Karel’s Legal Blog

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Karel Frielink

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Citizens versus non-citizens

According to the Netherlands Antilles Ordinance on the Establishment of Businesses (‘Landsverordening betreffende vestiging van ondernemingen’, PB 1946 nr. 43) a license is required to establish a company (‘vestigingsvergunning’). A further license is required to operate one as an individual director if one is not a citizen of the Netherlands Antilles (‘directievergunning’).

According to a policy document published by the Department of Economic Affairs (‘Dienst Economische Zaken’) in Curacao that is responsible for the enforcement of aforementioned Ordinance, a person is considered a citizen of the Netherlands Antilles if born in the Netherlands Antilles, or if one of his or her parents is born in the Netherlands Antilles or if he or she has been living in the Netherlands Antilles for over 5 years.

It furthermore follows from said Ordinance that at least one director of a company should be domiciled in the Netherlands Antilles. A company’s establishment permit (’vestigingsvergunning‘) may be revoked if there are no directors domiciled in the Netherlands Antilles.

Karel Frielink
Attorney (Lawyer) / Partner

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Filing MOT report no blanket protection

A provider of financial services, e.g. a bank, has the obligation under Section 11 of the MOT (National Ordinance Penalization Money Laundering) to report to the Financial Intelligence Unit (FIU), without delay, any unusual transaction made or proposed. Unusual transactions are described in the Ministerial Decree Indicators Unusual Transactions.

Suspected money-laundering transactions are, e.g., transactions non-typical of a client or transactions where there is otherwise cause to presume that they may relate to money laundering or terrorist financing. Such transactions, including proposed transactions, should be reported. The MOT also allows for permissive filings by institutions in connection with other unusual activity.

A report to the FIU must include, amongst others things, the nature, time and place of the transactions and the circumstances by which the transactions are considered unusual. A bank is, according the MOT, bound to secrecy in respect of such reporting. In such cases a bank is therefore not allowed to disclose to the client that is has reported pursuant to the MOT.

Furthermore, banks that acts in compliance with the obligation to report will be given a degree of criminal indemnity. The reason for this criminal indemnity is the principle of ‘nemo tenetur‘ (nemo tenetur seipsum accusare, no man is bound to accuse himself). Section 14 MOT states that data or information, furnished in accordance with the report, may not serve as a basis for, or for purposes of, a criminal investigation or prosecution by reason of suspicion of, or as proof in respect of, a charge of money laundering or a criminal offence lying at the root thereof by the party having furnished such data or information. In other words, the bank cannot be prosecuted for money-laundering on the basis of the information or data reported by it.

However, this does not mean that a bank can create blanket protection against criminal liability by filing a MOT report. The indemnity that Section 14 MOT provides is extremely limited and narrow in scope. Firstly, a MOT report will not provide protection with respect to transactions undertaken after its filing. Future transactions do not fall under the scope of the indemnification provided for by the filing of a report. Secondly, the safe-harbor only applies in connection with prosecution for money-laundering and the root offences thereof. The same set of transactions could not only give rise to money laundering charges but also to criminal charges under other laws. Third, even if a bank correctly files a MOT report, the Public Prosecutions Office that is faced with proof by other channels of information than the report by the bank can still prosecute the bank for money laundering.

Karel Frielink
Attorney (Lawyer) / Partner

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An overview

Important Netherlands Antilles anti-money-laundering regulations include the National Ordinance Penalization Money Laundering (‘Landsverordening Strafbaarstelling Witwassen van Geld’, ‘NOML’) which criminalizes money laundering, and the National Ordinance on the Reporting of Unusual Transactions (‘Landsverordening Melding Ongebruikelijke Transacties’, ‘MOT’). The latter requires anybody who offers financial services to report, without delay, any ‘unusual transactions’ to the Financial Intelligence Unit (‘Meldpunt Ongebruikelijke Transacties’).

Non-legislative regulations, such as the Provisions and Guidelines on the Detection and Deterrence of Money Laundering and Terrorist Financing for Credit Institutions (‘Guidelines’), issued by the Central Bank of the Netherlands Antilles are also relevant. These state that the Netherlands Antilles is a member of the Financial Action Task Force on Money Laundering (‘FATF’) and the Caribbean Financial Action Task Force (‘CFATF’) and indicate that such membership is part of the genesis of its anti-money laundering efforts. For instance, Section 3 of the CFATF Recommendations states that countries should criminalize the aiding and abetting of serious offences.
 
Section 3 of the NOML states that a person shall be deemed guilty by default of the laundering of money if that person:

(a) acquires, has at his disposal or transfers money while at the time the money was acquired by him or became available to him, it would have been reasonable for him to have presumed that the same was derived from criminal acts; or

(b) for the purpose of gain, has at his disposal or transfers money while he reasonably may presume that the money has been derived from criminal acts.

In addition, Section 5 states that both legal entities and those individuals directing legal entities may be held criminally liable under Section 3 NOML.

