Karel’s Legal Blog

Internet service providers should act prudently regarding claimed copyright infringement

File sharing, as is commonly understood, involves distributing or providing access to electronically stored data. One, if not the most, popular way to do this is through the use of so-called (distributed) peer-to-peer (P2P) networking programs. The rising popularity of music formats such as mp3 (a format for the compression of audio data) has led to the release and growth of software designed to make the sharing of electronic data relatively easy.

One of the legal issues involved with file sharing is that the shared data may (wholly or partially) be protected by one or more intellectual property rights. For instance, multimedia files (audio, video), documents (e.g. electronic books) and computer programs (e.g. computer games) are often protected by copyright legislation, which prohibit or restricts the sharing of such data. File sharing remains, nevertheless, widespread. Copyright holders, or rather their representatives, claiming declining sales and economic damages due to this extensive practice, are not sitting still however. In the US for instance, the fight against copyright infringement has expanded into lawsuits against users of file sharing software.

Also under Dutch Caribbean law, which contains statutory provisions addressing various intellectual property rights (such as trademarks, patents and copyrights) and enables holders of such rights to protect their rights effectively and in accordance with international standards thereby providing them with effective means to stop infringement of their rights. For instance, legal action may not only be instigated against individual users who share copyrighted data with others, e.g. based on the copyright ordinance, but in certain circumstances also against internet service providers (ISPs), for example.

While Dutch Caribbean legislation does not provide a regulatory framework such as a ‘notice-and-take-down’-system as is the case in some other jurisdictions, the obligations of ISPs may be based on general tort law, on specific legislation such as the ordinance on electronic agreements, or on the contract for services vis-à-vis the ISP and the subscriber. So although a claimed copyright infringement, for instance, may not be specifically regulated, this does not preclude that in actual practice the ISP (e.g., based on the general tort law and its generally accepted standards) may be bound to abide by one or more ‘rules of conduct’ comparable to ones expressly stipulated in other jurisdictions.

In the absence of a clear legal framework which regulates and provides for situations such as claimed copyright infringements, ISPs would be wise to develop a policy and include, in their general terms and conditions, contractual provisions dealing with (third party) claims of infringement, and the position of the subscriber (user) in such cases, since there are privacy and other rights (e.g. based on the law of contracts) of the latter to consider.

ISPs should be prepared (e.g. by means of a clear and sound policy as well as adequate provisions in their general terms and conditions) and in specific cases act prudently when it comes to claims of copyright infringement from, for instance, (a representative of) a copyright holder. If they do not, ISPs risk claims and legal actions from both sides; from third parties/copyright holders (such as claims for economic damages) and/or from their subscribers (e.g. in case the ISP upon request/demand from such parties/holders furnishes subscriber information such as indentifying data or terminates the account).

Karel Frielink / Ursus van Bemmelen
Netherlands Caribbean Attorneys / Lawyers

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Distribution agreement

So-called agency agreements frequently bear resemblance in actual practice, to (certain aspects of) distribution agreements. Hence, so-called ‘agency agreements’ are in actual fact not infrequently mixed type agreements, consisting of an agent and a distribution element.

In general, a distributor buys goods from a principal in his own name and for his own account and resells these goods to third parties in his own name and for his own account.

Distribution agreements are not defined in any Netherlands Antilles statute and are not subject to any specific Netherlands Antilles legislation. The distribution agreement is an agreement sui generis, subject to the general law on contracts.

In accordance with the general law on contracts, parties are in principle free to agree on whatever they wish. However, certain restrictions are imposed by the general principle of Netherlands Antilles law that agreements must be concluded in good faith (redelijkheid en billijkheid). The parties are free, in principle, to agree on a notice period for termination, provided that such a period is reasonable. When no notice period is agreed on, either party may terminate the agreement while observing a reasonable period of notice. The determination of whether a certain notice period is reasonable may depend on a variety of factors.

From a Netherlands Antilles case on negotiations that were broken off regarding the continuation of a license agreement (franchising) (Antillean Family Foods NV vs Mc Donald’s Corporation, Supreme Court, February 26, 1993, NJ 1993, 289) it may be concluded that under certain circumstances termination of an agreement may constitute an obligation (to negotiate a renewal of contract or) to pay damages / compensation. Possible circumstances are: the contents of the agreement and the circumstances under which the agreement was entered into; the amount invested by the franchisee and to what the extent the investment was recouped; the (economic) situation of the franchisee in relation to that of the franchisor; the reason for terminating the agreement; the interest of the whole franchise and the policy of the franchisor with regard to (other) franchisees within the organization of the franchisor; and the question of whether the franchisor made a reasonable offer (that was subsequently not accepted by the franchisee) with respect to the conditions under which the agreement could be renewed.

