The Netherlands Antilles and Aruba Focco W. Lunsingh Scheurleer attorney-at-law Conference on Netting of OTC Financial Contracts in Latin America and the Caribbean 10 November 2000 Final Version

    2. Legislative Issues on Netting, Bankruptcy and Collateral of Securities in the Netherlands Antilles and Aruba

    3. Topics General information on Netherlands Antilles and Aruba and their law systems Close out Set-off Fraudulent Preference Conflict of law Collateral issues and collateralisation of securities

    4. Netherlands Antilles and Aruba Aruba: separate jurisdiction Netherlands Antilles: group of five islands in the Caribbean Kingdom of the Netherlands: the Netherlands, the Netherlands Antilles and Aruba

    5. Law System Civil law jurisdiction Most important codes: Civil code Commercial Code Bankruptcy Code Effectively, 1 january 2001, there will be a change of the Civil Code. The New Civil Code will be implemented. That New Code is very similar to the Netherlands Civil Code that was implemented on 1 January 1992. Effectively, 1 january 2001, there will be a change of the Civil Code. The New Civil Code will be implemented. That New Code is very similar to the Netherlands Civil Code that was implemented on 1 January 1992.

    6. Courts Netherlands Antilles and Aruba: own courts Netherlands Antilles and Aruba share one Appellate Court, Curaçao Subject to jurisdiction of the Supreme Court of the Netherlands

    7. Most Important Legal Entities the company limited by shares (NV: naamloze vennootschap) For Aruba apart from N.V.: A.V.V. (Aruba exempt company)

    8. Close Out Bankruptcy code: close-out netting Suspension of Payments: same applies Termination clauses are recognised Contractual provisions not necessary Section 33 BA: the CP of the bankrupt can require the insolvency administrator to state whether he will perform. If the I.A. does not do so within a term of 8 days: the contract is terminated by operation of law. The creditor may claim damages. Section 34 BA: in spot transaction on a future exchange market and the delivery is due after the adjudication of the bankruptcy, the contract is automatically terminated upon the adjudication of the bankruptcy. The creditor may claim damages. Contractual provisions are necessary if one contract is for the delivery of goods and the other contract is for the payment of money. In that case a netting clause stipulating that the oligations to deliver goods is Section 33 BA: the CP of the bankrupt can require the insolvency administrator to state whether he will perform. If the I.A. does not do so within a term of 8 days: the contract is terminated by operation of law. The creditor may claim damages. Section 34 BA: in spot transaction on a future exchange market and the delivery is due after the adjudication of the bankruptcy, the contract is automatically terminated upon the adjudication of the bankruptcy. The creditor may claim damages. Contractual provisions are necessary if one contract is for the delivery of goods and the other contract is for the payment of money. In that case a netting clause stipulating that the oligations to deliver goods is

    9. Insolvency set-off Insolvency set-off is permitted. Requirements: Mutuality Delivery of goods and payment of money can not be set-off Pre-bankruptcy claims and debts Pre-bankruptcy claims and debts: Debt and claim have arisen prior to the adjudication of the bankruptcy; or Debt and claim arise from (trans)actions between the CP and the Bankrupt entered into prior to the adjudication of the bankruptcy Contractual provisions are necessary if one contract is for the delivery of goods and the other contract is for the payment of money. Pre-bankruptcy claims and debts: Debt and claim have arisen prior to the adjudication of the bankruptcy; or Debt and claim arise from (trans)actions between the CP and the Bankrupt entered into prior to the adjudication of the bankruptcy Contractual provisions are necessary if one contract is for the delivery of goods and the other contract is for the payment of money.

    10. Fraudulent preference Close-out netting and insolvency set-off allowed and not fraudulent, exceptions: Assigned debts/claims and assignee not acting in good faith Claims or debts assigned after the adjudication of the bankruptcy Not acting in good faith means that the assignee was aware that the bankrupt was in such a state that the bankruptcy was predictable. Not acting in good faith means that the assignee was aware that the bankrupt was in such a state that the bankruptcy was predictable.

    11. Conflict of law Choice of law recognised Choice of law of state which does not accept set-off, but no provision in contract excluding set-off: The lex concursus will apply: set-off is permitted Choice of law of state which does not accept set-off, but no provision in contract excluding set-off: The lex concursus will apply: set-off is permitted

    12. Multibranch Netting Issues Treatment of local entities with global operations and foreign branches or offices Treatment of local branches and offices of foreign entities Bankruptcy adjudicated by the Netherlands Antilles and Aruban courts for onshore entities do not have jurisdiction to assets of these entities outside the Netherlands Antilles and Aruba. But if these other jurisdictions do not prohibit or limit set-off, the set-off abroad will be recognised by the Netherlands Antilles/Aruban Insolvency Administrator. As for foreign based entities, in the absence of an applicable treaty, bankruptcy adjudications rendered by foreign courts (other than Netherlands, Netherlands Antilles and Aruba) will have no effect to assets of these offshore entities. If therefore a creditor would successfully set-off its debts against claims, where that would not be allowed if the set-off would be done against the head-office of the foreign entity because the relevant foreign bankruptcy acts do not allow such set-off, the creditor may be exposed to a recovery action in the jurisdiction of the head office. Bankruptcy adjudicated by the Netherlands Antilles and Aruban courts for onshore entities do not have jurisdiction to assets of these entities outside the Netherlands Antilles and Aruba. But if these other jurisdictions do not prohibit or limit set-off, the set-off abroad will be recognised by the Netherlands Antilles/Aruban Insolvency Administrator. As for foreign based entities, in the absence of an applicable treaty, bankruptcy adjudications rendered by foreign courts (other than Netherlands, Netherlands Antilles and Aruba) will have no effect to assets of these offshore entities. If therefore a creditor would successfully set-off its debts against claims, where that would not be allowed if the set-off would be done against the head-office of the foreign entity because the relevant foreign bankruptcy acts do not allow such set-off, the creditor may be exposed to a recovery action in the jurisdiction of the head office.

    13. Collateral Issues Tangible assets: lex rei sitae Claims: the law that governs the contract between the assignor/pledgor and the assignee/pledgee Securities: depends on nature of the security

    14. Collateralisation of Securities bearer securities: lex rei sitae non-bearer securities, registered in the name of the investor: laws of the state in which the issuer has its corporate seat securities registered in a book entry system: position unclear

    15. Collateralisation of Securities The law of the first intermediary is advocated in the Netherlands Antilles Promes Trenité Van Doorne is advising law makers in the Netherlands Antilles

    16. Promes Trenité Van Doorne Focco W. Lunsingh Scheurleer Julianaplein 22 P.O. Box 504 Curaçao, Netherlands Antilles Telephone: + 599 9 461 3400 ext. 160 Telefax: + 599 9 461 2023 lunsinghscheurleer@promes-trenite.com

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