Interesting development in Dutch asset recovery land

Introduction

In summary proceedings the Court of Appeal of Amsterdam ruled that the prejudgment attachments that were made against Samruk, a 100% daughter of the State of Kazakhstan, can remain in place, even though the - underlying - Swedish arbitral award only contains an order against the State of Kazakhstan. Samruk was not even a party to the arbitration. Reasoning? The Court of Appeal deems it plausible that Samruk abused her authority by invoking her legal independence vis-à-vis the creditors of the State of Kazakhstan. This ruling not only gives hope to creditors of foreign states, but also more generally to creditors of parties that use a web of entities to secure their assets for redress.

Summary of the decision of the Court of Appeal

According to the Court it is clear that the attachments made are in principle unlawful, because it is not at the expense of the judgment debtor (Kazakhstan) but at the expense of a third party (Samruk) and under Dutch (procedural) law there is no authority to do so. On the basis of the main rule the attachments should therefore be lifted. In these proceedings it is therefore about whether there are sufficient grounds to deviate from this main rule. Dutch law has a number of situations in which one can recover goods that do not belong to the debtor. Examples of such a special right of recourse are the substantive law of the tax authorities, maritime law claims from employment contracts or assistance, which may be recovered from the vessel regardless of whether the owner of the vessel is the debtor and costs for the preservation of an asset which may be recovered from that asset even if the owner of the asset is not the debtor.

With its judgment, the Court of Appeal adds to this the situation in which the third party makes an abuse of rights by invoking his legal independence vis-à-vis the attachment creditor. Whether this is the case, the Court of Appeal then assesses this with the application of Kazakh law, because the judgment of the preliminary relief judge on the applicable law has not been appealed. The preliminary relief judge ruled that Kazakh law applies (as the law of the country in which Samruk was incorporated) to the question whether the circumstance that Samruk is a separate legal entity should lead to the lifting of the attachment. I hesitate whether this is correct. Whether Samruk has legal personality is indeed governed by Kazakh law. However, I do not see why the criteria of abuse of law should also be governed by Kazakh law; in my opinion the lex fori applies to this. In this respect it is important to note that the situation at hand does not concern (reverse) veil piercing to which according to Dutch PIL (presumably) the incorporation law applies, but the existence or non-existence of a right of recourse on assets located in the Netherlands at the expense of a third party.

The application of Kazakh law to the present case leads to the conclusion that Samruk lacks factual-economic independence in her relation to Kazakhstan, in the sense that Samruk cannot rely on her legal independence vis-à-vis Kazakhstan to pursue her own policy, which deviates from that of (the politicians in) Kazakhstan. The court of appeal adds to this that Samruk (partly) serves as a means to keep substantial assets of Kazakhstan out of the reach of creditors. After all, Samruk holds shares in a number of important Kazakh state participations which, due to Samruk's legal independence, are in principle not subject to recourse by Kazakhstan's creditors, while Kazakhstan exercises the final control over Samruk's assets and the spending thereof. With this the Court considers it plausible that Samruk abuses her in principle existing authority to invoke her legal independence vis-à-vis the attachment creditor in this case. As there are no other grounds for lifting the attachments the Samruk’s attached assets may be executed after obtaining an exequatur of the Swedish arbitral award.

Pending before the Supreme Court

Currently the case is pending before the Supreme Court. A few weeks ago the Advocate General rendered its Advisory Opinion in which he advises the Supreme Court to confirm this decision of the Court of Appeal.**

Also noteworthy is that the Advocate General advises the Supreme Court to clarify its case law regarding immunity from execution. Although not relevant to the decision on the appeal in cassation (Samruk and Kazakhstan cannot be identified, so the question of whether there is immunity from execution does not arise here), it is relevant in the light of the development of the law. In three judgments in 2016 and 2017 the Supreme Court decided that – to keep the attachments in place - the attaching party must prove that the attached assets of the foreign State are specifically ‘in use or intended for use by the State for other than government non-commercial purposes’. Those decisions have been highly criticized in legal doctrine, as it makes it virtually impossible to attach assets of a foreign State. Since then, it has been expressed in the lower courts that decisive is the direct destination of the assets and not the indirect destination. The Advocate General would like this to be confirmed by the Supreme Court as far as other properties than those referred to in art. 21 UN Jurisdictional Immunities Convention (which has not been ratified by the Netherlands) are concerned.

Let’s hope and see.

Questions on asset tracing and recovery in the Netherlands or internationally? Or on immunity from execution? Contact Cathalijne van der Plas.

Lees hier ook de noot van Cathalijne van der Plas in de JOR op de betreffende uitspraak van het hof.

* Amsterdam Court of Appeal, 7 May 2019, ECLI:NL:GHAMS:2019:1566, JOR 2019/242.

**  Advisory Opinion of Advocate General P. Vlas, 26 June 2020, ECLI:NL:PHR:2020:650.