Prejudgment attachment plays a big role in Dutch debt collection practice. After obtaining leave, a prejudgment attachment can be levied on assets of the other party. The other party then loses its unfettered control over these assets. If the other party wishes to regain this control, a joint solution with the party levying the attachment must then be reached after which this party will then lift this attachment. This is why in practice prejudgment attachment often leads to out of court settlements. If two parties fail to come to an out of court solution, the prejudgment attachment stays in place until a final judgment has been given in the proceedings. After this, it can be converted into an executory attachment in favour of the attaching party. The attaching party can sell the attached assets or convert such into cash by other means and so collect his claim. The prejudgment attachment has then made sure that the financial position of the debtor as regards the attached assets has not changed during the proceedings.
This system operates very successfully in the Netherlands. But what happens if it concerns a debtor with assets in Germany?
Previously we explained that with the “Arrestverfahren” German law has, in theory, a similar instrument to prejudgement attachment. In practice however, the German courts virtually never grant leave to levy prejudgment attachment. In German case law, the threshold of the urgent interest on the part of the applicant (the creditor) is so high that such an application is hardly ever granted. In the event of pure financial interest, even if the other party threatens to go bankrupt, applications for leave are in principle not granted. But this does not mean that prejudgment attachment cannot be levied in Germany. Thanks to new provisions in the Brussels I Regulation, there is now a small backdoor Dutch creditors could make use of. The following situations must be distinguished here:
Situation 1: A German debtor with assets in the Netherlands
The first situation is unchanged as regards levying prejudgment attachment. The old and new Brussels I Regulation declare the Dutch court competent to grant leave to levy prejudgment attachment in the Netherlands. The nationality of the debtor is irrelevant here. The mere fact that the assets are located in the Netherlands ensures that the Dutch court has jurisdiction and that therefore Dutch civil procedural law applies. This provision is self-evident and will not really surprise anybody.
It is less well known that levying prejudgment attachment in the Netherlands also creates authority for the Dutch Court to hear the main action. This does not apply if the parties have declared a particular court to have exclusive jurisdiction, by means of a clause in an agreement for example. It no such choice of forum has been agreed, the main action, after levying prejudgment attachment in the Netherlands, can also be brought in the Netherlands. In international issues, levying prejudgment attachment can therefore be a tool to bring the main action to the Netherlands.
Situation 2: A Debtor with assets in Germany
Where the new Brussels I Regulation did not change situation 1, the introduction of the new Brussels I Regulation led to an important change for situation 2.
The new Brussels I Regulation contains express provisions to be able to execute rulings in interlocutory proceedings also across borders. This also applies to the granting of leave to levy prejudgment attachment. If in accordance with the Brussels I Regulation or a choice of forum, a Dutch court in principle has jurisdiction to hear the main action, then this Dutch court in principle also has jurisdiction to hear an application to levy prejudgment attachment. This also applies if (a part of) the assets of the debtor are located abroad.
A Dutch court in interlocutory proceedings can therefore grant leave to levy prejudgment attachment on assets located in Germany. As, on paper, German execution law offers the option of prejudgment attachment in the form of the “Arrestverfahren”, a German bailiff can execute a Dutch ruling by using his national execution law. Condition for enforcing such a ruling is that the debtor is aware of the application. In countries where the debtor is not aware of the proceedings by means of the service of an application/summons, this must be corrected before the cross-border enforcement takes place by means of the service of the decision on the debtor. This of course means that in practice the debtor has time to let assets disappear before prejudgment attachment can be levied. The creditor is therefore advised to have the service of a judgment in which the leave to levying prejudgment attachment has been granted take place very shortly before levying prejudgment attachment.
In summary, as regards situation 2, the new Brussels I Regulation now gives the option of levying prejudgment attachment in Germany as well. Initially it sounds remarkable that prejudgment attachment can be levied in Germany by means of a ruling of the Dutch court in interlocutory proceedings. It becomes far less remarkable after a proper recapitulation of the conditions. In situation 2, a court in interlocutory proceedings in the Netherlands can only grant leave if a Dutch court also has jurisdiction to hear the main action. In such cases, the German counterparty could also apply to the Dutch court in interlocutory proceedings under the old Brussels I Regulation for leave to levy prejudgment attachment on the assets of the party in the Netherlands. Under the old Brussels I Regulation, the party in the Netherlands could not do this as the German court in interlocutory proceedings rejected such applications.
In these cases the new Brussels I Regulation therefore creates a balance between the parties which was previously lacking.
In addition, enforcement orders have for a long time been executed cross-border thanks to European legislation. Why would this not also apply to judgments in interlocutory proceedings?
Although the new Brussels I Regulation has been offering the option to levy cross border prejudgment attachment for over a year now, practice must show to what extent this will actually be used.
Dutch debtors with a counterparty holding assets in Germany (as well) are certainly advised to consider this possibility when reviewing their procedural options.
One thing is certain: levying prejudgment attachment on assets in German is (in theory) possible thanks to the new provisions in the Brussels I regulation.