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Restricted enforcement protection against European Enforcement Order

Berlin, 10th October 2022

As early as 2004, Directive (EC) No 805/2004 of the European Parliament and of the Council of 21st April 2004 creating a European Enforcement Order for uncontested claims (EuVTVO) introduced the possibility of simplified enforcement from the titles of courts of another EU Member State if the underlying claims are not disputed.

As the Federal Court of Justice ruled in July this year (decision of 7th July 2022 – IX ZB 38/21), concerning unpaid fees from an Austrian law firm, the possibilities for legal protection in the enforcement of such titles are limited, since the debtors concerned require less protection because the underlying claims remain undisputed. Only the legal remedies mentioned in the EuVTVO itself, such as the possibility to apply for a correction of the title in the state of origin, and (national) legal protection possibilities in the state of enforcement are permissible unless there are corresponding special regulations in the EuVTVO.

Therefore, according to the Federal Court of Justice, an appeal to enforcement obstacles under the EuGVVO applicable to disputed decisions is already inadmissible. The Federal Court of Justice therefore ‘red-cards’ debtors who stall for time. This is good news for creditors who rightly demand prompt enforcement in these cases.

Author: Lutz Paschen, Attorney at law, PASCHEN Rechtsanwälte PartGmbB

Signing electronically in the Netherlands

Amsterdam/Enschede, 27th June 2022

Electronic signatures are playing an increasingly important role in signing contracts and other documents. The European Directive has also been implemented in the Netherlands. This article explains the role it plays and the recommendations surrounding electronic signatures in the Netherlands.

Also examined here is the question of whether electronic signatures in the Netherlands fulfil the “written form requirement” and the extent to which it is possible to sign electronically in the Netherlands.

At the European level, the rules on electronic signatures are set out in the eIDAS Regulation. Article 3 of the Regulation distinguishes between three types of signatures:

– Electronic signature: data in electronic form attached to or logically linked with other data in electronic form and used by the signatory to provide the signature (Part 10); e.g.,

• a scan of a paper signature
• the (typed) signature at the end of an email

– Advanced electronic signature: fulfils the following requirements (Article 13 Part 11 and Article 26 of the eIDAS Regulation):

a. It is clearly linked to the signatory;

b. It allows the signatory to be identified;

c. It has been created using electronic signature creation data which the signatory may use under their sole control with a high degree of confidence; and

d. It is linked to the data signed with it in such a way that any subsequent modification of the data can be detected.

– Qualified electronic signature: an advanced electronic signature which

e. is created by a qualified signature creation unit and

f. is based on a qualified signature certificate;

The qualified certificate must also be issued by a qualified trust service provider that fulfils the requirements of Annex I of the eIDAS Regulation (Article 3, Part 15 of the eIDAS Regulation).

The eIDAS Regulation only prescribes legal effect for qualified electronic signatures. The following shall apply to the other electronic signatures: “An electronic signature shall not be denied legal effect and admissibility as evidence in legal proceedings solely on the grounds that it is in an electronic form or that it does not meet the requirements for qualified electronic signatures.”

This means that qualified electronic signatures have the same effect in each Member State: they have the same legal effect as a handwritten signature. With regard to the other electronic signatures, the legislation varies from one Member State to another.

Dutch Regulations

Article 3:15a BW (the Netherlands Civil Code) regulates the legal effects of simple and advanced electronic signatures.

“An advanced electronic signature (Part 11) and another electronic signature (Part 10) have the same legal effects as a handwritten signature if the signature method used for those two electronic signatures is sufficiently reliable, taking into account the purpose for which the electronic signature is used and all other circumstances of the case.”

This Article does not specify what constitutes a sufficiently reliable electronic signature. There is an open standard which renders giving a general indication of when the requirements in Article 3:15a BW have been fulfilled difficult. It is assumed that a simple electronic signature generally suffices for simple transactions, whereas an advanced electronic signature is required for more complex transactions which demand greater reliability and security.

When determining whether a transaction is simple or complex, the economic value and the nature of the transaction play a role. As the importance of the legal act increases, the electronic signature must be supplemented with additional safeguards.

The parties may decide for themselves which type of electronic signature they consider to be desirable for which legal act. In most cases, the parties will record their choice in their contractual relationship for evidentiary purposes. Should the parties refrain from making such a choice, in the event of a dispute, the court will examine whether the signature actually used is sufficiently reliable, taking into account the nature of the transaction and all other circumstances of the case.

Evidence

If a qualified electronic signature is used, it will have the same legal effect as a handwritten signature (Article 25 (2) of the eIDAS Regulation). This means that it has a binding evidentiary effect (Article 156 in conjunction with Articles 156a and 157 (2) Rv).

The parties may conclude agreements regarding the reliability of advanced and other electronic signatures. This is not possible in the case of qualified electronic signatures, as this is stipulated in the Regulation.

This party agreement is a circumstance which is taken into account when assessing the reliability of the method used for the signature. In the event of a dispute, the judge will examine the cases based on the criteria set out in Article 3:15a BW.