Karel Frielink
Attorney (Lawyer) / Partner

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Dutch Caribbean as the jurisdiction of choice

There are millions of people around the world who can be called wealthy. Many of them want to protect their wealth, against political instability, for example. To do so they can choose among various jurisdictions.

The Netherlands Antilles (a.k.a. the Dutch Caribbean) is a jurisdiction of choice one should definitely consider. There are several reasons why the Netherlands Antilles is already the favorite jurisdiction for so many people. One reason is that it is part of the Dutch Kingdom, which is known for political stability. The fact that the Dutch Supreme Court in the Hague also serves the Netherlands Antilles adds to the trustworthiness of this jurisdiction.

The Netherlands Antilles is known for its excellent financial, legal and technical infrastructure. Global firms like PricewaterhouseCoopers, KPMG and Ernst & Young, for example, have offices in the Netherlands Antilles, not without reason! In addition, many international banks & investment institutions, as well as international law firms, tax advisers and accountants have done business in the Netherlands Antilles on a regular basis for decades.

The Netherlands Antilles offers a favorable tax regime. One of the instruments available is the Private Foundation (‘PF’). The PF is a legal entity but does not have a share capital. The PF is, for example, exempt from Netherlands Antilles profit tax, provided that it does not conduct a ‘real’ business or run an enterprise for profit. Click here for more information on tax planning issues regarding PFs. It should be noted that the tax regime of the Netherlands Antilles complies with international standards and is therefore not black-listed (OECD, FATF).

If you have any questions, please do not hesitate to contact me.

Karel Frielink
Attorney (Lawyer) / Partner

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Interlocutory or summary proceedings provide for immediate relief

Article 110 of the Netherlands Antilles and Aruba Code of Civil Procedure (‘the Code’) provides that all adversarial proceedings shall be initiated by means of a petition to the court of first instance. Proceedings so initiated are ordinary proceedings a.k.a. proceedings on the merits.

A petitioner may opt for preliminary relief proceedings (a.k.a. interlocutory proceedings; ‘kort geding’). Article 226 of the Code provides that in urgent cases which require an immediate decision, the plaintiff may request a provisionally enforceable judgement (‘beslissing bij voorraad’).

Article 229 of the Code provides that a provisional decision rendered pursuant to this special type of proceedings shall not impact the ‘principal case’, meaning that both parties are free to commence ordinary proceedings in respect of the same matter and that in such ordinary proceedings the court shall not be bound by the provisional decision. If the defendant does not voluntarily appear at the court hearing he will be summoned by the judge to appear (art. 226(2) NACCP).

With respect to both proceedings, a claim may be rejected (‘worden afgewezen’) by the court on the merits of the case, i.e., that the claim is considered to be unfounded. However, if a claim is denied for reasons other than the merits of the case, the plaintiff will be declared non-suited (‘niet-ontvankelijk’) in the original complaint, or in the appeal, if any. Or in exceptional cases: the initial petition or the appeal petition could be declared void.

Karel Frielink
Attorney (Lawyer) / Partner

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It serves the whole Kingdom

The Kingdom of the Netherlands is comprised of three separate jurisdictions, the Netherlands (i.e.: the part of the Kingdom located in North Western Europe), the Netherlands Antilles and Aruba. The Netherlands Antilles and Aruba have their own code of civil procedure, which in certain respects is similar, but not identical to the Dutch Code of Civil Procedure. The Supreme Court of the Netherlands also serves as the Supreme Court of the Netherlands Antilles and Aruba.

The Netherlands Antilles and Aruba have courts in the first instance (‘Gerecht in Eerste Aanleg’) and a joint court of appeal (‘Gemeenschappelijk Hof’). Generally speaking, parties may file an appeal in cassation against a judgment of the latter court.

The possibility of filing an appeal in cassation with the Supreme Court of the Netherlands is provided by article 1(1) of the Cassation Regulation for the Netherlands Antilles and Aruba (‘Cassatieregeling voor de Nederlandse Antillen en Aruba’), which is based on Article 23 of the Charter of the Kingdom (‘Statuut van het Koninkrijk’) and has the status of a Kingdom Act (‘Rijkswet’).

Pursuant to the same provision, the provisions of Dutch law concerning cassation proceedings in respect of Dutch judgments shall apply in respect of cassation proceedings concerning a judgment rendered by a court of the Netherlands Antilles. Article 4 of the regulation provides that the term for filing a cassation appeal is three months, counted from the date of the judgment.

In contrast with the review undertaken by a court of appeals, a review by the Supreme Court is not a full review, but is limited to verifying that the court whose judgment is under review has not breached  Dutch, Aruban or Antilles laws, as the case may be, and that there have been no defects in the proceedings resulting in the judgment (Article 79 of the Dutch Act on the Organization of the Judiciary (‘Wet op de Rechterlijke Organisatie’)).

Karel Frielink
Attorney (Lawyer) / Partner

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The Supreme Court applies strict standards

The European Convention for the Protection of Human Rights and Fundamental Freedoms (‘EVRM’), including Article 6, which safeguards the right of due process, applies to the standards of due process applicable in the Netherlands Antilles and Aruba.

