Debt Collection in the Netherlands
How Do You Collect a Debt in the Netherlands?
Collecting a debt from a company in the Netherlands does not have to be a difficult task. Our law firm in the Netherlands can pursue your Dutch debtors quickly and efficiently, ensuring you have maximum return at minimal cost. Our English, German and Dutch speaking team is highly experience in the debt recovery process.
Here we will go through a few pointers that will assist you in understanding the debt recovery process and how we can help you recover your outstanding debts. We will go through this in three parts:
- The Process of Debt Collection in the Netherlands
- Collecting Your Debt in the Netherlands Through the Judicial Process
- How We Can Help You Collect Your Debt in the Netherlands
I. The Process of Debt Collection in the Netherlands
The process of debt collection in the Netherlands goes through two phases: The extra-judicial phase and the judicial phase. The main difference between the two phases is that latter involves the courts which may result in rising costs.
I.I Extra-Judicial Process in the Netherlands
This generally involves issuing written demands and follow up correspondences through phone, fax and emails with the debtor. This phase attempts to pressure the debtor into yielding, and making the payment(s) required to satisfy your claim. As this process does not involve the courts, it is the cheapest and the quickest way to resolve issues of debt, and the majority of debt recovery claims in the Netherlands are resolved during this stage.
I.II Judicial Process in the Netherlands
Should the debtor not be pressured into making payment with letters of demand and follow up correspondences, it will become necessary to pursue legal proceedings. This may involve bankruptcy proceedings or general civil proceedings in the Dutch courts. It is preferable to resolve the issue during the extra-judicial stage as litigation can be unpredictable and costly. Even if the court rules in your favour in the first instance, there is always the possibility of an appeal to the Dutch Supreme Court.
II. Collecting Your Debt in the Netherlands Through the Judicial Process
If none of the extra-judicial processes have the desired effect, then it may be necessary to go through the courts.
In this section we will discuss the following:
- Filing a petition for bankruptcy
- Summary proceedings
- Ordinary proceedings
- European Order for Payment
- Property Subject to Enforcement and Arrest
- General Principles for Conservatory Arrests
- Lifting the Arrest
- Wrongful Arrest
- Proceedings After the Arrest
- Arrest Under a Third Party: Garnishment
- Dutch Title in Garnishment
II.I Filing a petition for bankruptcy
A petition for bankruptcy is often used in the Netherlands in order to compel uncooperative debtors to pay their creditors. The process is quick and typically takes around 3 weeks, and the court will determine whether the debtor should be declared bankrupt. The speed and the potential consequences of such a proceedings exerts a great deal of pressure on the debtor, who may be more compelled to pay before the courts declares them bankrupt. This may be filed by any creditor regardless of whether they have obtained a title of enforcement.
For the court to consider the petition, it will be necessary for a creditor to show that:
- The debtor has reached the position of insolvency;
- The creditor filing the petition has a valid claim; and
- The creditor can show that more than one creditor is still awaiting payment.
The final point abut being able to show more than one creditor is a matter of standard practice.
II.II Summary Proceedings
A summary proceeding can be considered if the debtor has no reasonable grounds for non-payment of their debt (i.e. a straight forward debt collection). This involves bringing in an action for provisional relief, where the defendant is summoned by a writ. This is a relatively simple process; the District Court hears submissions from the plaintiff and the defendant and then executes a judgment.
Two important aspects to note with a summary proceedings is that:
- A summary judgment can be appealed through the higher courts
- The judgment will become inoperative if it is successfully appealed
II.III Ordinary Proceedings
Where the debt collection is not straight forward, it may be necessary to rely on arguments based on the merits of the case. This will be argued in the courts, and may result in the courts ordering the debtor to pay their debts. These proceedings generally take more than a year to conclude as the court will generally grant stays for the preparation and submission of arguments from each of the parties, and the possibility of appeals can further complicate and extend the proceedings.
II.IV European Order for Payment
If the creditor and debtor are in any European Union Member States (other than Denmark), the creditor can seek payment through the European Order for Payment. This is only useful for undisputed claims; if this becomes disputed, then process will end and you will have to go through ordinary civil proceedings to continue. The advantage of this process is that it is generally completed within a 30 day period; the debtor has 30 days to state whether they object to the claim, and if there is no objection, the creditor may ask the court to make a payment order. This order is a valid and enforceable judgment.
II.V Conservatory Arrests
Before we summarise conservatory arrests in the Netherlands, it is important to know that creditors often need title to enforcement in order to take action against debtors, and this can be obtained through a judgment by a Dutch court. However, Dutch creditors need to be aware that a foreign judgment does not automatically entitle you to enforcement. In order for a foreign judgment to be enforceable, a Dutch court must grant leave in accordance with the principles of private international law instruments that are applicable to the Netherlands.
(a) Property Subject to Enforcement and Arrest
A creditor who is not entitled to execution for lack of title to enforcement may still attach the assets of their debtor in anticipation of a judgment, however if the creditor wants the property attached liquidated then he must have a title to enforcement. Conservatory arrests rely on the notion that moveable and non-moveable property can be seized in order to enforce a judgment or attachment – and this also applies to claims that the debtor has against third parties.