Should the judge find that the simple or advanced electronic signature is sufficiently reliable, this document will have a binding evidentiary effect in accordance with Article 3:15a BW in conjunction with Article 156a BW in conjunction with Article 157 (2) BW. Should the judge decide that an electronic signature is not sufficiently reliable, the electronic document will only have free evidentiary value (Article 152 Rv).

There remains little case law on these issues.

Use of electronic signatures in the Netherlands

Qualified electronic signature: This action is accompanied by a qualified certificate. This certificate is part of the digital code which the sender adds to their message There are special organisations which issue certificates, the certification service. Public Key Infrastructure (PKI) The government issues the certificates used by the Dutch government. Radiocommunications Agency Netherlands monitors the provision of certification services.

Various providers from whom this service can be purchased can be found online (DocuSign, Adobe).

Advanced electronic signature (AES): This option is not mentioned on the government website. The eIDAS Regulation mentions this but does not provide any further explanation.

Other electronic signatures: This is generally not recommended for business transactions of significant value.

Conclusion

A qualified electronic signature has the same legal effects as a “normal” signature. This means that the signed document has a binding evidentiary effect.

A document signed using an advanced or other electronic signature will only have binding evidentiary effect if the court considers the signature method to be sufficiently reliable in relation to the nature and value of the transaction. If a judge does not consider the type of signature to be sufficiently reliable, Article 3:15a BW will not apply and the document will have free evidentiary effect. It should be noted that, if the court does not consider the signature method to be reliable, it is highly unlikely that it will confer any significant evidentiary value.

Author: Advocaat Irith Hofmann, Damste Advocaten, Netherlands

The provisions relating to the actuarial deposit are not applicable to British plaintiffs

Vienna, 9th June 2022

The United Kingdom’s withdrawal from the European Union has raised numerous uncertainties regarding bilateral law enforcement. For example, the Austrian Supreme Court recently had to deal with the issue of the actuarial deposit. The purpose of the actuarial deposit (§ 57 of the Austrian Code of Civil Procedure (öZPO)) is to protect a domestic defendant from not being able to recover legal costs from a foreign plaintiff who has unsuccessfully filed a claim against the defendant; as a security for legal costs, the actuarial deposit is thus intended to protect against abusive or costly legal action by foreign plaintiffs.

The Austrian Supreme Court ruled on 23/03/2022 that a British plaintiff did not have to provide an Austrian defendant with an actuarial deposit. The Supreme Court based the decision on the enforcement obligation between the European Union and the United Kingdom agreed by the United Kingdom’s ratification of the Hague Convention on Choice of Court Agreements in Civil and Commercial Matters on 28/09/2021. Due to this contractual agreement, the defendant’s argument that the lack of enforcement of Austrian legally established procedures in the United Kingdom would create significant uncertainties for Austrian contracting parties was not valid.

This decision is part of a growing body of post-Brexit case law in the European Union. After a hard Brexit was avoided at the last moment via a trade agreement with the EU, Prime Minister Boris Johnson declared his intention to adjust the remaining EU influences on the hierarchy of standards in favour of British companies. It can therefore be assumed that EU companies will be increasingly confronted with legal uncertainties in the future.

Author: Mag. Kristina Steflitsch / Mag. Johannes Zink, hba Rechtsanwälte Vienna, Austria

EARN extends its reach

Berlin/Brussels, 17th November 2021

The EARN European Accounts Receivables network has gained another experienced partner in Central Europe with DEWISPELAERE ADVOCATEN, Belgium.

DEWISPELAERE ADVOCATEN is an independent law firm based in Brussels (Strombeek-Bever).  Founded as early as 1975, DEWISPELAERE today specialises in particular in corporate, contract and financial law also with cross-border aspects. In addition, they have special expertise in credit management and thus perfectly complement the EARN portfolio with a highly experienced legal partner in Belgium.

You can view our current EARN members here.

ECJ: avoidance of transactions in insolvency proceedings in cross-border business

Berlin, 28th July 2021

In insolvency proceedings conducted in Germany, it is particularly easy for insolvency administrators to successfully assert claims against creditors by means of insolvency avoidance. This practice is based on the administrator-friendly insolvency case law by the German Federal Court of Justice, which has facilitated the enforcement of avoidance claims for the insolvency administrator by lowering the standard of proof.

A judgement by the European Court of Justice (ECJ) of 22 April 2021 (Case C-73/20 – Oeltrans Befrachtungsgesellschaft) now provides a lifeline to foreign creditors domiciled in an EU Member State. In its judgment the court decided on insolvency avoidance claims asserted against a Dutch inland waterway shipping company which had received a payment for transports from a client who declared insolvency shortly after. This payment was demanded back by the insolvency administrator of the former client.

Art. 13 of Council Regulation (EC) No. 1346/2000 of 29 May 2000 (now identical in wording to Article 16 of the (EU) Regulation 2015/848 on insolvency proceedings) allows foreign defendants to invoke the insolvency avoidance law of their home country, as long as its requirements for avoidance are lower than the requirements in the country of the contesting insolvency administrator. The Dutch inland waterway shipping company used this regulation as defence against the insolvency administrator’s avoidance claim by arguing that under Dutch law the contested payment would not be voidable and thus the Dutch law would have to be applied.

