ORDER OF THE COMMON APPEAL COURT OF CURACAO CONCERNING THE RIGHT TO INSTITUTE AN INQUIRY

The Appeal Court has taken several fundamental decisions

On 5 March 2013 the Common Court of Justice of Aruba, Curacao, Sint Maarten and of Bonaire, Sint Eustatius and Saba (case: Ghis 55769 – HAR 28/12) issued an order in connection with inquiry proceedings. This order contains three major considerations.

The right of legal entities (including public limited companies [NV] and private companies with limited liability [BV]) to institute an inquiry was introduced in Curacao on 1 January 2012. Almost immediately after this introduction an application for instituting inquiry proceedings was submitted to the Appeal Court. The facts on which this application was based relate to the years prior to the introduction of the right to inquiry. This raises the question of whether the right to institute an inquiry can also relate to facts in the period prior to this right being introduced.

The Appeal Court considered that the right to institute an inquiry has immediate effect and that therefore the system is effective from the date of its implementation. Moreover, the Appeal Court ruled that there are no indications in the legal history that it was the intention of the legislator to restrict the inquiry of Section 2:271 of the Curacao Civil Code in advance to the period after the implementation of this system. That is why the Appeal Court assumes that facts which occurred before the introduction of the inquiry system can (also) in principle form the grounds for the decision to order an inquiry. The Appeal Court pointed out that it has a discretionary power to restrict the inquiry to certain subjects and/or a certain period.

The second issue has to do with a transfer of seat. The company against which the application for inquiry was directed transferred its seat to Curacao on 7 June 2000 on the basis of the Transfer of Seat to Third Countries Ordinance (Landsverordening zetelverplaatsing derde landen). Can an application for an inquiry also cover facts relating to the period when the company still has its registered office (according to its articles of association) abroad? The Appeal Court held that the internal relationships within the company are only governed by the law of (originally the Netherlands Antilles but now) Curacao from 7 June 2000 onwards. The Appeal Court considered that according to international private law it is generally accepted that a legal entity with a seat in a third country is not covered by the jurisdiction of the State of its new seat before the transfer of its seat. In other words: the Appeal Court (in Curacao) does not try facts relating to the period that the company was established abroad and was governed by that foreign law.

The third issue relates to a judgment pronounced in New York. The parties in these inquiry proceedings have already for years been litigating against each other and this in various countries. With regard to several points of the dispute this resulted in a final decision by the court in New York. Nevertheless, the applicants in these inquiry proceedings also submitted these points at issue to the Appeal Court in Curacao. This raises the question of how the Appeal Court has to deal with that American judgment. The Appeal Court held that the applicants submitted their objections to the court in New York, that those objections were rejected by the court in New York and the judgment of the court in New York has in the meantime become final and irrevocable. The Appeal Court held that there is no scope for a renewed review of these objections.

Considering the nature of the objections (it was about a contractually laid down selection procedure for the appointment of new directors) the Appeal Court also held that the court in New York has subject-matter jurisdiction since on this point it is of a contractual / proprietary nature. The Appeal Court reached the opinion that the court in New York reviewed all the objections of the applicants which are relevant in this case (and rejected them) and that thereby on this point at issue a binding decision susceptible to ‘becoming final and conclusive’ has been given (against which therefore legal remedies are no longer open) which also has a legal effect in other legal actions with regard to the parties involved in those legal actions. The latter means that the American decision must also be considered conclusive (res judicata). For this reason the Appeal Court must certainly follow the decision of the court in New York.

Although the right to inquiry was only introduced in Curacao on 1 January 2012, this system has almost immediately been made use of. And this resulted in an order in which the Appeal Court ruled on several fundamental issues, which is important for the legal practice.

Karel Frielink
Attorney (Lawyer) / Partner

(7 March 2013)

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Res judicata (Latin) means that a final judgment on the merits by a Court having jurisdiction is conclusive between the parties to a suit as to all matters that were litigated in that suit. The binding effect of a judgment is limited to the parties which have been involved in the proceedings that resulted in the judgment. As far as the subjective scope of the binding effect (i.e. res judicata) is concerned: the subjective scope of a judgment is in principle limited to the parties involved in the proceedings which resulted in that judgment and their successors (art. 70a Curaçao Code of Civil Procedure). Under Curacao law, a decision regarding (for instance) the contents of the law does have binding effect, subject to the limitation that it should concern the same case, i.e. if in proceedings between two parties the Court would decide on a particular interpretation of a statutory provision, such a decision would not be binding in subsequent proceedings concerning a different matter, but would be binding in subsequent proceedings (in the Kingdom of the Netherlands) concerning the same case.

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