Unlike agency agreements there is no statutory rule entitling a distributor to goodwill compensation. In certain case law it has been determined that a principal who terminated a distribution agreement should pay damages to the distributor who had made substantial investments that could not be recouped in the remaining period, despite the principal observing a reasonable notice period.

Karel Frielink / Ursus van Bemmelen
Netherlands Caribbean Attorneys / Lawyers

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Bonaire, St. Eustatius and Saba (BES)

Within a couple of years, the BES Islands, as public entities, will be part of the country of the Netherlands in the framework of the political restructuring in the Kingdom of the Netherlands. The US dollar will be introduced as the new currency in the BES Islands. Curacao and St. Maarten will each become a country within the Kingdom of the Netherlands and have their own legislation and regulations.

The starting point of the political restructuring is that Dutch legislation will be introduced only gradually into the BES Islands. It has been established that differences between the European part of the Netherlands and the BES Islands are possible, provided they are based on grounds to be incorporated to that end in the Charter of the Kingdom, including: economic and social circumstances, the long distance to the European part of the Kingdom, the small scale of the population and other factors, on account of which these islands differ substantially from the European part of the Netherlands. In the field of financial markets, there is every reason for deviating regulations instead of introducing Dutch legislation.

The Dutch Ministry of Finance is preparing legislation for the BES Islands, among other things, in the field of financial law (for information in Dutch click here). One of the starting points is that, notwithstanding integration of the BES Islands into the country of the Netherlands, the BES Islands and the Netherlands will remain two separate jurisdictions with regard to the activities in the financial sector. This means that a financial institution that is active in the Netherlands with a license, on the basis of the Financial Supervision Act (Fsa), may not be automatically active in the BES Islands. On the other hand, an institution with a BES license may, consequently, not operate in the Netherlands on the basis of that BES license.

The legislation that is involved here, is related to banks, insurers, insurance brokers, investment institutions and administrators thereof, money transfer offices and trust offices. Combating money laundering and financing terrorism also belong to this category.

The Dutch Central Bank (DCB) and the Financial Markets Authority (FMA) will be appointed as Supervisors with regard to the BES Islands. The DCB will be responsible for the supervision of banks, insurers and trust offices; the FMA for the supervision of insurance brokers, investment institutions and administrators, and stock markets.

After the transition, the financial institutions that are active in the BES Islands will, in principle, need a license on the basis of the supervisory laws applicable in the BES Islands, and subsequently come under the supervision of the DCB or the FMA. This applies to independent establishments as well as branch offices, and in certain cases also to financial enterprises (such as investment institutions) that offer their products and services in the BES Islands without being established there. All this is the direct consequence of the political restructuring, on account of which the BES Islands will be separated by a frontier from Curacao, respectively St. Maarten.

For financial enterprises that are already active in the BES Islands, the BNA license, insofar as it is related to their activities in the BES Islands, will be converted into a DCB license, respectively FMA license by operation of law, pursuant to transitional law. New entrants will have to apply at the Dutch Supervisors in the new situation and will have to apply for a license on the basis of BES legislation.

The Bank of the Netherlands Antilles (BNA), or its legal successor, will be responsible, as Supervisor for Curacao and St. Maarten, for the home country supervision (group supervision) of financial enterprises, established in the new countries. Among them are many of the banks and insurers that are active in the BES Islands (via a branch office or by means of performance of services). For this reason, the BNA will remain closely involved with the supervision of financial institutions in the BES Islands.

On June 24, 2009, a round of consultations started. All the market parties are involved (click here). There are two consultation documents: the consultation document Supervision BES and the consultation document Integrity BES (both in Dutch). It is possible to react to these consultation documents up to and including August 21, 2009.

Karel Frielink
Attorney (Lawyer) / Partner

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Commercial Agency Agreement

According to Section 7:428, Paragraph 1, of the Netherlands Antilles Civil Code, a commercial agency contract (agentuurovereenkomst) is a contract for services whereby one party, the principal, instructs the other party, the commercial agent, and whereby the latter binds himself, for a fixed or indeterminate term and for remuneration, to act as an intermediary in the conclusion of contracts, and, as the case may be, to enter into such contracts in the name and for the account of the principal, without being his subordinate.

No procedural requirements apply for entering into an agency agreement, and it may be agreed either verbally or in writing. However, the act does contain a provision (Section 7:428, Paragraph 3, Civil Code) which obliges each party to submit a document revealing the content of the agreement, at the request of the other party. The parties are free to determine the duration of the agreement; however, rules are imposed on its termination.