Against the insolvency administrator’s objection, the ECJ ruled that the payments in question have to be assessed under the Dutch insolvency law. Hence, the German Federal Court of Justice, which requested the ECJ’s decision in the first place, now has to decide whether the contested payments are voidable under Dutch law. Chances are high that the court will decide in favour of the Dutch company and dismiss the insolvency administrator’s claim.

In case of a business partner displaying an ambiguous payment behaviour, the ECJ ruling provides a new possibility for corporations with foreign group companies to prevent future insolvency avoidance claims. It is advisable to these corporations to have the supply or provision of services to such a business partner carried out by group companies that have their registered office in countries with insolvency laws that are preferable for creditors in case of avoidance claims. To do so, contracts should be drafted in a way that effectively determines the jurisdiction of the foreign group company that provides the services and receives the potentially contestable payments as governing. Prior to contracting, it is also necessary to examine whether the law on avoidance of transactions in insolvency proceedings in the country concerned is actually preferable for the creditor. However, as stated at the outset, this will be the case for almost all EU member states. Presumably, this legal concept is, in accordance with section 339 of the Insolvency Statute, also applicable to foreign companies domiciled outside the EU.

Author: Michael Schmidt, attorney at law

PASCHEN Rechtsanwälte

VAT: New EU e-commerce rules harmonise VAT rules for greater consumer convenience and fairer competition

Brussels, 9th July 2021

The new VAT e-commerce rules bring a simple and uniform set of VAT rules for all businesses engaged in cross-border e-commerce (especially online sellers,  marketplaces/platforms as well as operators, couriers, customs, tax administrations and consumers) either from inside or outside the EU.

The main changes as of 1 July 2021 are:

• End to VAT exemption on importation: With the implementation of the new VAT rules, all goods imported to the EU and services are now subject to VAT.
• New EU-wide threshold: It is defined that the EU-wide threshold for distance sales of goods is EUR 10,000. The VAT must be paid in the Member State where the goods are delivered.
• Achievement of uniformity of the VAT registration: The electronic portal One-Stop Shop (OSS) simplifies up to 95% of VAT obligations for online sellers and electronic interfaces throughout the EU. With the help of the One Stop Shop the online retailer can notify and pay VAT in the One Stop Shop for all of their EU sales via a quarterly declaration. For non-EU sellers is the registration in an analogous Import One Stop Shop possible that allow to ensure the correct amount of VAT in the Member State in which it is finally due.

These new rules will:

• ensure that VAT is paid where consumption of goods and services takes place;
• create a uniform and transparent VAT system for cross-border supplies of goods and services;
• re-establish fair competition between European and foreign e-commerce market players, as well as between e-commerce and traditional shops;
• offer businesses a simple and uniform system to declare and pay their VAT in the EU via the VAT One Stop Shop/Import One Stop Shop.

Similar reforms have been put in place and are working well in other jurisdictions such as Norway, Australia and New Zealand.

Full details including explanatory notes on VAT e-commerce rules and the Council Directive (EU) 2017/2455, the Council Directive (EU) 2019/1995 and the Council Implementing Regulation (EU) 2019/2026 are available here: https://taxation-customs.ec.europa.eu/vat-e-commerce_en

French study on the efficiency of European insolvency proceedings

Paris, 22nd April 2021

In January 2021, the « Conseil National des Administrateurs Judiciaires et des Mandataires Judiciaires de France » (National Council of French Judicial Officers and Judicial Representatives) has conducted a study on the efficiency of collective proceedings throughout Europe, comparing both the functioning and the role of legal systems governing insolvency proceedings in Germany, Spain, Italy, Netherlands, the UK and France.

As far as France is concerned the study reveals that:

1. France is the sole country in which two entities are involved. One to represent the interests of the debtor – the administrators – the other the interests of the creditors – the agents. These professions are regulated just like in Italy.
2. France has 2,6 times more bankruptcy proceedings than Germany and the UK. In 2019, insolvency proceedings opened in France where handled as liquidation proceedings in 65% of the case, 25 % of the cases where considered reorganisation proceedings and the remaining 10 % referred to the just introduced new preventive proceedings.
3. French insolvency proceedings focus very much on safeguarding employment and on the preservation of activity of companies. Consequently, 39% of companies under liquidation proceedings adopt a business continuity plan avoiding finaly liquidation. This 39% figure must be compared with the 8% figure in the Netherlands, 5% in Spain and 4.5% in Germany.
4. In France, the order of privileges differs from other jurisdictions since employee claims are given a very high priority. While employee protection is different in France from other EU- member states, all countries scrutinised in the study provide a guaranteed fund dedicated to the protection of the employees’ interests.

In 2020, subsidies aimed to cushion the economic consequences of the Covid crisis have considerably reduced the number of insolvencies in France.

Author: Marc Olivier-Martin, ROOM AVOCATS