Article 6, first sentence, EVRM, reads as follows: “In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law”. The requirement of a ‘fair hearing’ has been consistently interpreted by the European Court of Human Rights to encompass the general principles of due process, including the principle that both parties should be allowed adequate possibilities of presenting their case and to respond to presentations by the opposing party.

The Supreme Court applies strict standards regarding due process, both in respect of judgments rendered in the Netherlands and in respect of judgments rendered in the Netherlands Antilles or Aruba, and it scrupulously reviews the application thereof. For example, in the most recent decision by the Supreme Court addressing this matter [8 February 2008, RvdW 2008/202], it reversed a decision by the Joint Court of Appeals of the Netherlands Antilles and Aruba on the grounds that a party had belatedly (four days prior to the pleadings) submitted exhibits to the court. The Supreme Court reiterating the applicable standard:

“The judgment [by the court of appeals] is incorrect in the event that the appeals court has failed to recognize that the judge in civil proceedings is only allowed to decide on the basis of documents in respect of which the opposing party has had sufficient opportunity of examining the same and of commenting thereupon and that this fundamental rule of hearing both sides of the argument also applies in respect of examining and commenting upon documents which were submitted at the occasion of the court session during which these were  under discussion or (briefly) prior thereto. (…) In the event the appeals court has not failed to recognize the foregoing, it has failed to adduce sufficient reasons for the finding implied in its decision that the owners [the parties appellant in the cassation proceedings] were afforded sufficient opportunity of examining the exhibits and commenting thereupon (…).”

Identical or similar rulings may be found in numerous other decisions by the Supreme Court.

Karel Frielink
Attorney (Lawyer) / Partner

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Arbitration

A party can initiate legal proceedings in a court of law to solve a legal dispute. Alternatively, the parties may opt to appoint one or more persons (arbitrators) to decide on the dispute and by whose decision they both agree to be bound.

Why would one opt for binding dispute resolution (arbitration) over regular litigation? There are several reasons to do so:

• Arbitration is not public
• The parties can choose arbitrators, e.g., persons they particularly trust or who are experts in particular fields
• Many disputes are a mix of legal and, e.g., technical disputes, which can therefore better be decided upon by experts (it is not necessary to appoint only legally trained arbitrators)
• Generally speaking, arbitration proceedings are more flexible in terms of organizing the process and the scope

However, the parties are required to pay the arbitrators, which might be rather costly. Sometimes an arbitration procedure takes as long as or even longer than a regular court case in first instance. Nevertheless not all kinds of disputes can be settled out of court, especially not matters related to family law, criminal law or administrative law.

Article 1020 of the Netherlands Antilles and Aruba Code of Civil Procedure provides for the application of the UNCITRAL Model Law on International Commercial Arbitration. Many countries, including the Netherlands Antilles and Aruba, are a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of New York, 1958, which provides for mutual recognition. Lawyers (attorneys) can act as counsel to either the plaintiff or the defendant, and in the case of several of the lawyers at Spigthoff they may also act as arbitrators.

Karel Frielink
Attorney (Lawyer) / Partner

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A particular provision may help to prevent disputes

The board of directors has the function of managing, i.e., making policy and conducting the day-to-day management of the corporation. Except for restrictions in the articles of association, the board of directors is responsible for the management of the BV or NV (private or public limited liability company) and is authorized to represent it.

A conflict of interests is not in itself improper. The manner in which one deals with it determines the propriety of a transaction or one’s conduct. According to Article 2:11 par. 3 of the Netherlands Antilles Civil Code, the general meeting of shareholders of a company has the power to designate one or more persons as special representative of the company with respect to conflicts of interests. This power is irrespective of the provisions in the articles of association dealing with conflicts of interests.

In its judgment of 21 March 2008 [Pinakel; No. R07/012HR; JOR 2008/124], the Dutch Supreme Court ruled that the board of directors is obligated to inform the general meeting about a conflict of interests in order to enable the general meeting to exercise its power. However, the general meeting is under no obligation to exercise its power to designate a special representative. According to the Supreme Court, if the general meeting does not exercise said power, those persons, who, according to the articles of association are authorized to represent the company in the event of a conflict of interests, continue to do so. Although this decision concerns the laws of the Netherlands, it is also applicable with respect to the laws of the Netherlands Antilles.

It is not uncommon that articles of association of a Netherlands Antilles BV or NV contain a provision to the effect that even when there is a conflict of interests, e.g. between the company and a board member or supervisory director, the power to represent the company remains with the managing directors (Article 2:11 par. 2 Civil Code). In many cases it is advisable to add such a provision to the company’s articles of association to prevent disputes. One should not forget, however, to inform the general meeting in good time about any conflicts of interests.

In the first instance and during the appeal proceedings, the party who won the case was represented by Spigthoff’s lawyers Charles Langereis and Frank Peters. Spigthoff’s adviser, professor Alexander Mohr, provided the court with an expert opinion.

Karel Frielink
Attorney (Lawyer) / Partner

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