Introduction to dutch law

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INTRODUCTION TO DUTCH LAW – Law of the Nederlands

Course notes of dutch law (civil Law, business, intellectual property)

The Third New International Dictionary from Merriam-Webster defines law as: « Law is a binding custom or practice of a community; a rule or mode of conduct or action that is prescribed or formally recognized as binding by a supreme controlling authority or is made obligatory by a sanction (as an edict, decree, rescript, order, ordinance, statute, resolution, rule, judicial decision, or usage) made, recognized, or enforced by the controlling authority.

This is course notes of dutch law (dutch civil Law, business law of nederlands, intellectual property)

Les autres fiches de cours :

Plan du cours :

Table of Contents

Chapter 1. Introduction into Law

  • Paragraph 1.1 – What is law?
  • Paragraph 1.2 – Origins of law
  • Paragraph 1.3 – Fields, types and areas of law
  • Paragraph 1.4 – Civil law
  • Paragraph 1.5 – International law
  • Paragraph 1.6 – International organisations
  • Questions – Chapter 1

Paragraph 1.1 – What is law?

Because law is incredibly diverse, there is no universal definition of law. Two possible definitions are:

“The regime that orders human activities and relations through systematic application of the force of politically organised society, or through social pressure, backed by force, in such a society (…)”[1]

or;

“The collection of all the rules and regulations that are in effect at a given time and within a given territory.”.

Every human being is part of society and interacts with other human beings. In the relationships that these human beings develop, conflicts can arise. Not only human beings, but also businesses, organisations and nations are part of society. They too may become involved in conflicts with other members of society. Given the fact that conflicts can and will arise between different members of society, there is a need for a system or mechanism that can solve or – in case a solution cannot be established – keep these conflicts under control. Law is one of these systems or mechanisms.

Good manners, moral obligations or religious rules are not part of the law of a country or society. Neither are rules that have been abolished or that are not yet in effect. Obviously, all these types of rules do have an effect on how people will and should behave and of course these rules help(ed) shape the law as such, but they are not the sort of rules that can be enforced before a court of law.

Law has many different functions that may, however, at times be conflicting and that may not always provide an effective solution to a conflict.

One could say that the functions of law are to:

  • Keep the peace
  • Shape moral standards
  • Promote social justice
  • Maintain the status quo
  • Facilitate orderly change
  • Facilitate planning
  • Provide a basis for compromise
  • Maximise individual freedom

Why does law even exist? The purpose of law can be described as a means to order and protect the interests of human beings in their interactions or relation(ship)s with each other, while at the same time maintaining the underlying ethical principles or values. Another purpose of law is to maintain the rules, in other words to exercise supervision on adherence to the rules and to make sure that conflicts are solved via the judicial system. Therefore part of the law consists of rules regarding litigation and the competencies of those involved in upholding the law.

If law as we see it today would not exist, the law of the strongest would apply. This would inevitably lead to an arms race and economic inefficiency. Economic inefficiency means that resources that could be used for the advancement of society are now used to, for example, produce weapons.

Paragraph 1.2 – Origins of law

1.2.1 The different schools

There are many different views regarding the origin of law. Most views can be categorised in one of the following schools:

  • The natural law school: law is based upon what is correct; morality and ethics; choices between good and evil.
  • The historical school: law is an aggregate of social traditions and customs that have developed over centuries.
  • The analytical school: law is shaped by logic.
  • The sociological school: law is a vehicle for achieving (sociological) goals.
  • The command school: rules are made and enforced by the ruling party rather than a reflection of the society’s morality, history, logic or sociology.

There is general consensus about the fact that there are two guiding principles, based upon which legal rules or laws are created:

Efficiency: it doesn’t really matter what the content of the rules is, as long as there are rules. A good example of this are traffic rules; it doesn’t matter whether we drive on the left or right side of the road, as long as there are rules that determine which side of the road we use.

Ethics/justice: the rules are based on principles about fundamental human values, such as rules that prohibit murder, rape, abuse, et cetera.

Sometimes rules are the result of a combination of efficiency and ethics.

The law is therefore a collection of rules, based on social norms, human values and effective regulation with regard to the behaviour of human beings who are part of a society and with regard to the organisation of the human society.

1.2.2 Origins of Dutch law

Present Dutch law is largely based on French law, which in its turn is largely based on Roman law. However, even before the Code Napoléon was introduced, Roman law already (heavily) influenced Dutch law. Do bear in mind that the term ‘Dutch law’, in this context, is not entirely accurate since the Kingdom of the Netherlands did not yet exist. The various regions of what are now called the Netherlands were part of the Holy Roman Empire (Burgundian and Habsburg period). In 1462 Charles the Bold instructed the court of appeal of the region Holland to use Roman law. Under the reign of Holy Roman Emperor Charles V Roman law became even more important and widespread.

“Ma vraie gloire n’est pas d’avoir gagné quarante batailles; Waterloo effacera le souvenir de tant de victoires; ce que rien n’effacera, ce qui vivra éternellement, c’est mon Code Civil.”– Napoléon Bonaparte

The Code Napoléon (the French Civil Code) was finished in 1804. In 1809, during the French occupation of the Netherlands (approximately 1795 – 1815), Napoléon introduced the aforementioned Code in the Netherlands. The Code Napoléon was later used as the basis for the first Dutch Civil Code (1838). In 1992 a completely revised version of the Dutch Civil Code was introduced.

Roman law French law Dutch law

1.2.3 Sources of law

Law can be found in many different sources. Not all rules or regulations that are in effect in a certain country at a certain time are found in laws. In fact, many of those rules and regulations are not even codified. The different sources of law are:

  • Laws or acts:

A law or act is a document or a set of documents, usually made by a government, in which rules are written down that order the way in which society behaves and that apply to everyone or to a group of people specifically mentioned in that law or act.

  • Jurisprudence:

The combination of all past judgments by all courts. These judgments contain a solution to the specific case in question, but may also contain new rules and/or (new) interpretations of the law in general.

  • Customs:

In different sectors of business there are certain common practices that people working in that sector consider as binding rules or ‘the way things are done’. These customs within a certain sector of business can become part of the law in case a judge is convinced that those practices exist and that people working in that sector consider them as binding.

  • Treaties, conventions, regulations:

These sources of international law are also part of the law that is in effect in a certain country at a certain time. They may be given different names, but they all have an international origin.

1.2.3 The legal systems

There are three legal systems:

  1. Civil Law[2]
  2. Common Law
  3. Religious Law

All countries in the world can be categorised in one (or more) of these systems. The most common legal system is Civil Law. Civil Law can be subdivided into French Civil Law, German Civil Law, Scandinavian Civil Law and Chinese Civil Law. The introduction into China of Western legal texts probably started around the year 1839.[3]

The basic difference between the systems lies in the order of importance of the sources of law. In a Civil Law system, codified law is most important. Jurisprudence is important as well, but does, at least in theory, not have the same status as codified law. In a Common Law system, jurisprudence is the most important source. This does not imply that no codified law exists.

Religious Law can be Sharia (Islamic), Halakha (Jewish) or Canon law (Christian). Written law, in the sense of religious texts, is the most important source of religious law. The most widely used religious law is, without a doubt, Islamic law. It consists of Sharia and Fiqh (Islamic jurisprudence). Most countries use Islamic Law as a supplement to either Civil Law or Common Law. In these ‘mixed countries’ (i.e. bijuridical) Islamic Law commonly applies to family law.

Please note that the exact balance between the sources of law varies from country to country.

[4]

Civil Law

Common Law

Bijuridical (Civil and Common Law)

Customary law

Fiqh

Paragraph 1.3 – Fields, types and areas of law

1.3.1 National law vs. international law

Many different distinctions in law can be made. The first important one is the distinction between national law and international law. This distinction refers to the source from which the law stems. If the law is created by a national government and is intended to apply to the inhabitants of the country that government represents, it is a national law.

If a law is drawn up by the governments of two or more countries or by an international organisation, no matter whether it is called a treaty, a convention or a regulation, it is an international law. That law can apply to all the inhabitants of the countries the governments represent, it can consist of rules that govern the relationships between the governments involved or it can order the governments involved to create laws that apply to the inhabitants of the countries they represent.

Sovereignty is essential. Every state has the exclusive competence to determine what should be included into its legislation. On a national level, the Trias Politica (Montesquieu, Separation of Powers) often applies. The Trias Politica is the separation of the legislative power (le pouvoir législatif), executive power (le pouvoir exécutif) and judiciary power (le pouvoir judiciaire). Separation is important for a state to secure the freedom of its people. By separating the powers, there is less risk of abuse of power by one specific group or institution. In addition to the Trias Politica, a system of checks and balances may be applicable.

1.3.2 Areas of law

National law deals with a large variety of issues. Dependent on the specific subject of a particular law, national law can be divided into public law and private law. Public law deals with issues in which, in one way or another, public authorities are involved ‘as public authorities’ (à Schematic 1.1).

Public law can further be divided into:

  • State (or Constitutional) law consists of rules regarding the way the state is organised and the authority of the different institutions of the state, such as the parliament, the local governments (municipalities) et cetera. It also deals with the relationship between civilians and the state and the possibilities civilians have to influence the functioning of different institutions of the state. The main source of State law is the Constitution.
  • Tax law contains rules that deal with the amount of money persons have to pay to the tax authorities, based on things like income or the costs of goods or services that were bought.
  • Penal law (or Criminal law) is about threatening certain behaviour with penalties. Penal law determines which specific acts are prohibited, the sanctions that can be imposed if someone violates the law and the rules regarding the tracing and prosecution of criminals and the execution of sentences.
  • Administrative law governs the relationship between civilians and public authorities, acting as the executive power of the state. It determines the limitations for the different state institutions when executing their tasks and the rights civilians can enforce with regard to the executive tasks of the authorities.

Private law mainly governs the legal relations between private persons and legal entities. Private law can be divided into:

  • Civil law governs a large variety of topics (à Paragraph 1.4).[5]
  • Commercial law governs certain business and commercial transactions. By now, most commercial law has been incorporated into the Civil Code. The relevance of Commercial law therefore diminishes and it is very likely that Commercial law will eventually disappear as a separate area. Commercial law includes rules regarding carriage by land and sea; merchant shipping and certain payment methods.
  • Competition law promotes and maintains market competition by regulating anti-competitive conduct. Please note that Competition law also has public law aspects. Competition law, or Antitrust law, has three main elements:
    • Prohibiting agreements or practices that restrict free trade and competition between businesses. This includes in particular the repression of free trade caused by cartels.
    • Banning abusive behaviour by a firm dominating a market, or anti-competitive practices that tend to lead to such a dominant position.
    • Supervising the mergers and acquisitions of large corporations, including some joint ventures. Transactions that are considered to threaten the competitive process can be prohibited altogether, or approved subject to ‘measures’ to offer licences or access to facilities to enable other businesses to continue competing.

Schematic 1.1

Private Law

Public Law

Natural person Natural person

Natural person Legal person

Legal personLegal person

Natural person Public authorities acting as a person

Legal person Public authorities acting as a person

Public authorities Public authorities

Public authorities Natural person

Public authorities Legal person

Schematic 1.2

Private Law

Public Law

· Commercial law

· Competition law

· Civil law

· State law

· Administrative law

· Penal law

· Tax law

Paragraph 1.4 – Civil law

1.4.1 Introduction

The main source of Civil law is the Civil Code (Burgerlijk Wetboek). The Dutch Civil Code is divided into eight books. To quote an article of the Dutch Civil Code one first has to mention the book, then the article. For example, 6:162 DCC is article 162 of book 6 of the Dutch Civil Code (tort).

Book 1 – Family Law and the Law of Persons

Book 2 – Legal Persons

Book 3 – The Law of Property, Proprietary and Valuable Rights and Interests

Book 4 – Inheritance Law

Book 5 – Rights in rem

Book 6 – General Part of the Law of Obligations

Book 7 – Specific Contracts

Book 8 – The Law of Carriage and Means of Transportation

In addition to the Civil Code, there is a Civil Procedure Code (Wetboek van Burgerlijke Rechtsvordering). The Civil Procedure Code contains procedural law, such as rules that determine what happens in a lawsuit. It also contains rules about jurisdiction, the judgment, injunctions, seizure, arbitration et cetera.

The area Civil law has numerous sub-areas. The most important sub-areas are:

Property law

Possession, detention, ownership and transfer are all part of this sub-area (à Chapter 2).

Tort law

Law governing wrongful acts.

Contract law

Deals with topics such as offer and acceptance, the legal status of negotiations, breach of contract, force majeure.

Family law and the law of persons

A civilian’s rights as a person (name, nationality, custody, place of birth, etc.)

Labour law (or Employment law)

Laws, administrative rulings and precedents that address the legal rights of, and restrictions on, working people and their organisations. As such, it mediates many aspects of the relationship between trade unions, employers and employees

Corporate law (or Company law)

Determines a legal entity’s rights and obligations (ways of establishing a legal entity, place of establishment, name, organisation of the legal entity, etc.). Corporate law is the study of how shareholders, directors, employees, creditors, and other stakeholders such as consumers, the community and the environment interact with one another under the internal rules of the entity.

1.4.2 Essential Civil law definitions

In this paragraph some of the basic definitions of the area Civil law will be explained.

Good faith

What is good faith?

“A state of mind consisting in (1) honesty in belief or purpose, (2) faithfulness to one’s duty or obligation, (3) observance of reasonable commercial standards of fair dealing in a given trade or business, or (4) absence of intent to defraud or to seek unconscionable advantage.”[6]

In a Civil Law system, the term ‘good faith’ usually refers to (1).

The principle of reasonableness and fairness

Reasonableness and fairness (art. 3:12 DCC) is one of the most important principles of Dutch Civil law. In Common Law, just like in the old Dutch Civil Code, this principle is referred to as ‘good faith’ (à definition (3) of Good faith).

What is the importance of this principle?

The importance lies in the fact that even if parties specifically agree on something, the effect of what they agree upon can be limited by reasonableness and fairness (limiting effect of reasonableness and fairness).

Article 6:2 DCC:[7]

  1. An obligee and obligor must, as between themselves, act in accordance with the requirements of reasonableness and fairness.
  2. A rule binding upon then by virtue of law, usage or a juridical act does not apply to the extent that, in the given circumstances, this would be unacceptable according to standards of reasonableness and fairness.

Example: In a contract party A has excluded all liability in case of damage. By order of that party one of his employees wilfully (intentionally) causes damage to the property of party B. Rational application of the law would lead to the conclusion that party A is not liable, since he has excluded all liability in case of damage. However, that outcome is unfair in light of the fact that the employee wilfully caused the damage. The principle of reasonableness and fairness demands that party A pays for the damage caused to the property of party B, since only that outcome is just and fair.

Reasonableness and fairness also governs the legal relation between the parties involved. This means that the parties have to act reasonably and fairly towards each other. As a result of this, the parties have certain obligations towards each other, even if their contract doesn’t explicitly state this.

Example: A car dealer has the obligation to deliver a car with enough petrol in the petrol tank to allow the buyer to reach a petrol station. Even if there is no clause in their contract that deals with this issue, the car dealer has this obligation, simply because it is reasonable and fair.

Article 6:248 DCC:

  1. A contract not only has the juridical effects agreed to by the parties, but also those which, according to the nature of the contract, apply by virtue of law, usage or the requirements of reasonableness and fairness.
  2. A rule binding upon the parties as a result of the contract does not apply to the extent that, in the given circumstances, this would be unacceptable according to standards of reasonableness and fairness.

