On 17 December 2020, Dutch legislation came into effect which could impact a creditor's ability to exercise remedies in the Netherlands. It is called the "Temporary Act Covid-19 SZW and JenV" (Tijdelijke Wet Covid -19, SZW en JenV), and it aims to prevent unnecessary bankruptcies as a consequence of the COVID-19 pandemic. If a Dutch debtor, due to the economic consequences of the COVID-19, is in default, and confronted with a creditor's enforcement actions, that debtor shall be able to request the Dutch court to suspend those recovery measures. As a consequence, this (specific) creditor may not be able to enforce remedies. The initial suspension of a creditor’s remedies may be granted for a period of two months, which can be extended (twice) by two months.
If a creditor exercises any of its enforcement rights, the debtor can ask the Dutch court to apply the Temporary Act and would then need to show:
- they have been unable to continue their business as usual solely or primarily as a result of the outbreak of the COVID-19 virus and/or corresponding measures; and
- the inability to perform their obligations is temporary and they expect to be able to satisfy their obligations within the two month period (which period can be extended (twice) by two months).
The court will take the reasonable interest of the creditor into account, but we do expect that a Dutch debtor which finds itself in the circumstances described above, may be successful in convincing the court to suspend the ability of a creditor (e.g. in its capacity as lender under certain credit documents) to take possession of inventory, notify account debtors of its pledge and instruct such debtors to pay to the creditor directly, and to take control of pledged bank accounts. The relevant Dutch debtor may also request the lifting of attachments. Again, each of these measures would be temporary, and should only be imposed if the expectation is that the Dutch debtor will be able to satisfy its obligations with the passing of a limited period of time. Furthermore, the court, in granting a request for application of the Temporary Act, can order such measures/restrictions as it deems necessary in the interest of the affected creditor. In addition, a creditor can request the court to lift a suspension if: i) the conditions for application of the Temporary Act are no longer met, ii) there have been attempts by the debtor to prejudice the creditor; iii) there is a substantiated fear that the creditor will be prejudiced by the debtor; or iv) the creditor has been prejudiced by the debtor.
The Temporary Act will automatically lapse on 1 February 2020, although its duration can be extended by two months at a time.