(b) General Principles for Conservatory Arrests
In order to authorise conservatory arrest, leave of the President of the District Court is needed and this can be obtained through a petition filed by a solicitor. The creditor must be able to show that their claim is prima facie valid. A minimum requirement is to show that the creditor has a claim against the debtor, but does not have to prove that they have a strong argument in their favour. The creditor will generally not be required to provide security beforehand regarding costs, damages and interest that might be incurred through the attachment – however if the creditor is a foreign entity, it is at the President’s discretion as to whether security is needed.
(c) Lifting the Arrest
It is possible and relatively easy to lift the arrest in summary proceedings. Some situations where the President will lift the arrest include:
- Where the debtor provides suitable security (such as a guarantee from a world class bank)
- Where the President, having heard the parties’ submissions, finds the claim to be invalid or the arrest unnecessary
Such scenarios will involve the President to consider whether there is actually a claim or whether the party whose assets have been arrested is actually the debtor. It is important to note that these are just provisional judgments and are subject to appeal. However, an order lifting the arrest has an immediate effect, and appealing this order, which typically takes a few months, would, in most cases, not be useful.
(d) Wrongful Arrest
A wrongful arrest will often by a creditor will leave the creditor liable for damages and costs. However, the party who has had assets wrongfully arrested must make reasonable efforts to mitigate their loss.
(e) Proceedings After Arrest
It is important to note that an arrest lapses ex lege unless a writ is issued and served within a term set by the President of the Court (typically 14 days) with regards to the claim secured by the arrest. This means that the debtor may dispose over the goods arrested if no writ is served within the term set by the President. A conservatory arrest would typically be followed by (generally) ordinary proceedings – which may take more than a year before judgment. During this time, property subject to the conservatory arrest may not be sold by the creditor nor the debtor.
(f) Arrest Under a Third Party: Garnishment
Dutch law does not allow the creditor to act on the behalf of the debtor in collecting what is due to the debtor by third parties; however, the creditor may reach claims of his debtor against third parties through garnishment, including chattels which the third party hold for the debtor.
The three parties in garnishment are:
- The garnishor (the creditor)
- The debtor
- The garnishee (third party)
When garnishment is levied, the garnishee must pay any money to the garnishor, rather than the debtor. Any payment the garnishee makes to the debtor will not discharge the garnishee’s duty to pay the creditor – even where the amount the garnishee owed the debtor exceeds the amount for which the garnishment was levied. Also any future claims of the debtor are not subject to the garnishment, unless they are directly originating from obligations that already exist at the time of garnishment. Thus for example, the garnishment of a bank account only includes the funds available at the time of the garnishment and what is transferred to the account at a later date.
(g) Dutch Title in Garnishment
Garnishment is based on Dutch title only if the garnishee (i.e. the third party) is domiciled or resides in the Netherlands. Thus, foreign corporations with subsidiary in the Netherlands may become involved if the garnishment is connected with the affairs of their subsidiary in the Netherlands. However, where the garnishee is not in the Netherlands, but there is some connection with the Netherlands (i.e. a parent domiciled in the Netherlands), then garnishment may be levied in the Netherlands even though the debt must be paid abroad. However, this is not entirely clear and is thought to be only justifiable only where is no doubt that the local court where the debt is attached will recognise the garnishment levied in the Netherlands.
III. How We Can Help You to Collect Your Debt in the Netherlands
As a general rule, within two working days of receiving your instructions, and after establishing a working relationship, we will make an initial contact with the debtor and send confirmation of this to you.
To take the first step, we need to have copies of a few documents, namely:
- Outstanding invoices;
- The contract (if applicable);
- Your general terms and conditions (if applicable); and
- Reminders and demand letters already sent to the debtor
This informs us of exactly what is owed to you.
Typically we will begin by sending the debtor a letter demanding that payment be made within eight days.
The amount demanded in this letter may include:
- The principal sum that is being sought
- The payment of statutory interests
- Extra judicial costs; and/or
- Contractual interest and cost (if applicable)
IF demands are not met:
If the debtor does not pay after typically 8 days, then we may advise you based on the following:
For undisputed claims – Collection by means of a summary proceeding. If this is successful, then it is likely that you will get an executable judgment within 6 weeks. Another option is also to threaten with a request for insolvency or bankruptcy, which puts added pressure on the debtor to pay their debts. Filing for insolvency is the cheapest and fastest way to recover a debt – however you must have a second creditor for this. We can also help you search for a second creditor.
For disputed claims – In the case that the claim is disputed or the extrajudicial actions fail to result in payment, we will, with your consent, take legal action and initiate proceedings. This may take up to two years, and can be complicated by counter claims and appeals making the whole process longer and generally more expensive; however, we will endeavour to keep the necessary costs charged to you at a minimum.
Dutch Civil Proceedings
It is important to be aware of the fact that Dutch civil proceedings operate primarily in Dutch, however documents and witness testimonies may be in English at the court’s discretion. Our team here will endeavour to convey any important information to you in English to ensure that you are fully aware of the situation. It is also important to note that if a judge rules in your favour in the first instance but then an appeal is made, your judgment is no longer enforceable unless you have requested that the first instance judgment is enforceable notwithstanding an appeal.
If you require debt collection in the Netherlands, contact us!
Here at Blenheim we have an expert team of debt collecting attorneys in the Netherlands. We will gladly provide you with more information and assist you in any way possible.
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