Legal facts

The participants in legal relationships acquire their rights and obligationsas a result of events that are significant from a legal point of view. Those events are legal facts, which can be described as events that have one or more legal consequences.

The American book Black’s Law Dictionary[8] contains the following definition: “A fact that triggers a particular legal consequence.”.

Example: At birth a baby is already given certain rights, such as the right to nourishment. Birth is therefore a ‘legal fact’.

Example: A sales contract obliges the seller to transfer the property. A sales contract is therefore a ‘legal fact’.

Example: A driver who causes a traffic accident typically has the obligation to pay damages to the person who is injured in the accident. A traffic accident is therefore a ‘legal fact’.

Example: When a person dies, his rights and obligations end. Death is therefore a ‘legal fact’.

Legal facts can either be human acts with legal consequences or bare legal facts, meaning facts that do not necessarily involve any human action. Legal facts that involve human actions can be divided into two groups; juridical acts and factual acts (à Schematic 1.3).

Juridical acts

A juridical act is any human action that intends to achieve a certain legal consequence. Juridical acts can be unilateral and multilateral. Juridical acts are typical for Civil Law jurisdictions.[9]

Example: A person selling his bike has the obligation to deliver the bike to the person who bought it. This obligation was intended. The person who bought the bike has the obligation to pay the price. This obligation was also intended. More importantly, both parties intend to achieve the legal consequence of these two obligations, namely a transfer of ownership. Closing a contract of sale is therefore a ‘juridical act’.

Example: A’s (last) will grants certain rights and obligations to the persons mentioned in the will. Those rights and obligations were intended by the deceased (before he died). In other words, the one who writes the last will intends to achieve this legal consequence after he dies. Making a last will is therefore a ‘juridical act’.

Factual acts

Factual acts can be described as human acts that do not intend to achieve a certain legal consequence. Tort is one of the most important examples of a factual act. Breach of contract is another example of a factual act.

Example: A man, parking his car, unintentionally crashes his car into the car of his neighbour, which is parked in front of him. The neighbour obtains the right to claim damages. The man did not intend to damage his neighbour’s car and he certainly did not intend to create a right to claim damage for his neighbour. The law however clearly states that his neighbour has the right to do so. Since the law creates a legal consequence that was not intended by the man who parked the car, this action (which the law calls tort) is a ‘factual act’.

Example: A car dealer delivers a car that is not functioning properly. As a result of that the buyer loses control over the car and smashes it into a lamp post. The car is completely destroyed and the buyer suffers severe injuries to his head. The buyer is now entitled to claim damages from the car dealer. This breach of contract by the car dealer (he did not live up to his contractual obligation to deliver a properly functioning car) creates the right to claim damages; a legal consequence which was not intended by the car dealer. It is therefore a ‘factual act’.

Relative rights

A relative right is a right that can only be effected in relation to one or more specific persons. The right to claim damages is a right that can only be enforced against the person who caused the damage. The right to receive a bike one has bought can only be effected to the person who sold the bike. One cannot claim damages from just anyone or ask anyone else to deliver the bike. So, in other words, it is a right that can only be exercised within the scope of the legal relation between two (or more) specific persons.

Comprehensive rights (also known as absolute or exclusive rights)

Comprehensive rights work against everyone. Anyone who infringes these rights can be ordered to refrain from doing so. The best example of a comprehensive right is ownership. The owner of a plot of land, for example, can demand anyone who walks on his land without his permission (trespassing) to leave. The owner of a car can demand that no-one uses his car without his permission.

Schematic 1.3


Paragraph 1.5 – International law (Recommended literature)

1.5.1 Introduction

International law can be described as law that is drawn up by the governments of two or more countries or by an international organisation, no matter whether it is called a treaty, a convention or a regulation.[10] In its most general sense, international law consists of rules and principles of general application dealing with the conduct of nations and international organisations and with their relations inter se, as well as with some of their relations with (natural or legal) persons. International law originally started with regulation by moral values and customs. One of the earliest international agreements was concluded in 1258 BC between the Egyptian pharaoh Ramses II and the king of the Hittites, Hattusilis III.

A key-element in international law is sovereignty. This means that every state has the right and freedom to determine its own law and to decide which authority and competence the judiciary and the executive power have. States are independent and other states shall not interfere. That being said, due to ever-increasing globalisation and cooperation, states occasionally have to give up a part of their sovereignty.

International law is divided into Private international law and Public international law.Private international law deals with conflicts between persons (natural or legal) with a foreign element (the parties are usually living or established in different countries). In other words, the fundamental elements of Private international law are internationality and horizontal relations. Private international law is a set of procedural rules that determines which court has jurisdiction, which (national) law is applicable and the way foreign judgments are recognised and executed. The rules of Private international law are different from country to country.[11]

As previously stated, Private international law is primarily part of the national system. There are, however, several international institutions that attempt to codify and modify rules of Private international law through supranational regimes. The best example of such a supranational regime is the regime of the European Union.

Public international law should not be confused with Private international law. Public international law concerns itself only with relations between multiple nations, international organisations or nations and the citizens or subjects of other nations. During the twentieth century, Public international law has vastly increased in use and importance. This is mostly due to the increase in global trade, armed conflict, environmental deterioration on a worldwide scale, awareness of human rights violations, rapid increases in international transportation and a boom in global communication. Public international law is a distinct and self-contained system of law, independent of the national systems.

Since there is no overall legislature or legislative body in the international political system, the rules, principles, and processes of international law must be identified through a variety of sources and mechanisms. This can make international law appear difficult to maintain and enforce.[12]

The sources of international law are:

  • Treaties
  • Conventions and regulations
  • Jurisprudence (of International Courts of Justice)
  • Customs
  • Legal principles

1.5.2 Treaties

Conventional international law derives from international agreements, called treaties, between nations and/or international organisations. The scope of these international agreements or treaties is almost limitless. The only notable exception is that treaties should not conflict with the rules of international law regarding basic standards of international conduct or the obligations of a Member State under the Charter of the United Nations. Some rules of international law are recognised by the international community as absolute, so no derogation is allowed.

A treaty is called bilateral when only two parties are involved in the creation of the treaty; a treaty is called multilateral when more than two parties are involved in the creation of the treaty.

Characteristics

A treaty contains mutual rights and obligations for the parties that close the agreement. The treaty is binding for the parties that close the treaty, based on the principle of pacta sunt servanda.

In case of a national legal conflict, there is a judicial system to enforce compliance with an agreement. In case of international conflicts, no mandatory judicial system exists. Therefore, if the parties fail to settle and do not voluntarily submit their conflict to a mediator, an arbitrator or an international court, the only means a party has at its disposal to force another party to comply are diplomatic, economic and (sometimes) military sanctions.

Content of treaties

Treaties can create rules that apply to all the inhabitants of the countries the governments closing the treaty represent or can consist of rules that govern the relationships between the governments involved. They can also order the governments involved to create laws that apply to the inhabitants of the countries they represent.

There are three types of treaties:

  • Traité-contrat: governs the relationships between the parties involved; mutual rights and obligations (contract-like); e.g. delivery of products
  • Traité-loi: creates new (general public) laws that apply to the inhabitants of the countries of member states (law-like); e.g. European Convention on Human Rights
  • Traité-constitution: establishment of international organisations; g. United Nations Charter

The second category of rules is part of the law that is in effect in a country that is a party to the treaty. This category is directly effective, which means that it is binding for everyone, including civilians, legal entities, and even governments (local, regional and national). These rules create rights and/or obligations that can be invoked by everyone before a national court of law. It is up to a judge to decide whether or not a rule is directly effective. When such a rule is directly effective, it takes precedence over national law.

Process of making a treaty

Every country has its own national rules that deals with topics such as how to engage in treaties and the hierarchical position the rules of a treaty have, with regard to national rules.

The general procedure of concluding a treaty:

  1. The government of a country engages in negotiations with the government(s) of (an)other country/countries. As soon as they have reached an agreement, the governments of the countries involved sign the text of the treaty. Although the treaty is now signed, that doesn’t mean it is immediately in force.
  2. In order for it to enter into force, it has to be approved by the parliaments of the countries involved, so the governments will submit the treaty to their parliament for approval. Approval can be given tacitly or explicitly. Tacit approval is given, in case no member of the parliament requests explicit approval within a certain period of time. Explicit approval is given by the parliament in case more than a certain amount of positive votes is reached (usually 50% + 1 vote, sometimes a higher percentage is required).
  3. After approval is given by the parliament, the treaty is ratified. This is an official notification to the other country (or countries) involved in the treaty, that the treaty has been approved and is therefore binding. Usually this is done in an official ceremony in which representatives of the governments of the countries, involved in the treaty, sign a document containing the text of the treaty.
  4. Lastly an official proclamation (usually done by publishing the treaty) is made to the inhabitants of the countries involved, after which the treaty enters into force at a date mentioned in the proclamation.

Relation between national law and international law

As soon as a treaty enters into force, it becomes part of the law that is in effect in a certain country. However, that doesn’t automatically mean that it is directly in force in the sense that everyone can invoke the rules of the treaty. Countries can choose between two different systems to make sure the treaty is incorporated into their national legal system (so that everyone can invoke the rules of the treaty):

  1. Monism (Incorporation system):

A treaty is directly applied or self-executing (in a sense that no national act is required to make the treaty part of the national system). If a national rule is in violation of an international rule that is directly effective, the international rule takes precedence. Judges can use both national and international law.

  1. Dualism (Transformation system):

The rules of a treaty are only applied after a national act is made in which the rules of the treaty are included, so an additional act is required to make the treaty part of the national system. The rules of the treaty are, in other words, transformed into national law. Judges only use national law. If national law is in violation of international law, the most recent law prevails. Screening of subsequent law is therefore required in countries that have a dualistic system in order to prevent violation of international agreements.

1.5.3 Other sources

Conventions and regulations

A convention or regulation is a document, drawn up by an international organisation, in which governments of different countries participate. Examples of such organisations are the United Nations and the European Union. A document (containing rules) that is issued by the United Nations or the Council of Europe is usually called a convention; legislation issued by the European Union is often in the form of regulations (à Block 3). A convention is, in essence, just a treaty.

Jurisprudence (of International Courts of Justice)

A judicial system is a national phenomenon. In other words, there is not really an effective international court system. That being said, there are a few international courts.

  • The importance of the jurisprudence created by the International Court of Justice of the UN is limited, since the Court only has the authority to rule if the countries involved have voluntarily submitted to the rulings of the Court. As a result this the court never rules over really important matters.

  • Jurisprudence created by the European Court of Human Rights is much more important for international legal relationships. Even though it is an intergovernmental organisation, the court’s rulings are very important, because the supreme courts of the countries involved in the Council of Europe regard the rulings as binding and therefore uphold them.

  • The rulings of the European Court of Justice are essential, because they are based on judicial power that has been transferred from the participating countries to the European Union, so a fourth layer has been added to the national structure of the judicial system (Court of First Instance, Court of Appeal, Supreme Court). As a result of this the rulings of the European Court of Justice are binding within every Member State of the European Union. Not only rulings of this court in individual cases are important, but also the so-called preliminary rulings.

Customs

A set of customs, developed over the years, which regulate how countries should deal with each other. Customary law and conventional law are primary sources of international law. Both have equal authority. Customary international law comes into existence when states regularly and consistently follow certain practices out of a sense of legal obligation.

Legal principles

Another source of international law identified by the ICJ’s statute is “(…) the general principles of law recognized by civilized nations.” These principles essentially provide a mechanism to address international issues not already subject either to treaty provisions or to binding customary rules. Such general principles may arise either through Civil law or through international law. Perhaps the most important principle of international law is the principle of good faith. It governs the creation and performance of legal obligations and is the foundation of treaty law.[13] Other relevant legal principles are: pacta sunt servanda and freedom of contract.

Paragraph 1.6 – International organisations (Recommended literature)

International law includes the classic concepts of law in national legal systems, e.g. status, property, obligations, and tort (or délit). It also includes substantive law, procedure, process and remedies. Traditionally, states were the main subject of international law. Fairly recently individuals and international organisations have also become subject to international regulation.

International organisations play an increasingly important role in the relationships between nations. An international organisation is an organisation that is created by international agreement or which has membership consisting primarily of nations.[14] There are two types of international organisations, namely intergovernmental organisations and supranational organisations.

1.6.1 Intergovernmental organisations

This type of organisation is created to encourage international cooperation between the countries that participate in the organisation. These organisations try to establish this by developing common policies and drawing up treaties. The organisations themselves don’t have the authority or power to force a participating country to do something against its will. The participating countries cooperate within the context of the organisation on a voluntary basis and are free to use the facilities the organisation provides. The organisation itself has only very limited powers. The organisation can perhaps be compared to a sort of international board room, where the sovereign power remains with the participating countries. Decisions within the organisation are taken in unanimity.

The United Nations (UN) and NATO are examples of an intergovernmental international organisation.

1.6.2 Supranational organisations

This type of organisation is created by the participating countries in such a way that the countries transfer a part of their own sovereign power to the organisation itself. The common interests of the participating countries are more important than the interests of the individual countries. The participating countries create a treaty, on the basis of which an international organisation is created, that has its own sovereign power with regard to legislation, execution and jurisdiction.

As a result of the transfer of sovereign power, the organisation can force a particular participating country to do something against its will.[15] Every participating country is subject to the power of the organisation, and therefore also subject to its legislation, executive powers and legal rulings. Decisions within the organisation are usually made by a majority vote.

The European Union is the best known example of a supranational international organisation.

Intergovernmental organisation Supranational organisation

1.6.3 The United Nations

At the end of World War I, the League of Nations was founded. The – fairly unsuccessful – League of Nations was the precursor to the United Nations, founded after World War II. Many countries felt the need to create an international organisation that would have world peace, or the prevention of another world war, as its main goal. It would try to achieve this goal mainly by providing a platform for dialogue. On the 26th of June 1945 the founding countries concluded a treaty, called the Charter of the United Nations. There are currently 193 Member States. The headquarters of the United Nations are situated in New York.

All countries can become a member of this intergovernmental organisation, provided the country pledges to accept the obligations imposed on the member states by the United Nations Charter.

The five most important organs of the United Nations are:

The General Assembly

This organ consists of all the Member States of the United Nations, represented by a maximum of five representatives. Every Member State has one vote. The General Assembly deals with all topics mentioned in the Charter and everything that relates to the authority and functioning of the organs of the United Nations. The General Assembly can make recommendations about topics such as international peace and security, disarmament, political cooperation, the development of international law, and international economic, social, cultural and educational cooperation. The General Assembly can also take decisions, sometimes in the form of a resolution.

The Security Council

The powers of the Security Council are to maintain international peace and security. Military action can be taken by the Security Council.[16] The Security Council consists of fifteen Member States, of which five are permanent members (France, China, England, Russia and the United States). The other ten are chosen every two years.

Decisions in the form of Security Council Resolutions are adopted if at least nine members approve. The permanent members have the right of veto so an affirmative vote or an abstention from these Members is strictly required.

All Member States have to accept and execute a decision given by the Security Council. In that sense the Security Council is a supranational organ of an otherwise intergovernmental organisation.[17]

Economic and Social Council

ECOSOC was established under the United Nations Charter as the principal organ to coordinate economic, social, and related work of the fourteen specialised agencies, functional commissions and five regional commissions. The Council also receives reports from eleven United Nations funds and programmes. The Economic and Social Council (ECOSOC) serves as the central forum for discussing international economic and social issues, and for formulating policy recommendations addressed to Member States and the United Nations system. It is responsible for:

  • promoting higher standards of living, full employment, and economic and social progress;
  • identifying solutions to international economic, social and health problems;
  • facilitating international cultural and educational cooperation; and
  • encouraging universal respect for human rights and fundamental freedoms.

