Foreign ultimate beneficial owners of Dutch holding structures risk that they will be subjected to the jurisdiction of Dutch courts in case a claim against the UBO is closely connected to a claim against its Dutch subsidiary. The Dutch Supreme Court sheds new light on the question of jurisdiction of the Dutch Courts over such foreign defendants.

Introduction

In a recent decision that will be explained below, the question was if the claims against the Moldavian defendants were so closely connected to the claims against the Dutch defendants that it is expedient for the Dutch Court to hear and determine these claims together with the claims against the Dutch subsidiaries. The Supreme Court held that there was jurisdiction over the Moldavian UBO of one of the Dutch defendants, but no jurisdiction over the other Moldavian defendant.

The Supreme Court case of 29 March 2019

Two German investors were the plaintiffs (“Plaintiffs”) in this case. They held interests in several Moldavian financial institutions, including Victoriabank. The Economic Court in Moldavia ruled in 2010 and 2011 that the agreements that had led to plaintiffs’ acquisition of these shareholdings were void.

Plaintiffs asserted that the Dutch defendants (company A and its board B) and the Moldavian UBO of the Dutch company A acted unlawfully by taking control of the shares in the financial institutions previously (indirectly) held by Plaintiffs and by subsequently selling these interests to a third party for an amount of USD 80 million. Further, Plaintiffs asserted that the Moldavian UBO and another Moldavian party acted unlawfully by having used their influence on the Economic Court in Moldavia to come to the above mentioned decisions, which enabled the Dutch defendants to unlawfully take control of the shares.

Relevant Dutch procedural rule on international jurisdiction

Dutch law provides for similar rules of jurisdiction as the Brussels I-bis Regulation, in case this Regulation does not apply. The Brussels I-bis Regulation does not apply in relation to the Moldavian parties.

The Dutch Court had jurisdiction over the Dutch defendants. Article 7 Dutch Code of Civil Procedure (“DCCP”) provides that if the Dutch Court has jurisdiction over one of the defendants, it also has jurisdiction over the other (foreign) defendants, if the claims against the various defendants are so closely connected that hearing them jointly is justified based on expediency.

The Dutch legislator intended to align the interpretation of the general Dutch rules on international jurisdiction with the interpretation of the Brussels I-bis Regulation by the Court of Justice of the European Union (“CJEU”). The interpretation of article 7 DCCP should be aligned with the interpretation of the CJEU of article 8 preamble and under 1 Brussels I-bis Regulation.

Jurisdiction over the Moldavian UBO

Plaintiffs asserted that the Moldavian UBO acted unlawfully by having used its influence on the Moldavian Economic Court to come to its ruling that the agreements whereby Plaintiffs acquired the shareholdings in the Moldavian financial institutions were void. However, Plaintiffs did not allege that the Dutch defendants unlawfully influenced the Moldavian Court. Plaintiffs claimed that both the Moldavian UBO and the Dutch defendants had unlawfully taken control of the interests in the financial institutions. According to the Supreme Court, a successful claim based on the allegation of having unlawfully influenced the Moldavian Court is a precondition for a successful claim based on the allegation of unlawfully taking control of the shares in the financial institutions. Therefore, the claims against the Moldavian UBO were considered to be so closely connected to the claims against the Dutch defendants that it was expedient to hear them jointly. As a result thereof the Dutch Court has jurisdiction over these claims against the Moldavian UBO.

No jurisdiction over the other Moldavian party

Plaintiffs argued that the same reasoning should apply to the other Moldavian party, who is not an UBO of the Dutch defendants. Plaintiffs alleged that the other Moldavian party also unlawfully used its influence on the Moldavian Economic Court and that the Moldavian parties had a close relationship. Plaintiffs argued that its claims against the other Moldavian party are therefore so closely connected to the claims against the Moldavian UBO that they should also be heard before the Dutch Court.

The Supreme Court ruled that in order to base jurisdiction on article 7 DCCP (close connection), it is required that there is jurisdiction over one of the other defendants based on another ground than article 7 DCCP. In other words: it is not possible to base jurisdiction on the sole ground that the claims against that defendant are closely connected to claims against another defendant over whom the Court has jurisdiction based on article 7 DCCP (close connection). As a result, the Dutch Court does not have jurisdiction over the Moldavian party who is not the UBO of the Dutch defendant company A.

In conclusion

There are many Dutch holding structures with a foreign UBO. The recent Supreme Court decision shows that these UBO’s can be at risk that Dutch Courts will have jurisdiction over claims against them, although at least a part of the alleged facts took place outside of The Netherlands. For plaintiffs, there are increased chances to have various claims against foreign UBO’s and its Dutch subsidiaries dealt with by one court, leading to one court order of a Dutch Court.

After 1 January 2020, UBO’s of Dutch companies need to be registered with the Chamber of Commerce. This new legislation may facilitate plaintiffs even further in obtaining a Dutch court order against a foreign UBO. If you wish to learn more about this new legislation, please see the blog of my colleague Chantal Bakermans.

The full decision of the Supreme Court (in Dutch) can be found here. Please contact Hans Klaver (h.klaver@penrose.law) if you wish to learn more about foreign parties before the Dutch civil courts.