If the content and the practical execution of the agreement lead to the conclusion that there is an agency, the rules of Section 4 of Book 7 of the Civil Code apply to the commercial agent. An agent can be either a natural or a legal person.

The agency agreement ends upon the expiry of the period for which it was entered into, upon the termination of the agreement on the basis of mutual consultation, or if it is terminated by one party for ‘urgent reasons’. An agency agreement for an indeterminate period, or for a specific period with the right of interim termination, may be terminated by either of the parties, taking the agreed period of notice into account. If no period of notice has been agreed then a legal period of notice of a minimum of four months must be observed. The legal period is five months if the agreement has lasted at least three years and six months after six years (Section 7:437, Paragraph 1, Civil Code).

If the parties wish to come to an agreement about a period of notice, they must take into account the following minimum periods. The periods depend on the duration of the agreement in the following way: one month after a duration of a maximum of one year; two months for a duration between one and two years and three months for the following years. If longer periods are agreed then these may not be shorter for the principal than for the commercial agent (Section 7:437, Paragraph 2, Civil Code). Notice must be given at the end of a calendar month (Section 7:437, Paragraph 3, Civil Code).

Every agency agreement may be terminated with immediate effect if there is any question of an urgent reason. In that case the other party must be immediately informed of that reason. If the termination of the agreement for such reasons is based on circumstances for which the other party is at fault, the latter is liable for damages (Section 7:439, Paragraph 1, Civil Code).

The party which has become liable for damages with regard to the termination owes the other party a sum equal to the payment for the time that the agreement would have continued if it had come to an end in a regular manner. In that case, there is a legally determined compensation for damages based in principle on the remuneration for the period of twelve months preceding the termination (Section 7:441 Civil Code).

In addition to the right to compensation for damages, the agent has the right to a so-called goodwill payment at the end of the agency agreement if his work has led to significant increases in turnover in the principal’s company or to goodwill or an increase in goodwill.

Karel Frielink / Ursus van Bemmelen
Netherlands Caribbean Attorneys / Lawyers

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Several requirements apply

Article 6:162 section 1 of the Aruba Civil Code (Aruba CC) stipulates four conditions for someone’s obligation to compensate damage based on an unlawful act (tort):

1. A person has committed an unlawful act (‘onrechtmatige daad’) against another person; and
2. The act can be attributed (‘toegerekend’) to that person; and
3. Some other person has suffered damage (‘schade’); and
4. The unlawful act has caused these damages (‘causaal verband’).

Article 6:163 Aruba CC provides for an exception to the general rule of article 6:162 Aruba CC: “There is no obligation to repair damage when the violated norm does not have as its purpose the protection from damage such as that suffered by the victim”. This is called the requirement of relativity (‘relativiteitsvereiste’). This can be regarded as the fifth requirement for someone’s obligation to compensate damage.

Article 6:162 section 2 Aruba CC provides for three forms of unlawful acts under Aruban law: (i) a violation of a right (‘inbreuk op een recht’); or (ii) an act or omission violating a statutory duty (‘doen of nalaten in strijd met een wettelijke plicht’); or (iii) an act or omission violating a rule of unwritten law pertaining to proper social conduct (‘doen of nalaten in strijd met hetgeen volgens ongeschreven recht in het maatschappelijk verkeer betaamt’).

Article 6:162 section 3 Aruba CC mentions three possibilities in which an unlawful act can be attributed to its author: (i) the act results from its author’s fault (‘schuld’); or (ii) the act results from a cause for which he is accountable by law (‘wet’); or (iii) the act results from a cause for which he is accountable pursuant to generally accepted principles (‘in het verkeer geldende opvattingen’).

In general, the burden of proof whether someone has committed an unlawful act will be on the plaintiff. The burden of proof whether the plaintiff suffered damages will be on him too.

The determination of the damage suffered also depends on other factors, e.g., if one and the same event has resulted in both losses and benefits for the plaintiff. In such event the benefit must, to the extent that this is reasonable, be taken into account while determining the damage (‘verrekening van voordeel’). This is also the case where circumstances which can be attributed to the plaintiff have contributed to the damage (‘eigen schuld’). In such event the obligation to repair the damage is reduced by apportioning the damage between the person suffering the loss and the person who must compensate the damage.

Karel Frielink
Attorney (Lawyer) / Partner

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Stricter rules for large companies

Under Netherlands Antilles law the annual accounts of limited liability companies which do not qualify as so called large companies, need to be prepared in accordance with generally accepted standards and shall provide sufficient insight as to enable a sound judgment to be formed regarding the assets and the results and, to the extent the nature of the annual accounts so permit, regarding the solvency and liquidity of the company (article 2:116 (4) Netherlands Antilles Civil Code). This is comparable to the principles of good business practice (goed koopmansgebruik).