It has the power to make or initiate studies and reports on these issues. It also has the power to assist the preparations and organisation of major international conferences in the economic and social and related fields and to facilitate a coordinated follow-up to these conferences. With its broad mandate the Council’s purview extends to over 70 per cent of the human and financial resources of the entire United Nations system.

The Secretary-General of the United Nations

The Secretary-General is the highest administrative official who presides over meetings of the General Assembly, the Security Council and a few other organs. He has the authority to bring every situation that – in his opinion – threatens international peace and security to the attention of the Security Council. The Secretary General is the highest executive power within the United Nations.

The International Court of Justice

The Court resides in The Hague (in the Netherlands). It is the most important judicial authority of the United Nations. The Court only has authority to rule in cases in which Member States have voluntarily submitted to the authority of the Court, in which case the Member States are obliged to adhere to the ruling of the Court. In case they don’t, the other Member State(s) involved can ask the Security Council to take measures to enforce the Court’s ruling.

The Court is allowed to give legal advice to the General Assembly, the Security Council or any other organ of the United Nations.

Separate body established by the United Nations:

The International Criminal Court

The International Criminal Court (ICC), governed by the Rome Statute, is the first permanent, treaty-based international criminal court established to help end impunity for the perpetrators of the most serious crimes.

This Court, residing in The Hague, was founded in 1998 within the context of the United Nations by a treaty called the Rome Statute. Its purpose is to try people who have committed the most serious international crimes such as genocide, crimes against humanity and war crimes. The court can even try people who have committed these crimes during an internal (national) conflict (civil war) in a member state, as long as the crimes have been committed after the Statute took effect.

Chapter 2. Property

Paragraph 2.1 – What is property?

Paragraph 2.2 – Ownership

Paragraph 2.3 – Detention and possession

Paragraph 2.4 – Acquisition and loss

Paragraph 2.5 – Transfer

Questions – Chapter 2

Paragraph 2.1 – What is property?

According to article 3:1 of the Dutch Civil Code, property is comprised of all things and of all proprietary and valuable rights.[18] In some countries things can be corporeal (tangible) or incorporeal (intangible), but in the Netherlands things are always corporeal. Property in general, on the other hand, can be either corporeal or incorporeal.

Things (corporeal property) are objects that have physical form and characteristics such as tables, chairs, computers but also buildings, land et cetera. Proprietary and valuable rights (incorporeal property) are non-physical, such as a right to enforce a debt (chose in action). Other examples of proprietary and valuable rights are business goodwill, patents and copyrights. The general definition of proprietary and valuable rights is: rights that are transferable and are intended to procure a benefit or have been acquired in exchange for actual or expected benefit.

Corporeal things can be divided into movable (or personal) things and immovable (or real) things. Examples of movable things are aeroplanes, books, televisions and bread. Examples of immovable things are land and buildings.

A word that is often used in the context of property is the wordgoods. Goods are tangible or movable personal property, in particular articles of trade or items of merchandise. Services, on the other hand, are intangible commodities.

There are three possible legal statuses one can have with regard to property: property can be held (detention), possessed (possession) or owned (ownership).

Paragraph 2.2 – Ownership

2.2.1 Characteristics

Ownershipis the most comprehensive right a person (or a group of persons) has over property. The main characteristic of ownership is therefore that one is allowed to do with one’s property whatever one wants. The owner has – nearly – limitless authority: he can use it, discard it, sell it or even destroy it. That being said, ownership is not completely unlimited.

Please note that the owner (of property) is also the owner of all the components of the property, meaning everything that is attached to the property. The property is part of the owner’s estate.

Droit de suite

Droit de suite is another characteristic of ownership. Ownership of corporeal property remains with the owner even if owner doesn’t have direct control overit.For example: if a car is stolen, the owner remains the owner of the car, even if the thief starts using it and even if the thief takes the car with him to another part of the world.

Droit de préférence

Even if someone else claims certain rights with regard to the property, the owner has priority (in the sense of preference) because he has higher ranking rights.

Example: The owner of a car lends it to his neighbour, who is allowed to use it for as long as he wants, until the moment the owner needs it again. However, after three weeks the neighbour goes bankrupt. In case of bankruptcy, the neighbour normally wouldn’t be able to return the car, since all the goods that were in his possession at the moment of bankruptcy are handed over to the trustee who presides over the settlement of the bankruptcy. The creditors of the neighbour will all submit their claims and will want to be paid from the revenue of the sale of, among other things, the car. The owner of the car, however, is allowed to retrieve his car, because his rights as owner are higher in rank than the rights of the creditors of the neighbour.

2.2.2 Rights and limitations

Rights

The owner has the right to:

  • Enjoy the use of the property in (almost) every way he wants to
  • Collect and use the civil and natural fruits of his property, such as dividend paid by a company or apples from an apple tree
  • Pursue legal actions with regard to his property
  • Revindicate his property
  • Establish limited rights
  • Transfer the property

Limitations

There are basically three main categories of limitations to the comprehensive right of ownership.

  1. Rights accorded to others
  • Limited rights (usufruct, pledge etc. See paragraph 2.2.3)
  • Personal rights (rent)

  1. The law

The law also imposes certain limitations on ownership. There are situations where you need permission to use your property in a certain way. For example: you need permission, in the form of a permit, from the local authorities (the municipality) to start a restaurant in your home. You are also not allowed to simply build a house on a plot of land that you own and you are not allowed to paint the outside of your house bright pink.

  • Expropriation

The last category is expropriation. Expropriation may be necessary for the construction of roads, railroads, canals, public utilities et cetera. Because expropriation has far-reaching consequences and, possibly, a large impact, two requirements have to be met. The first requirement is that expropriation is only allowed if it is done in the public interest. The second requirement is that there shall be a pre-defined reasonable indemnification (due compensation).

  1. Rules of unwritten law
  • Abuse of rights

The category abuse of rights is primarily based on jurisprudence. There are several standard judgments dealing with this specific category.[19] Two essential rules derived from jurisprudence are that 1) you are not allowed to use your right without reasonable interest and with the sole purpose of annoying someone else and 2) if there is a disproportionately small advantage versus a disproportionately large disadvantage (consideration of interests), your ownership rights may be restricted.

  • Nuisance

It is a fact of life that the quiet enjoyment of property (mainly immovables) is sometimes interfered with. Interference can be in the form of loud noises, vibrations, foul odours, smoke, dust, gases, excessive light, high temperatures and so on. The question is whether interference always constitutes nuisance. The answer to this question is: no. In the Netherlands there has to be interference (annoyance/disturbance) plus a wrongful act (art. 5:37 jo art. 6:162 DCC). There will only be a wrongful act if the interference is substantial and unreasonable.

2.2.3 Limited rights (Recommended literature)

When the owner grants someone else a certain right to his property, he splits off specific rights from his own comprehensive right. These rights are called limited rights; they encumber the comprehensive right. Limited rights only give the person, who was granted that right, limited authority with regard to the property. Limited rights are divided into limited rights on property in general and limited rights on things. Limited rights can also be divided into rights of enjoyment[20] and liens (or security rights).

Servitude

The first limited right that can only rest on things is servitude, also called easement. Servitude is a right of enjoyment. It can be described as an encumbrance imposed on an immovable thing in favour of another immovable thing. The first thing is called the servient thing (or property) and the second thing is called the dominant thing (or property).[21] In practice, servitudes can be a right-of-way, a servitude of support, a servitude of light and air or rights regarding artificial waterways. More varieties do exist. Servitudes have a specific, limited purpose.

Emphyteusis

The second limited right that can only rest on things is emphyteusis, also called leasehold. Emphyteusis is a right of enjoyment. In the Netherlands, emphyteusis is often used in the city centre of larger cities such as The Hague and Amsterdam. Emphyteusis gives the holder the right to hold and use the immovable thing of another person. Usually the lessee has to properly maintain the property and he has to pay taxes. In addition to the aforesaid, the lessee may have to pay (a small amount of) rent. The duration of emphyteusis can be extremely long; it is not uncommon for emphyteusis to last more than twenty years.[22] Termination of emphyteusis by the lessor is very difficult.

Superficies

The third limited right that can only rest on things is superficies – a right of enjoyment. Superficies allows you to own or to acquire buildings, works or vegetation in, on or above an immovable thing owned by another person. Superficies is an exception to the rule of article 5:20 DCC that states that the owner of the land is also owner of buildings, works and plants durably attached to the land. Superficies prevents acquisition by fixture.

Apartment rights

The fourth category of limited rights that can only rest on things is apartment rights. Apartment rights are rights of enjoyment. As the name already indicates, apartment rights are (only) relevant for apartment buildings/apartment complexes. The owner of an apartment (or flat) is co-owner of the whole building and has an exclusive right to use his own apartment. In addition to that, he has a right to use the common parts of the building. The apartment owners are organised in an owner’s association.[23] The rights and obligations of the owners can be found in the deed of division and – if applicable – in regulations issued by the owner’s association. Usually a monthly fee has to be paid to the owner’s association.

Usufruct

Usufruct is a right that can rest on property in general. Usufruct is a right of enjoyment; as usufructuary you have the right to use/enjoy and derive profit or benefit from someone else’s property. ‘Fruits’ in this context is not limited to natural fruits: civil fruits are included as well. The best examples of civil fruits are rent and interest. In the Netherlands one can even have usufruct on a house, which means that one can use and live in the house. The main obligation of the usufructuary is to properly maintain the property.

2.2.4. Liens

Pledge[24] and mortgage are both liens (or security rights). They can both rest on property in general. The difference between the two types of liens is that, in the Netherlands, mortgage can only rest on registered property (aeroplanes, ships, buildings) whereas pledge can rest on all movable non-registered property (for example the inventory of a café).

The purpose of a lien is to provide security (usually payment security) to a creditor. If the debtor doesn’t fulfil his obligations, the creditor can sell the property on which the lien rests and settle his claim(s) with the proceeds. The biggest advantage of a lien is that holders of a lien have priority in case of bankruptcy of the debtor. They are, in other words, secured creditors[25]. Pledgees and mortgagees have the right of immediate execution, which means that they can sell the property without interference from a judge.

Pledge and mortgage are inconceivable without a corresponding obligation/claim. Consequence of the aforesaid is that if the obligation/claim ceases to exist, the lien will also (automatically) cease to exist. Pledge and mortgage are indivisible rights: both rights don’t (partially) cease to exist if part of the obligation is fulfilled. Only when the obligation is fulfilled in its entirety, the liens (automatically) cease to exist.

Pledge

There are two types of pledge: one requires the property to be brought under control of the pledgee or a third person agreed upon by the parties, the other one simply requires a deed or registered document. The reason why two types of pledge exist is that it would, for instance, be rather inconvenient to have a pledge on the inventory of your restaurant with the requirement to bring it under the control of someone else. The major downside of the second type of pledge is that the pledgee has no control over the property on which the pledge rests. There is, therefore, a risk that the property suddenly ‘disappears’.

Mortgage

Nearly everyone, at some point in life, has to deal with mortgage (or hypothec[26]). Buying a house without previously obtaining financing is rare. Banks or other financial institutions, however, won’t be very keen on providing financing for your house if they can’t establish a mortgage on the house in case you fail to pay the (monthly) fees.

From a mortgagor’s perspective, the main benefit of a mortgage is that the mortgagor can use or continue using the property; he doesn’t have to bring the property under the control of the mortgagee. The main advantage for the mortgagee is that the value of immovable property is relatively stable. It is also much easier to verify whether another lien (mortgage) rests on the property.

Paragraph 2.3 – Detention and possession

2.3.1 Detention

A holder[27] only has (effective) control over a thing; he holds the property for someone else, usually the owner.

Examples: A contractor, a carrier, someone who rents, hires or leases something, someone who has something on loan and someone who manages the affairs of another all don’t pretend to be the person entitled; they all acknowledge that someone else, namely the owner, has a better right.

A holder can’t promote himself to possessor or owner.[28] Holders don’t receive special protection by law.

2.3.2 Possession

Possession is the detention of property for oneself; a person has effective control combined with a suggestion of entitlement. A pretention of ownership, one could say.

It is important to note that there can only be one possessor at the same time. It is usually the owner who has possession.

Possession can be in good faith or in bad faith. Good faith requires that the possessor reasonably considers himself as person entitled. Once you possess something in good faith, you automatically continue possessing something in good faith (good faith remains good faith).

There are several benefits to being a possessor: you are considered as person entitled, you are entitled to receive both natural and civil fruits, you can execute possessory actions to recover possession of the property and you may even acquire ownership via prescription (à Paragraph 2.4.6).

Paragraph 2.4 – Acquisition and loss

There are many different ways of acquiring property.[29] In this paragraph the most important ways are described.[30]

2.4.1 Transfer

The most common way in which people acquire property is by transfer, such as a sales contract or a gift. Please note that not all contracts transfer ownership.

2.4.2 Inheritance

One can inherit property from someone who has died. The heirs inherit the exact same rights the person who died had, including – if applicable – any limited rights (à Paragraph 2.2).

Example: If you inherit your uncle’s boat, but his neighbour was granted the right to use that boat for ten years, and that time period has not yet expired, you will acquire ownership of the boat, but you will have to allow the neighbour to use the boat until the period expires.

2.4.3 Fixture

To understand what fixture is, one first has to take into account the following:

Article 3:4 DCC:

  1. A component part of a thing is anything commonly considered to form part of that thing.
  2. A thing attached to a principal thing in such a manner that it cannot be separated therefrom without substantial damage to either, is a component of that thing.

Article 5:20 DCC:

  1. To the extent the law does not otherwise provide, ownership of land comprises:
  • (…)
  • (…)
  • (…)
  • (…)
  • buildings and works forming a permanent part of the land, either directly or through incorporation with other buildings or works, to the extent that they are not part of an immovable thing of another person;
  • plants growing on the land.

There are two basic situations of acquisition of property by fixture. The first situation is that a thing becomes immovable by attaching (affixing) it to an immovable thing.

Examples: If you plant a tree in your neighbour’s garden, your neighbour will acquire ownership of that tree by fixture. If you install a bath in someone else’s house using cement, the owner of the house becomes owner of the bath by fixture. If you build a house on someone else’s land, that other person becomes owner of the building.

The second situation is that a movable thing is attached (affixed) to another movable thing that is regarded as the prominent object (also called the principal thing).

Example: If you install two bicycle tyres on your bicycle, and these tyres are someone else’s property, you will acquire ownership of the tyres by fixture. The bicycle is clearly the prominent object.

For both situations, the degree of attachment is important. If something can easily be removed, acquisition by fixture is highly unlikely.

In case there is no prominent object, the owners of the different parts that were attached to each other will become co-owners of the whole (combined) thing. The same rule applies if separate components, owned by different people, form an entirely new object.

2.4.4 Occupatio

Res nullius

If you find a thing you don’t immediately acquire it unless the thing is movable and clearly belongs to no-one. In that particular case, the thing is a res nullius. One acquires a res nullius via occupatio (appropriation).[31] Bar some exceptions, finding a res nullius becomes increasingly difficult. Susceptible to occupatio are: animals (land, sea and air), shells, minerals et cetera, but also things that were abandoned/given up by the previous owner.

2.4.5 Finding

Lost things

How can you acquire ownership of things you find, but are not a res nullius? You first have to report the find to the authorities (municipality or police). Consequence is that you usually have to deposit the thing. After that, you have to wait one (1) year. If, during that year, the original owner doesn’t claim back the thing, the finder acquires it. If the original owner does reclaim the thing, the finder is entitled to a finder’s fee. Please note that the aforementioned only applies to lost things.

Treasures

Discovering a treasure is everyone’s dream. Treasures are things of value that have remained hidden for a long time so the owner becomes untraceable. The question is: do you acquire ownership if you find a treasure? Yes, in the Netherlands the person who finds the treasure immediately acquires ownership of one half of the treasure; the person in or on whose property the treasure was found acquires the other half.[32] There is no co-ownership if you discover the treasure in or on your own property. Regardless of where the treasure was found, you are required to report it to the authorities.

2.4.6 Prescription

Prescription is acquisition of property by lapse of time. There are two types of prescription: acquisitive prescription and extinctive prescription. Acquisitive prescription is only possible in case the acquirer acted in good faith. Extinctive prescription is possible even if there is bad faith.

The main difference between the two types of prescription is the duration (prescription period). The prescription period of acquisitive prescription is either three (3) years or ten (10) years. The three-year period applies to movable, non-registered things, rights to bearer and rights to order.[33] The ten-year period applies to immovable things.Because bad faith is allowed, the prescription period of extinctive prescription is much longer: twenty (20) years.[34] It is applicable to all property.

Completion of the extinctive prescription period results in expiry of the legal claim (right of action – usually revindication) of the owner. Therefore, the owner simply can’t reclaim his property anymore. In general, completion of the prescription period leads to the same result for both types of prescription: automatic acquisition of property. Continuous possession is required for acquisitive and extinctive prescription.

It is important to realise that possession is one of the main requirements; a holder can’t acquire property via prescription.

2.4.7 Loss of property

Property can be lost in several ways as well. For obvious reasons, the ways of losing property are very similar to the ways of acquisition.

  • Transfer: the former owner of the goods loses his property rights as a result of a valid transfer of property to the new owner; this includes the situation in which a third party, acting in good faith, becomes the new owner, despite the fact that the seller did not have the authority to transfer the property to him (à Paragraph 2.5).
  • Death
  • Fixture
  • Giving it up/Abandoning it: if you intentionally throw away something, you give up ownership.
  • Destruction: if your house burns down, you lose ownership of the house. You will now be the owner of the burned remains of the house, but the house as such no longer exists so you no longer own it.
  • Via prescription
  • Expropriation

Paragraph 2.5 – Transfer

In order to validly transfer property or, in other words, for someone to validly become owner, three requirements have to be met:

  • Valid title
  • Delivery
  • Authority

The requirements can be found in article 3:84 DCC.

Valid title

The title described the reason for the transfer; it refers to the legal basis.

Valid titles:

  • Sales agreement:

Two obligations: the obligation of the owner to deliver the property to the other contractual party and the obligation of the other contractual party to pay the agreed upon remuneration.

  • Exchange agreement:

Two obligations: the obligation of the first party to deliver the property to the second party and the obligation of the second contract party to deliver his property to the first party.

  • Gift:

One obligation: the obligation of the owner to deliver the property to other party. The other party, however, has to accept the transfer.[35]

  • The law:

Tort can be the basis for a transfer of property.

Examples of invalid titles are:

  • Putative title:

Both parties are convinced that certain obligations still have to be met, but in reality they have already been met.

  • Sale to someone who has an appointed guardian:

Someone who has an appointed guardian is often (legally) incapable of transferring property. The guardian is allowed to annul the juridical act.[36]

  • Rent, loan, lease:

These types of agreements are not meant to transfer ownership.

  • Title resulting from an agreement that is contrary to the law/public policy (agreement null and void):

For example arms trade between private individuals.

Delivery

Delivery of property can be done in many different ways, depending on the kind of property that is transferred.

Immovable property:

Immovable is delivered by drawing up the necessary documents (deeds) and the registration of the transfer in the relevant public registry. Only after these two requirements are fulfilled, the ownership transfers.

Movable property:

Delivery of possession can be done by a possessor or by a detentor.

By a possessor:

  • Factual transfer of possession: is the most common way of delivering movable physical property is by simply handing it over to the new owner.
  • Traditio symbolica:a symbolical act of delivery (for example handing over the keys to a car).
  • Constitutum possessorium: is used if the former owner wants to keep the property for a short period of time after the transition of ownership took place. This way of delivering property requires a mutual statement (by the former and the new owner) that the property is transferred to the new owner, and that the former owner will now hold the property (for the new owner) for a certain period of time.
  • Traditio brevi manu:is used in case the new owner was already holding the property. For this way of delivering property a mutual statement that the property is transferred to the new owner is sufficient.
  • Traditio longa manu: is used in case a third party holds the property and will continue to hold the property for a certain period of time after the transfer of property between the former and the new owner took place. A mutual statement is required and – in addition to that – the third party has to be notified of the transition of ownership.

By a detentor:

  • Factual delivery of possession: works the same way as factual transfer of possession but please note that only a possessor can transfer possession (!).
  • Traditio symbolica
  • Traditio brevi manu
  • Traditio longa manu

Rights:

Rights to bearer (cheques, share certificates, bonds) are delivered by handing over the documents to the new owner. Rights to order (certain claims that explicitly mention the name of the creditor) are delivered by handing over the documents to the new owner plus endorsement.

Authority

Transfer of property is only valid in case the property is transferred by someone who has the authority to commit legal actions with regard to the property.

It is usually the owner who has the exclusive authority to perform juridical acts with regard to the property, so someone who has stolen property or someone who has borrowed property can’t validly transfer the property.

However, sometimes someone other than the owner has the authority to perform juridical acts. This mainly applies to situations where a representative is appointed by the owner.

Article 5:2 DCC:

The owner of a thing is entitled to recover it from any person who holds it without right.

Article 5:2 DCC is about reivindicatio: the owner’s right of revindication. Revindication is one of the most important rights of the owner. Revindication is even possible if the current possessor or holder is in a state of bankruptcy.

Example: A is the proud owner of a very valuable, 18th century violin, which has been a family heirloom for generations. One day he discovers a scratch on the varnish of the violin. The next morning he brings the violin to B, a renowned repairman. B assesses the damage and ensures A that he will be able to repair the violin. A can collect the violin in a month. After three weeks C, a famous violinist, visits B’s workshop. He tells B he is looking for ‘the violin of his dreams’. B, who is a little absent-minded, offers C A’s violin, thinking it is one of his own. C is impressed by the ‘beautiful sounds’ the violin produces and decides to buy it. After some negotiating between B and C, they reach an agreement. B hands the violin over to C and C leaves the shop, thinking he is now the proud owner of A’s violin.

In order to facilitate trade, by limiting uncertainty, a few exceptions exist to the owner’s right of revindication. The aforementioned exceptions result will in a loss of ownership. In the Netherlands, the new owner is protected against the previous owner’s revindication if he meets the requirements of article 3:86 sub 1 DCC:

  • Movable property
  • Physical delivery
  • Remuneration paid
  • The acquirer acted in good faith
  • The acquirer is willing and able to identify the alienator within three (3) years of acquisition

Looking back at the example with the violin: if C meets all five requirements mentioned above, he will become the new owner of the violin and A will, unfortunately, lose ownership. The only thing A can do now is claim damages from B.

However, even if all five requirements of article 3:86 sub 1 DCC are met, the owner of a movable thing, who has lost it a as a result of theft, can – on the basis of article 3:86 sub 3 DCC – revindicate the movable thing within a period of three (3) years unless the following requirements are met:

  • Acquirer is a natural person
  • Acquirer is not acting in the conduct of a profession or business
  • Alienator (usually) deals with the public in similar things
  • Alienator uses business premises (such as a shop)
  • Alienator acting in ordinary course of business

Or: it concerns money or paper payable to bearer or order (so it shouldn’t concern money)

If these six (five + one) requirements are met, ownership is finally acquired for good.

Paragraph 2.6 – Retention of title

As the name already indicates, retention of title is about retaining ownership until a certain obligation is fulfilled. The obligation in question is usually a payment obligation. This means that ownership will not pass from (typically) seller to buyer until the contract price is paid in full. One could, therefore, say that retention of title is a form of security.

The main advantage of a retention of title clause is that the seller can revindicate in case of bankruptcy of the buyer.

Retention of title clauses are frequently used in (inter)national business.

Questions – Chapter 2 Ownership, Detention, Possesion (& Acquisition) Version A

Question 1

Mention the main characteristics of ownership.

Question 2

  1. Albert has a very old cabinet at home. However, the cabinet is damaged, so Albert takes the cabinet to a repairer (Bob). The cabinet is in the workshop for a whole month. In this month, who is owner of the cabinet and why? Which characteristic of ownership is relevant here and why?
  2. Imagine all the trousers of the clothes shop H&M have been stolen by Mr. X. According to droite de suite, who is now owner?
  3. Going back to the case of the cabinet. The cabinet is still in the workshop. Unfortunately the business is not doing well so Bob goes bankrupt and the bank seizes all his things so the creditors can be repaid. Does this mean Albert has lost ownership of his cabinet? Which characteristic of ownership is relevant and why?

Question 3

  1. Accepting a gift is a way of acquiring property. Yes/no
  2. Taking possession of a wallet is a way of acquiring property. Yes/no,
  3. Installing an engine in someone else’s car is a way of acquiring property of that car. Yes/no.
  4. Inheriting the right to use someone else’s cottage is a way of acquiring property of that cottage. Yes/no,
  5. If you find a treasure you will acquire property of the treasure. Yes/no,

Question 4

  1. What is droit de suite?
  2. What is droit de préférence?
  3. Give an example of a limitation to the right of ownership on the basis of non-codified law.

Question 5

Albert, a first year student at the Rotterdam Business School, shares an apartment with two of his friends. Albert and his friends live the life of ordinary students: they sleep late, drink a lot and produce a lot of garbage, which they usually throw in their back garden, instead of putting it in a public garbage disposal. After some time they have collected so much garbage, that they are no longer able to see the grass of their back garden. The garbage begins to rot, so Albert and his friends want to get rid of it. They decide to donate the garbage to their neighbour. One night they collect all the garbage and put it in the neighbour’s back garden. The neighbour is less than pleased when he sees the pile of garbage in his garden the next morning.

  1. Does a gift or donation constitute a legal basis for transfer of property?
  2. Has the neighbour become the owner of the garbage? If so, why? If not, who is then the owner of the garbage?
  3. Who is the legal owner of the garbage that is now in the neighbour’s back garden?
  4. What would it take for them to legally give up ownership of the garbage?

After the neighbour hands the garbage back to them (and gives them a piece of his mind), Albert and his friends decide to throw everything in the public garbage disposal, situated in front of their apartment block. Another neighbour, passing by an hour later, discovers a piece of parchment in one of the garbage bags and takes possession of it. At home he discovers that it is a valuable, 17th century manuscript, worth at least € 10,000. A few weeks later, Albert reads a newspaper article about the find and realises the piece of parchment was in one of his garbage bags.

  1. Can Albert revindicate the piece of parchment, claiming he is still the owner of it?

Question 5

  1. Explain the difference between possessor, holder and owner.
  2. How do you determine whether someone is holding or possessing a thing?

One month ago, Alex bought a new car. He has the car at home and mainly uses it to go to work. Nina, a very good friend of Alex, wants to go away for the weekend and she asks if she can use Alex’s car. Alex agrees, as long as she puts petrol in the car. Nina uses the car to go to Belgium for the weekend.

  1. Who is owner of the car and who is possessor?

Nina and Alex end up in an argument because Nina wants to stay in Belgium for a few more weeks. She is so angry at Alex for not lending the car for a few more weeks that, in her anger, she sells the car to her cousin, Frank. Her cousin does not know that this is in fact Alex’s car so he is very pleased with ‘his’ new car.

  1. Who is owner, possessor and/or holder?

Questions – Chapter 2 Ownership, Detention, Possesion (& Acquisition) Version B

Question 1

Mention the main characteristics of ownership.

Question 2

  1. Albert has a very old cabinet at home. However, the cabinet is damaged, so Albert takes the cabinet to a repairer (Bob). The cabinet is in the workshop for a whole month. In this month, who is owner of the cabinet and why? Which characteristic of ownership is relevant here and why?
  2. Imagine all the trousers of the clothes shop H&M have been stolen by Mr. X. According to droite de suite, who is now owner?
  3. Going back to the case of the cabinet. The cabinet is still in the workshop. Unfortunately the business is not doing well so Bob goes bankrupt and the bank seizes all his things so the creditors can be repaid. Does this mean Albert has lost ownership of his cabinet? Which characteristic of ownership is relevant and why?

Question 3

  1. Which rights do you have as an owner?
  2. Name some limitations.

Question 4

You are an IBMS student renting a room from Eelco, a private landlord. In the agreement it is stated that you are not allowed to put your music on after 22h00. Eelco, however, does regularly put his music on after 22h00 because the building is his property.

Is this allowed, if not, why?

Question 5

  1. The Hogeschool hands out free pens with their logo on it. Have you acquired ownership of the pen? Yes/no
  2. Taking possession of a set of keys is a way of acquiring property. Yes/no,
  3. Building a shed with wood you stole from your neighbour is a way of acquiring property of your neighbour’s wood. Yes/no,
  4. Inheriting the right to receive interest of the bank account of your uncle is a way of acquiring property of that bank account. Yes/no,
  5. If you find a very valuable and ancient Roman sword in a public garden, will you acquire property of the sword? Yes/no,
  6. Adrian is sitting in a train and sees a Metro (free newspaper) lying on a chair which someone has left behind. Adrian takes the newspaper. Did he acquire ownership? Yes/no,
  7. Bruno sees a bike, which has still its key in the lock, in front of a club (Blender in Rotterdam) and thinks he is very fortunate, because he needs a new bike. He takes the bike and cycles away with it. Did he obtain ownership? Yes/no.
  8. Bruno is fishing in Kralingse bos (park in Rotterdam) and he catches a carp (fish). Is he owner of the fish?
  9. Adrian adds the neighbouring land to his land, seeing no one is living nor using this piece of land. Is he owner of the land?
  10. Adrian finds a diamond ring on the street and reports it to the police. The owner never shows up. Is Adrian owner?

Question 6

  1. Explain the difference between possessor, holder and owner.
  2. How do you determine whether someone is holding or possessing a thing?

One month ago, Alex bought a new car. He has the car at home and mainly uses it to go to work. Nina, a very good friend of Alex, wants to go away for the weekend and she asks if she can use Alex’s car. Alex agrees, as long as she puts petrol in the car. Nina uses the car to go to Belgium for the weekend.

  1. Who is owner of the car and who is possessor?

Nina and Alex end up in an argument because Nina wants to stay in Belgium for a few more weeks. She is so angry at Alex for not lending the car for a few more weeks that, in her anger, she sells the car to her cousin, Frank. Her cousin does not know that this is in fact Alex’s car so he is very pleased with ‘his’ new car.

  1. Who is owner, possessor and/or holder?

Questions – Chapter 2 Acquisition of property and transfer Version A

Question 1

Gilbert is 14 years old and has a bike worth € 2,000. He sells and delivers his bike to Henk, an 18 year old, for the price of € 1,200. He also delivers the bike to Henk. A week later, Gilbert’s father asks his son where he left his bike. Gilbert tells his father that he sold the bike to Henk. Gilbert’s father does not agree with the sale of the bike and goes to Henk and tells him the contract of sell is annulled.