For large companies the legislator chose a tighter annual accounts regime. Annual accounts for large companies need to be prepared in accordance with the principles of the International Accounting Standards Board (IASB) and shall provide such insight as to enable a sound judgment to be formed regarding the assets and results and, insofar as the nature of the annual accounts so permit, on the solvency and liquidity of the company.

In order to qualify as a large company under Netherlands Antilles corporate law a company has to meet certain criteria. One of the requirements that has to be met is that it has at least twenty employees in the Netherlands Antilles who all work at least twenty man-days, at any time in the period one month prior to and one month after the date of the balance sheet, pursuant to an employment contract with the company, a group company of the company, a temporary employment agency or a similar institution.

Karel Frielink
Attorney (Lawyer) / Partner

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An NV may be converted into a BV and vice versa

The Netherlands Antilles Civil Code provides for an NV to be converted into a BV and vice versa. Conversion does not terminate the existence of the legal entity.

Conversion requires a resolution. A resolution to convert and to amend the articles has to be adopted, if only to satisfy similar requirements as for a resolution to amend the articles. The conversion shall become effective by execution of a notarial deed of conversion, and said deed must contain the new articles of association.

A conversion balance sheet must be attached to the notarial deed of conversion. The net equity of the company may not be shown to be negative. If the company into which the legal entity is converted has a nominal capital, then the net equity may not be lower than such nominal capital. The conversion balance sheet must relate to a date no earlier than one month prior to the date of the deed of conversion. The conversion balance sheet must be signed by all managing directors and supervisory directors.

After the conversion, shareholders, usufructuaries and pledgees may not exercise the rights attached to a share until they have been registered in the shareholders register. To the extent that bearer share certificates are issued, no record shall be kept except against surrender of such share certificates to the company.

The civil law notary who executes the deed establishing the conversion must register an authentic copy of the deed and its attachments in the trade register. Finally, the notary must publish notification of the conversion of the legal entity as soon as possible in the Government gazette.

Karel Frielink
Attorney (Lawyer) / Partner

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Only corporations may plead absence of representative authority

Under the Netherlands Antilles Corporate Code, i.e. Book 2 of the Civil Code, transactions with third parties that violate either the law or any limitations on the transactional powers of the board of directors of a corporation, are not enforceable against the corporation if the limitations are properly disclosed at the trade register. According to Article 2:10(3) Netherlands Antilles Civil Code only corporations may plead the absence of representative authority.

A counterparty wishing to withdraw from a legal act on that ground, may only rely on the fourth paragraph of Article 2:10 CC. This fourth paragraph was inspired by the thought that it is generally difficult for a counterparty to verify whether the representative authority has fulfilled its conditions, for instance an approval requirement according to the articles of incorporation, even if he knows or ought to know of the existence thereof.

It should be noted that Article 2:10(4) Civil Code deals with more or less factual questions, e.g. as to whether a certain condition has been fulfilled, and does not cover legal questions, e.g., as to whether an acting managing director is legally authorized to represent the company.

Karel Frielink
Attorney (Lawyer) / Partner

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Limitations must be disclosed to have effect

Netherlands Antilles law provides that, subject to restrictions laid down by the Netherlands Antilles Corporate Code or a corporation’s articles of association, the board of directors of a corporation shall be competent to represent the corporation, e.g. a limited liability company (‘naamloze of besloten vennootschap’; NV or BV). In the event of several managing directors, any managing director shall be competent, insofar as not otherwise provided for by the articles of association. 

Under Netherlands Antilles law, information required to be disclosed pursuant to the Civil Code, for instance (i) the identities of the Managing Directors of a corporation and (ii) the articles of association, which may contain limitations to the management authority, may be asserted against counterparties if this information is actually disclosed.

Karel Frielink
Attorney (Lawyer) / Partner

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Five year period

With respect to the limitations under Aruban law for filing a claim, the pertinent legal provisions governing limitations are set out in Book 3, Title 11 (Rights of Action) of the Aruban Civil Code.

According to Article 310 the right of action for compensation for damage is prescribed up to the end of a five year period from the beginning of the day following the one on which the person who is prejudiced becomes aware of both the damage and the identity of the person responsible for it.

If an accident occurred on August 1, 2004, for example, then, even if it must be assumed that the prescription commenced on that date (which is not always that evident, particularly with respect to the element of being aware of the identity of the person or persons responsible), today (May 22, 2009) there would still be ample time for filing a claim.

Karel Frielink / Ursus van Bemmelen
Dutch Antilles Attorneys / Lawyers

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