  1. Has Henk acquired ownership of the bike before het contract of sale was annulled?
  2. Can you say after the annulment, that Henk has never been owner of the bike?
  3. What if Henk has already sold the bike on to Isaac, before the father of Gilbert intervened. Did Isaac acquire ownership of the bike?

Question 2

John is the proud owner of a valuable classic car. One day, when he takes it for a ride, he is involved in a car accident. As a result, the rear bumper of the car is badly damaged. John brings the car to Edward, who is an expert in repairing classic cars. Edward tells John he will be able to repair it, but it will take time. John can collect the car in two months. A few days after John has brought the car to Edward, he shows a picture of the car to Philip, who immediately falls in love with it. After some negotiating, John sells the car to Philip.

Can John transfer ownership of the car to Philip at that particular moment? How?

John and Philip make a (two-sided) declaration, but they forget to inform Edward. When Philip shows up in the workshop of Edward after the car has been repaired, Edward refuses to give him the car, because – as far as he knows- John is still the owner of the car.

  1. Can Philip claim the car from Edward, stating that he is the owner of the car?

John calls Edward and tells him that Philip bought the car from him. Edward is now willing to hand it over to Philip. On his way home, Philip is spotted in his new car by Alex. Alex, a multi-millionaire who has a huge collection of classic cars, tells Philip he wants to buy the car right away. Philip is hesitant, but Alex offers him an amount of money Philip can’t refuse. Philip only has one condition. He is willing to transfer ownership of the car to Alex immediately, but he wants to drive the car for another month, so that he can at least enjoy his ‘treasure’ a bit longer. Alex agrees and the car is sold.

  1. Can Philip transfer ownership of the car to Alex at that particular moment and still drive it for one month? How?

Question 3

Walking down a busy street, Alan loses his watch without even realising it. A bit later, Bridget picks up the watch, not knowing whom it belongs to. The watch is in perfect condition, so she decides to take it home with her and give it to her boyfriend Charles as a present. She doesn’t tell him she found it on the street. Charles doesn’t like the design of the watch, so he sells it to his friend Daniel for a fair price, telling Daniel he received the watch as a gift from his girlfriend. Daniel happens to be a colleague of Alan. When Alan meets Daniel the next morning at the office, Alan realises Daniel is wearing his watch. He recognises the dial of the watch, which was designed at his specific instructions. Alan wants to claim back his watch from Daniel.

  1. Did Bridget become the owner of the watch?
  2. Did Charles become owner of the watch?
  3. Will Daniel have to give Alan the watch back (so in other words, did Daniel become owner)?

Questions – Chapter 2 Acquisition of property and transfer Version B

Question 1

Alex has a very expensive Samsung television (€ 5,000) in his living room. One night Bob breaks in and steals the TV. A few days later, he sells the TV to Chris for a price of € 1,000. Chris is a friend of Bob and he is aware of the fact that the TV is stolen. Bob delivers the TV to Chris. Another few weeks later, Chris sells the TV to David, owner of an electronics shop, for the price of € 3,000. Chris delivers the TV to David. David isn’t aware of the theft. Chris told David that he acquired the TV of his mother, who passed away several months ago. Chris even hands over a false (but very convincing) receipt, which makes his story even more plausible. Four days later, Ewoud (a consumer) buys the TV for € 3,500 at David’s shop. Ewoud takes the TV to his house. Three months later Frank visits Ewoud and he convinces Ewoud to sell the TV to him for € 3,000. Frank takes the TV to his house. Frank is a friend of Bob and he knows that the TV is stolen from Alex.

  1. Has Bob acquired ownership of the TV?
  2. Has Chris acquired ownership of the TV?
  3. Has David acquired ownership of the TV?
  4. Has Ewoud acquired ownership of the TV?
  5. Has Frank acquired ownership of the TV?
  6. Imagine that Alex had seen the TV in the shop of David, before David could sell the TV to Ewoud. Would it be possible for Alex to claim (revindicate) his TV back from David?
  7. Imagine that Alex had seen the TV in the house of Ewoud, before he could sell it to Frank. Would it be possible for Alex to claim (revindicate) his TV back from Ewoud?
  8. What if Alex had seen the TV in the house of Frank? Would it be possible for Alex to claim (revindicate) his TV back from Frank?

Question 2

On an unfortunate day, Julia loses her diamond-studded watch worth € 10,000. The next day Karen finds the watch. A week later Karen sells Julia’s watch to Leo, who knows the watch was lost. Leo takes the watch to a jewellers shop to check if the diamonds are real. The shop gives him a certificate of origin. A month later, Leo gives the watch as a gift to his brother Michael. Leo told Michael that he got the watch from his father-in-law. Three months later Michael sells the watch to Nick for € 8,000. Michael has told Nick that he got the watch from his brother Leo and he also give the certificate of origin to Nick.

  1. Has Karen acquired ownership of the watch?
  2. Has Leo acquired ownership of the watch?
  3. Has Michael acquired ownership of the watch?
  4. Has Nick acquired ownership of the watch?
  5. Imagine that Julia finds out that Nick has her watch in possession. Julia revindicates her watch from Nick. Is Nick obliged to give the watch back to Julia?

Question 3

Oliver has a chainsaw in his garden. One day Patrick walks past the garden of Oliver, climbs over the fence and steals the chainsaw of Oliver. He takes it home with him and uses it for a while. After a year, Patrick decides he does not need the chainsaw anymore and puts an advertisement in the local newspaper. Quinton reacts to this advertisement and visits Patrick to have a look. When Quinton asks where the chainsaw comes from, Patrick tells him a vague story that a friend of his had to get rid of his chainsaw. Quinton, however, does not really care about the story and is very happy he can buy a very good quality chainsaw for quite a low price. He pays Patrick € 100 and takes the saw with him.

  1. Has Patrick acquired ownership of the chainsaw?
  2. Has Quinton acquired ownership of the chainsaw?
  3. Assume that Quinton bought the chainsaw in good faith. Will Quinton have to give the chainsaw back to Oliver if Oliver revindicates his chainsaw?

Chapter 3. Insolvency

Paragraph 3.1 – What is it?

Paragraph 3.2 – Who can go bankrupt?

Paragraph 3.3 – Types of creditors

Paragraph 3.4 – Procedure

Paragraph 3.5 – Consequences

Paragraph 3.6 – Termination

Questions Chapter 3

Paragraph 3.1 – What is it?

3.1.1 An introduction

Insolvency is the legal status of a person or an organisation that cannot repay the debts it owes to his/its creditors. In case of insolvency, creditors may file a bankruptcy petition against a business or corporate debtor (‘involuntary bankruptcy’) in an effort to recover a portion of what they are owed. In the majority of cases, however, bankruptcy is initiated by the debtor himself (a ‘voluntary bankruptcy’ that is filed by the insolvent individual or organisation). An involuntary bankruptcy petition may not be filed against an individual, private debtor who is not engaged in business.[37]

Bankruptcy in The Netherlands is governed by the Dutch Bankruptcy Act (DBA).[38] Intra-EU cross-border insolvency proceedings are governed by Council Regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings. Cross-border insolvency proceedings that do not fall within the scope of the EU Insolvency Regulation will be governed by the general rules of Dutch international private law.

Three types of insolvency procedures are to be distinguished from each other in the Dutch Bankruptcy Act:

  • Bankruptcy (faillissement)
  • Suspension of payments (surseance van betaling)
  • Debt restructuring for private individuals (schuldsanering)

3.1.2 Bankruptcy proceedings

If the petition is granted, the district court will declare the debtor bankrupt and appoint one or more trustees (in Dutch: curator). The trustee is charged with the administration and liquidation of the bankruptcy estate.

Main rule is that the district court will only declare a debtor in state of bankruptcy if the debtor has ceased to pay.This means that there is at least a due debt and a claim for support.[39] In jurisprudence it has been established that there should be more than one creditor.

If the debtor is properly summoned, bankruptcy may be declared in a default judgment. In that case the debtor has a right to ask for a review within fourteen days after the judgment of bankruptcy. Appeals must be lodged ultimately within eight days. Both review and subsequent appeals have no suspensory effect (the judgment is provisional).[40]

3.1.3 Suspension of payments

Proceedings:

With the suspension of payments procedure the Dutch Bankruptcy Act intends to provide a legal instrument in order to restructure and continue an enterprise in financial distress, which in whole or in part is viable.

This means the debtor will have a postponement by court order of the payment of his debts, which he foresees will be impossible to meet when they respectively fall due.[41] This remedy is available to debtors who possess sufficient property to cover all their debts but foresee the impossibility of meeting them when they respectively fall due.[42]

The commercial court will appoint an official receiver to report to it on the debtor’s situation and may decide to grant a suspension of payments. In this case it will appoint one or more administrators to supervise the debtor’s transactions during the period of suspension. During this period, the debtor may not transfer, mortgage or commit his assets.[43]

A requirement is that the debtor must foresee that he will not be able to continue paying his due debts.[44] Also there is a duty of information: inform the administrator or receiver fully and accurately about everything that he knows of or can understand that is important for proper completion of the proceedings.

;

The purpose of a suspension of payments is to suspend or delay the payment of debts.
The basis is the probability of the debtor’s inability to meet his obligation when they respectively fall due, despite the fact that he has sufficient assets to cover all his liabilities.[45]The suspension of payments procedure, however, rarely ever fulfilled its goal and companies that do ask for suspension of payment generally are declared bankrupt within a few weeks after the initial decision on the suspension of payments request.

3.1.4 Debt restructuring for private individuals[46] (Recommended literature)

This relatively new arrangement under the Dutch Bankruptcy Act provides a possibility for private individuals in a debt position without any prospects to make a fresh start without being chased for life by his creditors.The Netherlands have had a regulation for restructuring the debts of private individuals since 1999. It is based on the Debt restructuring of private individuals act (Wet Schuldsanering Natuurlijke Personen (WSNP)) and is as such incorporated as an independent regulation in title III of the Bankruptcy Act. The principal objective of the regulation is to ensure that private individuals finding themselves in a financially difficult situation are not pursued for years on end by the debts they incurred. Another objective of the regulation is to ensure that fewer private individuals are declared bankrupt.[47]

The aim of the scheme is to prevent private individuals, with or without their own business, suffering from the effects of a debt for a prolonged period. Creditors are also required to cooperate under the scheme.

The core of this Act is to provide the possibility to private individuals in a debt position without any prospects to make a fresh start without being chased for life by his creditors. The fresh start is obtained by the liquidation of the assets of the debtor and to save during a period of at the most five years his repayment capacity (earnings less minimum costs of living).[48] At the end of the term these proceeds are divided among the creditors and a fresh start is obtained. During this term the debtor has to observe the terms and conditions set out by the law and the so-called restructuring plan (saneringsplan). If the debtor does not comply with these terms the debt restructuring could be revoked and the debtor will be declared bankrupt without getting a fresh start.[49]

Several criteria apply to the debt restructuring arrangement:

Prior to application of the legal debt restructuring arrangement the law imposes mandatory pursuit of an extrajudicial[50] phase. On the grounds of a model statement issued by the municipality it must be evident that there have been attempts to reach an amicable settlement. Why these attempts have been in vain must also be evident.[51]

Only the private individual himself can petition for the applicability of the debt-restructuring act. The court appoints an administrator. The administrator is charged with the supervision over the debtor in the sense that the debtor complies with his obligations under the debt restructuring. In the majority of the debt restructuring cases debt relief social workers are appointed as administrators. In the more complex cases (most of the time if the debtor runs a business) attorneys at law are appointed. The administrator is paid a small monthly fee and receives a subsidy. The monthly fee is to be paid from the proceeds of the estate. The subsidy is only a temporary measure and subject to review. The bankruptcy judge in a debt restructuring supervises the administrator. The fresh start is obtained by the liquidation of the assets of the debtor and to save during a period of at the most five years his repayment capacity (earnings less minimum costs of living). At the end of the term these proceeds are divided among the creditors and a fresh start is obtained. During this term the debtor has to observe the terms and conditions set out by the law and the restructuring plan. If the debtor does not comply with these terms, the debt restructuring could be revoked and the debtor will be declared bankrupt without getting a fresh start. The debt restructuring can also be ended by offering the creditors a scheme of arrangement. Under the debt restructuring act different voting ratios are applicable and under circumstances the judge can even impose a scheme of arrangement on the creditors.[52]

Summary

To summarise, the objectives of the three types of insolvency are:

  • The sole objective of bankruptcy proceedings is liquidation of the available equity to distribute among the creditors.
  • The suspension of payments proceedings has a restructuring objective rather than liquidation in order to prevent the latter.
  • The debt restructuring proceedings in court have a double objective: liquidation of the available equity and restructuring of the debt burden.[53]

Paragraph 3.2 – Who can go bankrupt?

Any debtor (being a natural person or a private legal entity) can be declared bankrupt by the district court, so both legal entities and private individuals can be declared bankrupt.Applications for bankruptcy can be filed by:

  • the natural person or private legal entity itself;
  • a creditor, or
  • the public prosecutor.

Bankruptcy is open to both natural persons and legal entities. Bankruptcy can be applied for by the debtor himself (own declaration), by a creditor or by the Public Ministry (Openbaar Ministerie) for reasons in the public interest. In principle this means that all private individuals may submit an application, as may those enterprises that are not operated in the form of a corporate body, such as a sole proprietorship.

Suspension of payments is not granted to a natural person who does not practice an independent profession or business. The debtor himself can apply for suspension of payments provided that this party is not a natural person. Creditors may not therefore apply for suspension of payments.

Debt restructuring is only open to natural persons. The natural person who has a debt burden such that there is no prospect of repayment and who submits a complete petition for debt restructuring to the court and who moreover is in good faith according to the court. Creditors may not therefore apply for debt restructuring.

The clerk to the court should publish in the State Gazette[54] certain data from the pronouncement of the court in which the bankruptcy, suspension of payments or debt restructuring proceedings are opened: for example the name and full address of the debtor and the name of the acting supervisory judge and the appointed receiver.[55]

The main focus of modern insolvency legislation and business debt restructuring practices is no longer on the elimination of insolvent entities but on remodelling the financial and organisational structure of debtors experiencing financial distress in order to permit the rehabilitation and continuation of their business.[56]

Paragraph 3.3 – Types of creditors

Before discussing the process of how assets of a bankrupt company are distributed, it is important to understand the classification of creditors for the purpose of the distribution of claims on liquidated assets. Creditors can be divided (can differ per country) into roughly four categories.

  1. Preferred creditor
  2. Secured creditors
  3. Unsecured creditors

After the general bankruptcy costs have been complied (e.g. payment of the trustee), the liquidation of assets will be completed. Examples of bankruptcy debts are indebted salaries, indebted rent payments (from the date of bankruptcy).

3.3.1 Preferred creditors[57]

A preferred creditor is a creditor receiving a preferential right to payment upon the debtor’s bankruptcy under applicable insolvency laws. Examples of preferred creditors are employees with overdue salaries, the Tax authorities.

In most legal systems, some creditors are given priority over ordinary creditors, either for the whole amount of their claims or up to a certain value. In some legal systems, preferential creditors take priority over all other creditors, including creditors holding security. If property of the bankrupt company is insufficient to compensate all preferred creditors, the property is distributed proportionally to all preferred creditors.

3.3.2 Secured creditors

Creditors whose claims are guaranteed by a lien or security right (à Paragraph 2.2.3). These creditors are not affected by the insolvent company’s bankruptcy since they can take possession of assets. However, they still need to prove their claim to the trustee or to the court. Secured creditors have the law to protect them and can apply to the courts to enforce payment. By ignoring a secured creditor you could end up in court, have the bailiffs remove your personal belongings and furniture, cut off your vital supplies such as water and electricity and ultimately have you put in prison. Examples are suppliers of gas, electricity, water, lessor of immovable property. Usually they are considered as unsecured creditors, unless they have guaranteed their claim.[58]

3.3.3 Unsecured creditors[59]

Unsecured creditors are the creditors whose claims are not guaranteed by any security in the bankrupt company’s property and do therefore not have priority. If the property of the estate is insufficient to compensate all unsecured claims, the property is distributed proportionally to all unsecured creditors. Normally these creditors are in one of the following categories: credit cards, unsecured loans, store cards, catalogues, mobile phones and mail order companies.[60]

There is also even another category after unsecured creditors. This is the subordinated debt. This debt has a lower priority than other bankruptcy debts. This means that they are more risky for the lender of the money. It is unsecured and has lesser priority. Parties can contractually agree to this. This does entail a high risk for the creditor, so often the interest rate is very high and it is attractive for entrepreneurs to ask for investment.

Research in the Netherlands has shown that creditors in bankruptcy often receive nothing. The Tax Authorities usually recover 30% of their debts, preferred creditors 10% and unsecured between 3-8%.[61]

3.3.4 Significance

A bankruptcy affects both common unsecured creditors and preferred creditors. Secured creditors may exercise their security rights as if there were no bankruptcy. In practice secured creditors are affected by the bankruptcy, since secured creditors tend to prefer a private sale of the secured goods instead of the legally required public sale. The reason for this preference is that the proceeds through a private sale are most of the time higher than through a public sale. In order to sell the secured goods through a private sale the co-operation of the trustee is required.[62] The practice has risen that the trustee asks a certain percentage of the sale proceeds for his co-operation. Secured creditors and even third parties are not allowed to exercise their rights if a cooling down period is ordered.[63]

A suspension of payments only affects common unsecured creditors. Secured creditors and preferred creditors are as a general rule not effected and should in principle be fully paid. The practice, however, is somewhat different, due to inter alia the introduction of the cooling down period and the grown practice that preferred creditors like the tax authorities and the social insurance board under circumstances give their co-operation to a scheme of arrangement. Since the circumstances under which co-operation is given are laid down in policy rules such co-operation could be enforced legally.[64]

Paragraph 3.4 – Procedure (Recommended literature)

3.4.1 The Netherlands

Dutch bankruptcy law (Dutch Bankruptcy Act = Faillissementswet) covers three separate legal proceedings:

The first is the bankruptcy (faillissement). The purpose is the liquidation of the assets of the company. The bankruptcy applies to both individuals as well companies.

The second legal proceeding in the Bankruptcy Act is the suspension of payments (surseance). Surseance only applies to companies. Its goal is to reach an agreement with the creditors of the company.

The third proceeding is the debt restructuring for individuals (schuldsanering). This proceeding is designed for individuals only. Decisions taken can be granting discharge in debt restructuring, a levy from the bankruptcy or a possible interim termination of debt restructuring. The court appoints a bankruptcy judge and an administrator. The court may also dismiss the receiver or administrator if he neglects his legal duties.An acting supervisory judge is appointed by the court to take care of the numerous decisions of management and supervision of the estate during the term of the proceedings. This individual supervises the receiver or administrator, grants permission for some transactions and decides on possible complaints from interested parties.[65]

3.4.2 The United Kingdom

‘In the United Kingdom, bankruptcy (in a strict legal sense) relates only to individuals (including sole proprietors) and partnerships. Companies and other corporations enter into differently-named legal insolvency procedures: liquidation and administration (administration order and administrative receivership). However, the term bankruptcy is often used when referring to companies in the media and in general conversation.

A trustee in bankruptcy must be either an Official Receiver (a civil servant) or a licensed insolvency practitioner. Current law in England and Wales is largely derived from the Insolvency Act 1986. Following the introduction of the Enterprise Act 2002, a UK bankruptcy will now normally last no longer than twelve months and may be less, if the Official Receiver files in court a certificate that his investigations are complete. It was expected that the UK government’s liberalisation of the UK bankruptcy regime would increase the number of bankruptcy cases.’.[66]

3.4.3 The United States

Bankruptcy in the United States is a matter placed under federal jurisdiction by the United States Constitution (in article 1, section 8, clause 4), which allows Congress to enact « uniform laws on the subject of bankruptcies throughout the United States ». The Congress has enacted statute law governing bankruptcy, primarily in the form of the Bankruptcy Code, title 11 of the United States Code.[67] Federal law is complemented by state law in some places where federal law does not provide a suitable solution or expressly refers to state law.

While bankruptcy cases are always filed in United States Bankruptcy Court (an adjunct to the US district courts), bankruptcy cases, particularly with respect to the validity of claims and exemptions, are often dependent upon state law. State law therefore plays a major role in many bankruptcy cases, and it is often not possible to generalise bankruptcy law across state lines.

Generally, a debtor declares bankruptcy to obtain relief from debt, and this is accomplished either through a discharge of the debt or through a restructuring of the debt. Generally, when a debtor files a voluntary petition, his or her bankruptcy case commences.

Paragraph 3.5 – Consequences

The effect of the bankruptcy order is that the bankrupt loses his power of disposition over the estate in bankruptcy[68] to a trustee in bankruptcy or receiver (for legal persons), who has far-reaching power, but who in turn is supervised by a supervisory judge.[69] The estate comprises all of the debtor’s property at the time of the judgment that admits him to the arrangement, as well as all property that he obtains during the bankruptcy or application of debt restructuring.[70] The possessions that are not excessive remain outside of the estate.

As a result of the judgment in which the debtor is admitted to the bankruptcy or the debt restructuring arrangement he lawfully loses authority to have his property at his disposal: from that time onward the property belong to the estate that is managed by the administrator or receiver. He also loses the authority to conduct and to allow actual transactions in respect of the property He is obliged to surrender all property that belongs to the estate on the request of the administrator or receiver. The debtor must obtain permission from his administrator or receiver for some legal transactions, such as entry into a credit transaction.

No obligation exists for the creditors to submit all claims to the receiver or administrator. Anyone wishing to share in the income, which is paid out via what is referred to as a distribution list to known creditors, should submit his claim.[71]

It is common in many cases to limit credit to individuals and businesses for major purchases for a period of up to several years after the bankruptcy is considered fully discharged. The circumstance that someone has been bankrupt or has been involved in moratorium or debt restructuring, remains registered for some time with the Bureau for Credit Registration (BKR) and with the Central Insolvency Register (CIR) at the Board for Jurisprudence in The Hague. This is after all a relevant risk factor for credit providers. There are no legal obstacles to restarting an enterprise.

An entrepreneur who has significantly contributed to the bankruptcy through apparent improper administration of the enterprise may be held liable by the administrator on the grounds of the Civil Code. The Penal Code contains provisions concerning threatened bank breaking. No specific sanctions exist for employers/non-corporate bodies if they do not comply with their debt restructuring obligations.[72]

Paragraph 3.6 – Termination

What are the conditions for termination of the proceedings?A bankruptcy can be ended in several ways:

  • The bankruptcy judgment is reversed by the Court of Appeal
  • Closing of the bankruptcy for lack of assets
  • Closing of the bankruptcy due to the fact that the debtor is in the position to resume payments of his debts
  • Conclusion with the creditors of a scheme of arrangement[73]

Suspension of payment proceedings end either through withdrawal at the debtor’s request or by means of an agreement that the court approves.

Debt restructuring is completed positively or negatively. If a debtor complies with the debt restructuring obligations (fully informing the receiver, getting as much money into the estate as possible for three years, going to work or, as the case may be, staying at work) the court will grant him a ‘clean sheet’ in the final judgment. This implies that the remaining debts may no longer be legally collected by the creditors.[74] If a debtor does not comply with his debt restructuring obligations, there may be an intermediation with no ‘clean sheet’: the debtor will now be in a state of bankruptcy.[75] For example, this can happen if the debtor allows excessive new debts to arise during the term of his debt restructuring, or if he tries to disadvantage his creditors.

The essential difference between bankruptcy and debt restructuring is that after completion of a bankruptcy the unpaid claims survive and can therefore become collectable again for creditors.[76] A bankruptcy ends by means of an agreement, by means of a simplified completion (removal in case of a lack of income) or by means of a distribution to the creditors following verification of their claims.

Questions – Chapter 3 Insolvency

Question 1

The public prosecutor has requested for the bankruptcy of Mrs. Hommel (who is the director of Hommel Ltd). The public prosecutor accuses her of mismanagement; she is therefore personally liable for the financial damage of the shareholders. According to the public prosecutor, Hommel lives in a fancy villa in Wassenaar and owns several BMW’s. However, Hommel has already foreseen the judgment declaring bankruptcy and flees to Belgium. The curator/trustee has a claim of € 1,600,000 on Hommel.

  1. Can the public prosecutor file a petition against Hommel Ltd? Which type of insolvency is possible and which isn’t?
  2. Why is personal bankruptcy relevant here?
  3. Could Hommel do anything against the judgment declaring bankruptcy?
  4. Mention a reason why Hommel would flee to Belgium. Would it make a difference?

Question 2

The foundation YoungFit offers to her forty-two creditor’s payment of half of their debt. The week before, one of the big creditors has filed for bankruptcy of the foundation. The board of directors is trying to come to an agreement with this creditor before the court case. They say that if bankruptcy is granted, the creditors will receive a lot less.

How is the foundation trying to avoid bankruptcy and if the request of the creditor would be granted, would this method of the foundation be a way to end the bankruptcy?

Question 3

The company H&M is not doing well financially. The board of directors has an emergency meeting to decide whether to file a request for bankruptcy or suspension of payments. They turn to you for legal advice.

  1. What is the difference between bankruptcy and suspension of payments? What would you advise?
  2. What is the main advantage and disadvantage of suspension of payment?

Question 4

Mr. Wevers had borrowed a sum of € 5,000 from his friend Bart. Unfortunately, Wevers has several outstanding debts with several creditors, including his bank (he has not paid his mortgage for three months), his credit company Visa, his study loan with DUO, Ikea (he had ordered all his furniture there, but only paid half) and his ex-wife, who he still owes alimony.

Bart is worried that he will not get his money bank. In addition, Wevers is thinking of submitting a request for bankruptcy or a debt restructuring for private individuals.

  1. Why should Wevers not ask for a suspension of payments?
  2. Mention per party the type of creditor.
  3. Let’s assume that Wevers has been granted the request of bankruptcy, so Bart now has a claim on a bankrupt. What does this mean for Bart?
  4. What if Bart had lent the money to Wevers after his bankruptcy was granted (which would not be very wise…): can Bart still claim his money back?
  5. If mr. Wevers would request of a Debt restructuring for private individuals, how long would the procedure take?
  6. Bart has been waiting for a very long time for his claim. What if the bankruptcy has been terminated and Bart still has not been paid?
  7. What if mr. Wevers has done the debt restructuring for private individuals and the judge has decided after 3 years he deserves a clean slate. Can Bart still claim his money back? And what could he have done or still do?

Chapter 4. Intellectual Property Law

Paragraph 4.1 – What is intellectual property law?

Paragraph 4.2 – Copyright

Paragraph4.3 – Trade mark

Paragraph 4.4 – Patent

Questions – Chapter 4

Paragraph 4.1 – What is intellectual property law?

Intellectual property law is an interesting and diverse area. One of the things that make it such an interesting area is the increased importance of intellectual property: intellectual property is booming business. This is also clearly demonstrated by the number of recent (significant) lawsuits.

The main types of intellectual property are copyright, trade mark (or trademark), patent and design rights. In this Chapter, the first three will be discussed.

Intellectual property is a form of intangible property. Just like any other property it can be (partially) bought, sold, inherited or otherwise acquired. In the Netherlands, intellectual property rights are comprehensive rights, which means they can be enforced against everyone.

Intellectual property is protected to prevent others, typically for a certain period of time, from taking unfair advantage of someone else’s efforts. Moreover, it gives people incentives in the form of recognition and the possibility of obtaining fair economic rewards. The ultimate goal is to encourage development and to stimulate creativity.

The focus of this Chapter is on Dutch law, but English law is also used by way of comparison. Due to the on-going harmonisation of intellectual property laws, European law is very relevant and therefore regularly quoted and referred to.

Paragraph 4.2 – Copyright

4.2.1 Introduction

The most important message regarding copyright is that it does not protect the idea but only the independent expression of the idea. Copyright in the Netherlands is codified in the Auteurswet (henceforth: Dutch Copyright Act). Even though quite a few people would love to disagree, copyright ≠ the right to copy. On the contrary; copyright is meant to protect the work of an author[77] against unauthorised copying. The copyright holder, usually the author himself, controls whether and how the work is used.

In the Netherlands, the international copyright notice (©) is entirely optional. This implies that copyright is automatically obtained and that no (registration) fees have to be paid. In the Netherlands, an author doesn’t even have to realise that he created a protected work.[78] The fact that copyright is automatically obtained applies to all countries that are party to the Berne Convention (à Paragraph 4.2.6). In countries that are not party to the Berne Convention, registration may be required. In some countries, copyright does have to be asserted. To assert a copyright, the copyright notice is often used.[79]

To avoid disputes about who is the author of a work, it is advisable to keep an archive of your work, including all sketches, concepts et cetera. This archive helps to demonstrate the process of creation.

Article 7 of the Berne Convention determines that the duration of copyright is the life of the author plus fifty (50) years after his death. European legislation provides even longer protection: the life of the author plus seventy (70) years. Therefore, the duration of copyright in the Netherlands is the life of the author plus seventy years. In case of joint authorship, the death of the last surviving author counts.

Copyright laws in the European Union are harmonised – albeit less harmonised than patent and trade mark laws – mainly through Directive 2001/29/EC.[80]

4.2.2 The requirements

In the Netherlands there are four requirements that have to be met in order to obtain a copyright:

  • A ‘work’
  • Tangibility
  • Own character
  • Personal stamp (touch) of the author

In England there are only three requirements: it has to be a work, there has to be tangibility and there has to be originality.

A ‘work’

Only certain, specific types of works are protected. In the Netherlands there are three categories, based on the Berne Convention:[81]literary works, scientific works and artistic works. Literary works and artistic works are categories in England as well, but in addition to these they have dramatic works and musical works as separate categories.

A few examples of what is regarded as a work on the basis of article 10 of the Dutch Copyright Act: books, brochures, magazines, geographical maps, designs, sketches, photographic works, films, computer programs, choreographic works, speeches, theatrical performances, sculptures, musical works (with or without words) and so on. One can clearly see that even though England has two different categories, more or less the same types of works are protected.

The length, the quality or the artistic value is in principle irrelevant.

Tangibility

Tangibility implies that copyright does not protect ideas, but only the particular (tangible) expression of an idea. The expression must be recorded in a permanent form; this can either be in writing or in any other way.[82]

Own character

The own character requirement implies that the work shall not be an imitation or a copy of another work. In practice it rarely happens that there is no own character.

Personal stamp of the author

This requirement – combined with the own character requirement –is often referred to as ‘originality’. The words ‘personal stamp’, as a matter of fact, should be interpreted as ‘personal touch’.

The Supreme Court of The Netherlands redefined this requirement in its 2008 decision in the Endstra tapes case.[83] The Supreme Court stated[84] that the work has to be in a form that is the result of creative human labour, and therefore creative choices, which means that it must be a creation of the mind. It also stated that the aforesaid has to be derived from the work itself, not from the intentions of the author.

4.2.3 Style

Style is not protected by copyright. Therefore, you can compose music in the style of Gershwin, paint in the style of Picasso and write in the style of Tom Clancy. The main issue is: what is considered as non-protected style and what is considered as copyright protected features? The boundary between these two is largely determined by the following factors:

  • Is the specific combination of style-elements as such original and does it bear the personal stamp of the author?
  • Can the style-elements be shaped in a different way?

These factors were developed in Dutch jurisprudence. Despite the fact that these factors help in determining the boundary, there is still a large grey area. It is eventually up to a judge to decide where exactly the boundary is in each individual case.

4.2.4 Rights

A copyright holder has two sets of rights: moral rights and economic (or exploitation) rights.

Economic rights

As the name already indicates, the goal of economic rights is to give the copyright owner the possibility to make money from the exploitation of the work. Copyright owners have the exclusive right to authorise, restrict or prohibit:[85]

  • Copying in any way, shape or form
  • Issuing copies of the work to the public
  • Renting or lending copies of the work to the public
  • Performing, showing or playing the work in public
  • Broadcasting the work or other communication to the public by electronic transmission
  • Adapting the work, such as translating, transcribing or converting

Examples of copying: photocopying, reproduction of a printed page in handwriting, typing or scanning, taping live or recorded music.

Moral rights

The typical thing about moral rights is that they can even be exercised after the author has transferred or licensed his work to a third party. Moral rights can be integrity rights or paternity rights.[86]

On the basis of his integrity right, the author can object to derogatory treatment (in the sense of mutilation, modification or distortion) of the work that is prejudicial to his honour or reputation. For the latter, the opinion of a right-thinking member of the public is relevant and not the opinion of the author himself.[87] The integrity right can only be exercised by the author if the work that is treated in a derogatory way is afterwards published or issued to the public.

The paternity right involves that the author is entitled to be identified as such. This is not an automatic right because it has to be asserted. This also works the other way around: authors have the right not to have works falsely attributed to them.

4.2.5 Infringement and use

Copyright infringement is the unauthorised use of the whole or a (substantial) part of the work. In the Dutch Copyright Act there are two categories of infringement: verveelvoudiging (multiplication) and openbaarmaking (disclosure – in the sense of making available to the public).[88] Multiplication has two sub-categories: producing one or more physical copies in which the work is included (reproduction) on the one side and translating, adapting or otherwise changing the intangible work (adaptation) on the other side.[89]

The remedies of the copyright owner are: filing an injunction, claiming damages and obtaining an order to hand over or destroy infringing copies. On a European level, the remedies are laid down in Directive 2004/48/EC.[90] Some forms of infringement are considered a criminal offence. The most notable example is piracy – (deliberate) copyright infringement on a commercial scale.[91]

Using (a part of) a copyrighted work does not always constitute copyright infringement. First of all, there is a possibility to obtain a licence from the copyright owner. A copyright can also be bought. Moreover, one is allowed to quote from lawfully published works – the so-called citation right. The work can also (partially) be used for research and teaching purposes and even for news reporting. All limitations to copyright are included in paragraph 6 of the Dutch Copyright Act.

Fair use

Fair use, which is a very important limitation to copyright in the United States, does not exist as such in the Netherlands. There is, however, an on-going debate about whether fair use should (eventually) be included in either the Dutch Copyright Act directly or in European legislation.[92] In the United States, fair use is codified in section 107 of the Copyright Act:

  • 107. Limitations on exclusive rights: Fair use[93]

Notwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work, including such use by reproduction in copies or phone records or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include —

  • the purpose and character of the use, including whether such use is of a commercial nature or is for non-profit educational purposes;
  • the nature of the copyrighted work;
  • the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
  • the effect of the use upon the potential market for or value of the copyrighted work.

The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors.

Despite the fact that fair use is non-existent in the Netherlands, Dutch courts can use general legal rules and principles to determine that a certain situation does not constitute infringement.[94]

Parody

A parody is the imitation of another work in an altered form to achieve a comical effect. From a social and cultural point-of-view, parodies are usually allowed.[95]

4.2.6 International copyright law

Most countries in the world are Member of the World Intellectual Property Organisation (WIPO), a specialised agency of the United Nations. The WIPO was established in 1967. The WIPO’s website has a huge database with the intellectual property laws of all Member States.[96] The database is not limited to copyright laws.

The Berne Conventiondeals with the protection of literary and artistic works. The text of the convention was first accepted in Berne (Switzerland) in 1886. To handle the administrative tasks, BIRPI[97] was established. In 1970, BIRPI became WIPO. The importance of the Berne Convention is that before it entered into force, national copyright laws – generally speaking – only applied to works created within the country itself. A work published in the Netherlands was only protected in the Netherlands; it could be copied and sold without permission of the copyright owner in any other country.

European Directives, such as Directive 2001/29/EC and Directive 2004/48/EC, are also an important source for international copyright law.

Paragraph 4.3 – Trade mark

4.3.1 Introduction

A trade mark is a distinctive, exclusive sign used by a person.[98] Trademarks are used to identify that certain products or services originate from a unique source. In other words, products or services can be distinguished from products or services of other persons. A trade mark gives the trade mark proprietor the exclusive right to use the mark for products or services for which it has been registered. Goodwill is protected; others are not allowed to profit from the reputation of the trade mark. The economic value of a trade mark can be substantial.

To claim a trade mark, ™ can be used. The ® indicates that a trade mark is officially registered. However, even if you register a trade mark use of the ® is not mandatory. Registration is not strictly required in the Netherlands, but if you decide to register your trade mark in the Netherlands, it is registered at the regional Chamber of Commerce (Kamer van Koophandel). For better protection, registration at the BBIE (Benelux-Bureau voor de Intellectuele Eigendom)[99] is necessary. If you want to sell your products or services in the whole European Union, registration at the OHIM (Office for Harmonization in the Internal Market) in Alicante, Spain is strongly recommended.[100] World-wide registration of a trade mark at the WIPO can be arranged via the BBIE.

A Benelux trade mark costs at least € 240. The registration procedure can take more than four months. A European trade mark, called Community Trade Mark (CTM) costs at least € 900. The duration of a trade mark is ten (10) years. It is important to note that a trade mark registration can be renewed, provided you still actively use the trade mark (‘Use it or lose it’).

Dutch trade mark law was codified in the Benelux Merkenwet. In September 2006, the Benelux Merkenwet was replaced by the BVIE, Benelux-verdrag inzake de intellectuele eigendom (henceforth: BCIP, Benelux convention on intellectual property).

4.3.2 The requirements

In the Netherlands, but also in England, the three requirements for obtaining a trade mark are:

  • A sign
  • Graphical representation
  • Capable of distinguishing

A sign

A sign can consist of words (including personal names), designs, letters, numerals, shape or packaging. The following is included: word marks, figurative marks, sound marks, three-dimensional marks and colours[101].[102] Registration of smell as a mark is extremely difficult, but possible in theory.

Graphical representation

A trade mark has to be clear, precise, self-contained, easily accessible, intelligible, durable and objective. These criteria were first mentioned in Sieckmann v. Deutsches Patent- und Markenambt[103] and are therefore often referred to as the Sieckmann-criteria.

Capable of distinguishing

A trade mark can be distinguishing because it has an original or a fantasy name. If the trade mark does not have an original or fantasy name, distinctiveness can be built up by the trade mark holder. An example of this is Apple. In addition to this, distinction through use is possible.[104]

Registration is refused if there are absolute or relative grounds of refusal. The absolute and relative grounds for refusal are included in the Community Trade Mark Regulation (CMTR).[105] In October 2008 the Trade Mark Directive was issued.[106] This Directive – the successor of Directive 89/104/EEC[107] – contains many provisions that were also included in the CMTR.[108]

Article 7 CMTR:

Absolute grounds for refusal

  1. The following shall not be registered:
  • (…);
  • trade marks which are devoid of any distinctive character;
  • trade marks which consist exclusively of signs or indications which may serve, in trade, to designate the kind, quality, quantity, intended purpose, value, geographical origin or the time of production of the goods or of rendering of the service, or other characteristics of the goods or service;
  • trade marks which consist exclusively of signs or indications which have become customary in the current language or in the bona fide and established practices of the trade;
  • signs which consist exclusively of:
    • the shape which results from the nature of the goods themselves;
    • the shape of goods which is necessary to obtain a technical result;
    • the shape which gives substantial value to the goods;
  • trade marks which are contrary to public policy or to accepted principles of morality;
  • trade marks which are of such a nature as to deceive the public, for instance as to the nature, quality or geographical origin of the goods or service;
  • (…);
  • trade marks which include badges, emblems or escutcheons other than those covered by Article 6ter of the Paris Convention and which are of particular public interest, unless the consent of the competent authority to their registration has been given;
  • trade marks for wines which contain or consist of a geographical indication identifying wines or for spirits
  • which contain or consist of a geographical indication identifying spirits with respect to such wines or spirits not having that origin;
  • trade marks which contain or consist of a designation of origin or a geographical indication registered in accordance with Council Regulation (EC) No 510/2006 of 20 March 2006 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs (1) when they correspond to one of the situations covered by Article 13 of the said Regulation and regarding the same type of product, on condition that the application for registration of the trade mark has been submitted after the date of filing with the Commission of the application for registration of the designation of origin or geographical indication.

Article 8 CMTR:

Relative grounds for refusal

  1. Upon opposition by the proprietor of an earlier trade mark, the trade mark applied for shall not be registered:
  • if it is identical with the earlier trade mark and the goods or services for which registration is applied for are identical with the goods or services for which the earlier trade mark is protected;
  • if because of its identity with, or similarity to, the earlier trade mark and the identity or similarity of the goods or services covered by the trade marks there exists a likelihood of confusion on the part of the public in the territory in which the earlier trade mark is protected; the likelihood of confusion includes the likelihood of association with the earlier trade mark.

Genericised trade mark

On the basis of article 12 paragraph 2 sub (a) of the Trade Mark Directive,[109] registration may be revoked if, as a consequence of acts or inactivity of the proprietor, the name becomes customary in the current language to describe a general class of products or services. These trademarks are referred to as genericised trademarks or generic trademarks; at first they are distinctive, but they lose distinctiveness and become generic. The following marks are examples of trademarks that became generic in the United States and therefore lost protection: aspirin, butterscotch, escalator, kerosene, Tipp-ex, zipper, thermos.[110]

4.3.3 Infringement and use

A trade mark is infringed if it is used for the same products or services or if it is used for similar products or services. Others are free to use the trade mark for other goods unless the mark is used in such a way that it harms the proprietor in an unfair way. A trade mark does not monopolise the word that is trademarked.

The available remedies for a trade mark proprietor in case of infringement are largely similar to the remedies of a copyright owner (à Paragraph 4.2.5). Some forms of infringement are considered a criminal offence. The most notable example is counterfeiting – an economic crime. Counterfeiters deceive the consumer and potentially damage the reputation of the genuine manufacturer.

Trademarks of repute

Trademarks of repute are better protected than ‘normal’ trademarks. To become a trade mark of repute, a trade mark needs a certain reputation. The reputation is determined by the following factors: market share, intensity of sale, geographical location, duration of use and the advertising of the trade mark.[111] An example of a trade mark of repute is Heineken.

Questions – Chapter 4 Copyright Version A

Question 1

Peter, a Dutchman living in Montreal but often returning to his hometown Rotterdam, is a manufacturer of t-shirts in Canada. As a brand he uses his name and an image of an elf (designed by Chris). On the shirts there is a random selection of Dutch words. Fred buys a whole load of these shirts in Canada and ships them to the Netherlands. During the period of time that Peter is in Rotterdam, he seizes the shirts that Fred has brought in.

  1. Does Peter have copyright protection in the Netherlands? Argue when he has and when he has not.
  2. Does Peter have the right to change the elf next year? What if Chris is considered as copyright holder?
  3. Does Peter have a copyright in Canada and also the Netherlands?
  4. Could Fred successfully use the defence that he doesn’t like the image of the elf and that it should therefore not be seen as a work of art or literature?
  5. Could Fred use the argument that the elf looks exactly like the ones in Lord of the Rings?
  6. Is Fred still acting in violation of a copyright if he put the shirts on the market in Canada after buying them in Canada?
  7. Would Fred have a better position if he had bought the shirts in Germany to sell in the Netherlands?
  8. Imagine Fred has his own shop in Rotterdam where he sells the t-shirts of Peter. Would it be allowed for Fred to put an image of the elf which is on the t-shirt in his commercial add?
  9. Which rights does a maker have and which rights could be infringed by Fred?
  10. Does Peter have a copyright on the words on his shirts?
  11. Are the words a strong or weak copyright? What would be the consequence? And what about the image of the elf (answer for both cases where the elf is a design of Chris and where the elf is very similair to the one in Lord of the Rings).

Questions – Chapter 4 Copyright Version B

Question 1

The Business Law teachers are rewriting all course materials. They are using many books they borrowed from the library and reliable internet sources for their rewriting. After a few weeks they have a very nice Syllabus for the course module. They have also used a few images in the Syllabus which they found on the internet. In addition to the Syllabus they also occasionally want to show a video film during their lectures. However, one of the Business Law teachers is a bit worried whether they are infringing any copyrights.

  1. When does copyright become relevant for the BL teachers?
  2. What protection does copyright offer?
  3. Who are protected by copyright?
  4. When do you infringe copyright and can you also mention some exceptions.
  5. With regards to the videos: to show the students a video film during a lecture. Is this allowed?
  6. The BL teacher has downloaded some of the pictures from internet. Can she use it in an educational context?
  7. Imagine one of the teachers would like to use a section of the film for a trial study day to give a good illustration to the potential new students how a business law lecture looks like. Can the teacher do this?
  8. Answer the before mentioned question if it was for an open day?
  9. During a conference at your university, one of the BL teachers gives a lecture using a PowerPoint presentation. During the presentation, she shows a TV programme via a link. Is that allowed?
  10. The BL teacher wants to send an article related to copyright she found on the web by e-mail to her colleague. Can she do this?

Question 2

Patrick, who is an artist, gives permission to his publisher to publicise 13 of his own paintings in the form of a calendar. A third party, Harry, buys a few of these calendars, cuts out the reproductions of these paintings and sticks them on chipboards and sells these to consumers. Harry says that the rights of the creator is exhausted by selling his painting as a calendar, he (Harry) therefore can use his picture. According to Harry, Patrick as a copyright holder cannot control the change of ownership of the copy anymore, because Patrick publicised his work and Harry can now ‘reuse’ it without asking permission.

  1. Could you argue for Patrick that Harry is copying his work?
  2. What if Patrick has also made a small film, which you as a student want to use in your ppt presentation for Business Law. Can you use parts of the video in your ppt (or prezi) presentation?
  3. What are the remedies Patrick can use?
  4. What if Harry thought of making a parody of the calendar by adding Nazi soldiers on every picture? Would this be allowed or not?

Questions – Chapter 4 Trademark Version A

Question 1

Robert has a restaurant called Snacks. On the outside of his restaurant he hangs a sign with his logo (which he has registered); a frying pan with the word ‘Snacks’. In a village nearby Hank opens his catering service company named Snecks. On his window he paints a frying pan with the name ‘Snecks’ underneath.

  1. Could Robert prohibit Hank to use the word Snecks? Which arguments would Robert use? Could Hank argue against it?
  2. Suppose that Robert has a right on the word ‘Snacks’, which arguments could you think of to say that this brand is weak?
  3. Why could it be important that a trade mark is strong or weak?
  4. Could a trade mark get weaker and/or stronger?
  5. Suppose Hank finds out that Robert has ‘stolen’ his logo from his artist, Peter. Could this make the legal position of Hank stronger? Name the requirements for legitimacy of a trade mark.

Question 2

In Thailand, Carel buys five containers full of perfume. The bottles have a shape similar to a Greek god. On the bottles there is no label and no name. The package of the bottles is plain white cardboard. At arrival in Rotterdam a French company called Eaudelille, seizes the bottles, on grounds of infringement of her trade mark. Eaudelille has registered the bottle and the scent as a trade mark in the Benelux. Eaudelille has requested the judge to destroy the whole cargo of Carel and to prohibit further promotion of the perfume in his commercial paper.

  1. Can you register a shape of a bottle and a scent as a trade mark? Can scent be protected by copyright?
  2. What is the advantage of a trade mark on the bottle and the scent compared to a copyright?
  3. Could Eaudelille ask for destruction of the whole cargo of Carel if he has purchased the perfume legally in Thailand and did not know of the registration of Eaudelille?
  4. Would Carel have a better legal position if he had purchased the perfume in Germany?
  5. Is Carel allowed to put a picture of the bottle in a commercial paper? What if he had bought the bottles in Germany? What about the copyright?
  6. Would it be an option for Carel to empty the bottles of perfume, fill them with clear Greek water instead, and sell them?

Question 3 (Recommended)

The Dutch inventor Wallace has invented a kind of a metal which can carry a thousand times its own weight. He asks for patent. More and more companies are using his type of metal. Gareth buys in Taiwan many refrigerators of the brand Super. The refrigerators contain elements of Wallace’s metal. Gareth transports the refrigerators to Holland. In Holland Wallace seizes the refrigerators because Super had never asked for permission to use the metal.

  1. Gareth hopes to find a failure in the patent of Wallace and wonders what the requirements are. Could you name them and has Wallace fulfilled them all?
  2. Which requirements of trade mark do not have to be fulfilled for patent?
  3. What kind of patent can Wallace obtain and for how long?
  4. What are the disadvantages of applying for a patent?
  5. Suppose that Wallace’s metal is composed of two kinds of materials and another manufacturer makes the same metal, but with a slightly different composition, namely with three types of other materials. Based on which argument could you say that there is still an infringement on Wallace’s rights?
  6. What if another company has improved the metal, into a stronger and lighter type? They want to use this metal in products, but Wallace refuses to give permission. Does the company need his permission?

Question – Chapter 4 Trademark Version B

Question 1

L’Oréal has brought a perfume on the market called Maroussia. Another company, called Thor, has brought similar perfumes (no copies though). L’Oréal argued that this in an unjustified advantage for the other companies at the expense of L’Oréal. L’Oréal questions how much their trade is protected. L’Oréal thinks there is a certain level of similarity between its brand and of its opponent Thor. Especially because L’Oréal thinks when consumers see the perfume of Thor they will connect this with their perfume Maroussia.

L’Oréal goes to you for advice and asks you several questions:

  1. Must L’Oréal, in order to be protected, register their trademark?
  2. L’Oréal decides to go to the trademark office to register their mark? Will there be a guarantee that their mark will be registered?
  3. L’Oréal is thinking of a new symbol for their brand. Can they use any type of mark?
  4. What would you advise L’Oréal to use for their mark?
  5. Imagine that Thor was a producer of detergent for toilets. They have a new product to clean your toilets with called Naroussia. Can you think of any objections L’Oréal, as a perfume producers, could have against this product of Thor?
  6. If L’Oréal had called their perfume not Maroussia, but ‘oriental flour for the passionate women’. Could this be rejected and why?
  7. What if L’Oréal does not use their trademark for 6 years? What can be the consequence?

[1] Source: Black’s Law Dictionary, Third pocket edition, Thomson/West 2006

[2] When referring to the legal system, capital letters (majuscules) will be used à Civil Law

[3]http://www.lawinfochina.com/Article/Article2.shtm

[4]http://en.wikipedia.org/wiki/File:LegalSystemsOfTheWorldMap.png; latest revision 13 February 2012

[5] In Dutch: Burgerlijk recht or Civiel recht

[6] B.A. Garner, 2006. Black’s Law Dictionary. 3rd edition. St. Paul: Thomson/West

[7] All translations are taken from: The Civil Code of the Netherlands; H. Warendorf, R. Thomas, I. Curry-Summer; Kluwer International BV, 2009

[8] B.A. Garner, 2006. Black’s Law Dictionary. 3rd edition. St. Paul: Thomson/West

[9]http://definitions.uslegal.com/j/juridical-act/

[10] http://www.britannica.com/EBchecked/topic/291011/international-law/233501/General-principles-of-law

[11] http://www.transnational.deusto.es/IP2010/docs/What%20is%20PIL.pdf

[12] http://library.law.columbia.edu/guides/Researching_Public_International_Law

[13]http://www.britannica.com/EBchecked/topic/291011/international-law/233501/General-principles-of-law; Another important general principle is that of equity/impartiality, which permits international law to have a degree of flexibility in its application and enforcement

[14] http://topics.law.cornell.edu/wex/international_law

[15] As long it is with regard to a matter over which sovereign power has been transferred

[16] http://www.un.org/Docs/sc/unsc_functions.html

[17] To a very limited extent the Member States have transferred their sovereign power to the Security Council

[18] The Civil Code of Québec (Canada) uses the word patrimony to describe all property and debts of a person

[19] For example: Berg en Dalse Watertoren (HR 13 maart 1936, NJ 1936, 415 en HR 2 april 1937, NJ 1937, 639)& Amotie-arrest (HR 17 april 1970, NJ 1971, 89)

[20]Genotsrecht

[21] In Common Law terminology: servient estate and dominant estate

[22] See for example article 1197 of the Civil Code of Québec

[23] In Dutch: VvE – Vereniging van Eigenaren

[24] In some jurisdictions, pledge is commonly referred to as chattel mortgage

[25] In Dutch law, the word separatist is often used

[26] Depending on the jurisdiction, hypothec is either a type of mortgage or used as a synonym for mortgage

[27] Also called detentor

[28] This rule, which also applies to possession, is derived from Roman law: nemo causam possessionis sibi ipse mutare potest

[29] Please note: if one, in this context, acquires property, one becomes owner, so one could also use the term ‘acquisition of ownership’

[30] Compare articles 711 – 717 of the Code civil français

[31] J.H.A. Lokin, 1999. Prota – Vermogensrechtelijke leerstukken aan de hand van Romeinsrechtelijke teksten. 5th edition. Groningen, page 105

[32] The Monumentenwet 1988 contains a few exceptions (article 50 in particular)

[33] Article 3:99 DCC

[34] Article 3:306 DCC

[35] Which makes it a bilateral juridical act

[36] Article 3:32 sub 2 DCC

[37]http://books.google.com/books?id=iqE9AAAAIAAJ&pg=PA4; http://www.thefreedictionary.com/bankrupt

[38]Faillissementswet (Fw)

[39]Articles 6 BA

[40] Provisional enforcement or execution is a decision by the court that there will be no stay (suspension) of execution of a decision, although an appeal is being lodged against it. Normally the lodging of an appeal does lead to a stay of execution. So a defendant, who went into appeal, can still be forced to pay to the creditor. Without the provisional judgment, the defendant would only have to pay after the Judge of the Court of Appeal has made a decision. T. Foster, 2009. Dutch Legal Terminology in English. Deventer:Kluwer, page 155

[41] http://www.batasnatin.com/law-library/civil-law/obligations-and-contracts/830-suspension-of-payments-insolvency-law.html

[42] http://pinoy-business.com/corporate/284-options-for-entrepreneurs-in-financial-distress-suspension-rehabilitation-and-insolvency

[43] http://ec.europa.eu/civiljustice/bankruptcy/bankruptcy_lux_en.htm#3.c)

[44]http://ec.europa.eu/civiljustice/bankruptcy/bankruptcy_net_en.htm; article 214 BA

[45] http://www.batasnatin.com/law-library/civil-law/obligations-and-contracts/830-suspension-of-payments-insolvency-law.html

[46]Wet Schuldsanering voor Natuurlijke Personen. See articles 284 of the Bankruptcy Act.

[47] http://ec.europa.eu/enterprise/policies/sme/files/sme2chance/doc/report_ned_en.pdf; N.J. Polak, 1999. Faillissementsrecht. Deventer: Kluwer, page 276; R.J. van Galen, E.W.J. Liagre Böhl and R.W. de Ruuk, 1997. Faillissementswet. Deventer: Kluwer, Losbladige Kluwer, inleiding Titel III.

[48]Duty of effort in debt restructuring: the debtor who is admitted to the debt should exert maximum effort for his creditors for a period of three years, so that as much money as possible comes into the estate. For three years he will have to make his capacity to repay available to his creditors up to 95% of the applicable support level

[49] http://www.cbs.nl/en-GB/menu/methoden/toelichtingen/alfabet/p/personal-debt-restructuring.htm

[50] Dutch translation: buitengerechtelijk

[51] For further information about the requirements: http://ec.europa.eu/civiljustice/bankruptcy/bankruptcy_net_en.htm

[52]M.A.J.G. Janssen et al, 2008. Bankruptcy And A Fresh Start: Stigma On Failure And Legal Consequences Of Bankruptcy. Dutch report, p. 7.

[53] http://ec.europa.eu/civiljustice/bankruptcy/bankruptcy_net_en.htm

[54]Staatscourant: Official journal/legal gazette: The Staatsblad, Staatscourant and Tractatenblad contain parts with legislation as well as parts with legal notices and other official texts

[55] http://ec.europa.eu/civiljustice/bankruptcy/bankruptcy_net_en.htm

[56] Reifner et al, 2003; Gerhardt, 2009; Fraude, 2010

[57]Preferred creditor: a creditor with a preferential right created by a statutory provision, i.e. the tax authorities and the social insurance board are examples of high ranking preferred creditors

[58] http://www.becomingbankrupt.co.uk/types-of-creditor.html

[59]Concurrente crediteur:Common creditor: a non-preferred, unsecured, deferred creditor

[60] http://www.becomingbankrupt.co.uk/types-of-creditor.html

[61] http://www.cbs.nl/NR/rdonlyres/0D1B8D1C-ABBF-4A39-8D8E-B5D500BA1EA0/0/insolventietrechtincijfers07.pdf

[62] He now manages the the affairs of the debtor (who is now officially incapable and unauthorised)

[63]M.A.J.G. Janssen et al, 2008. Bankruptcy And A Fresh Start: Stigma On Failure And Legal Consequences Of Bankruptcy. Dutch report, p. 5.

[64]M.A.J.G. Janssen et al, 2008. Bankruptcy And A Fresh Start: Stigma On Failure And Legal Consequences Of Bankruptcy. Dutch report, p. 6.

[65] http://ec.europa.eu/civiljustice/bankruptcy/bankruptcy_net_en.htm

[66]http://en.wikipedia.org/wiki/Bankruptcy

[67] http://www.credit-land.com/articles/articles_page_68600_1881780_4.php

[68] Dutch translation: failliete boedel

[69] T. Foster, Dutch Legal Terminology in English, Kluwer 2009, p. 26.

[70]According to articles 20 and 295 BA

[71] http://ec.europa.eu/civiljustice/bankruptcy/bankruptcy_net_en.htm

[72] http://ec.europa.eu/civiljustice/bankruptcy/bankruptcy_net_en.htm

[73]http://ec.europa.eu/enterprise/policies/sme/files/sme2chance/doc/report_ned_en.pdf, p. 5.

[74]See article 358 of the Bankruptcy Act

[75]See article 350 of the Bankruptcy Act

[76]Articles 195 BA

[77] Also referred to as ‘maker’ or ‘creator’

[78] J.H. Spoor, D.W.F. Verkade, D.J.G. Visser, 2005. Auteursrecht. 3rd edition. Deventer: Kluwer, page 3

[79] Countries that are party to the Universal Copyright Convention 1971, but are not party to the Berne Convention

[80] Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society

[81] J.H. Spoor, D.W.F. Verkade, D.J.G. Visser, 2005. Auteursrecht. 3rd edition. Deventer: Kluwer, page 75

[82] D. Bainbridge and C. Howell, 2011. Law Express – Intellectual Property Law. 2nd edition. Essex: Pearson Education Limited, page 5

[83] HR 20 May 2008, LJN:BC2153, C07/131HR, Endstra tapes

[84] In line with HR 4 January 1991, NJ 1991, 608, Van Dale/Romme

[85] http://www.ipo.gov.uk/types/copy/c-about/c-about-faq/c-about-faq-economic.htm

[86] Article 25 of the Dutch Copyright Act

[87] D. Bainbridge and C. Howell, 2011. Law Express – Intellectual Property Law. 2nd edition. Essex: Pearson Education Limited, page 29

[88] Article 12 and article 13 of the Dutch Copyright Act

[89] J.H. Spoor, D.W.F. Verkade, D.J.G. Visser, 2005. Auteursrecht. 3rd edition. Deventer: Kluwer, page 156

[90] Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights

[91] Agreement on Trade-Related Aspects of Intellectual Property (TRIPs), annex C1 of the Marrakesh Agreement Establishing the World Trade Organisation, Marrakesh 15 April 1994, article 61

[92] http://www.rijksoverheid.nl/onderwerpen/ict/legaal-downloaden-en-fair-use

[93] http://www.copyright.gov/title17/92chap1.html#107

[94] J.H. Spoor, D.W.F. Verkade, D.J.G. Visser, 2005. Auteursrecht. 3rd edition. Deventer: Kluwer, page 221

[95] Article 18b of the Dutch Copyright Act

[96] http://www.wipo.int/wipolex/en/national.jsp

[97]Bureaux Internationaux Réunis pour la Protection de la Propriété Intellectuelle

[98] This will usually be a legal person – natural persons, however, can also be the owner of certain trade marks

[99] BOIP – Benelux Office for Intellectual Property

[100] http://oami.europa.eu/ows/rw/pages/index.en.do

[101] http://www.ipo.gov.uk/pro-types/pro-tm/t-law/t-pan/t-pan-207.htm

[102]http://oami.europa.eu/ows/rw/pages/CTM/FAQ/CTM1.en.do, and; http://www.boip.int/nl/pdf/regulations/beneluxverdrag.pdf

[103] European Court of Justice C-273/00, judgment of 12 December 2002, paragraph 47 – 55, as confirmed in: European Court of Justice C-104/01, judgement of 6 May 2003, Libertel Groep BV v. Benelux Merkenbureau, paragraph 1 of the Court’s ruling

[104] For example: European Court of Justice C-108/97 and C109-97, judgment of 4 May 1999, Windsurfing Chiemsee Produktions- und Vertriebs GmbH v. Boots- und Segelzubehör Walter Huber and Franz Attenberger, paragraph 2 of the Court’s ruling

[105] Council Regulation (EC) No 207/2009 of 26 February 2009 on the Community trade mark;

[106] Directive 2008/95/EC of the European Parliament and of the Council of 22 October 2008 to approximate the laws of the Member States relating to trade marks

[107] First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks

[108] The developments are accurately described in: http://www.whoswholegal.com/news/features/article/12862/developments-european-trademark-law

[109] Similar to article 51 paragraph 1 sub (b) of the CMTR

[110] More examples can be found here: http://en.wikipedia.org/wiki/List_of_generic_and_genericized_trademarks

[111] European Court of Justice C-375/97, judgment of 14 September 1999, General Motors Corporation v. Yplon SA,

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