The Supreme Court decided on 10 July 2020 that banks can validly assign credit claims to non-banks, also if the underlying loans are non-performing or have been terminated. It also decided that if the assignee is not a bank, it can be required to observe the same duty of care towards debtors as would apply to a bank under the given circumstances. As such, the Supreme Court’s decision not only confirms existing practice, but also provides guidance for future securitisations of Dutch loans.
In 2015, Van Lanschot transferred a substantive part of its non-performing commercial loans to Promontoria, an entity of the Cerberus Group. The portfolio had a value of around EUR 400 million and consisted of non-performing commercial real estate loans. Several debtors argued that the assignment was null and void, because the claims were, by their nature, non-transferable within the meaning of the Dutch Civil Code (Article 3:83(1) DCC).
Based on a Supreme Court precedent from the nineties, the debtors argued that claims arising out of credit agreements for that reason cannot be transferred by a bank to a non-bank. This was because assignments to a non-bank would allegedly impair the legal position of the debtors, since a non-bank assignee allegedly is not bound to the same regulatory obligations and the duty of care that is applicable to a bank.
The Amsterdam District Court submitted four prejudicial questions on these issues to the Supreme Court. In 2012, the Dutch legislature opened up this procedural route for lower courts if the answer to such a question is necessary to decide on: (a) multiple claims that are based on the same or similar facts, or (b) multiple similar cases where the same legal question arises.
1. Does the nature of the bank’s claim on its client mean that the claim is not transferable within the meaning of article 3:83(1) DCC if the claim is intended to be transferred to a non-bank?
The Supreme Court confirmed that, as Van Lanschot had argued, a bank can validly assign a credit claim to a non-bank, also if the underlying loan is non-performing or has been terminated and regardless of whether the debtor is a consumer or not.
Credit claims are by their nature transferable, according to the Supreme Court, because the assignee of a credit claim does not obtain any rights that only a bank can exercise. This was different in the precedent invoked by the debtors, in which the government had provided emergency credit to companies in exchange for which the government gained certain supervisory powers with respect to these companies.
The obligations that the assignee must meet after the assignment of a credit claim do not differ in any relevant respect from the obligations that a bank must exercise towards a debtor (see answer to question 2 below). The possibility that the non-bank will in fact exercise its rights in a different way than a bank, does not mean that the credit claims are by their nature non-transferable under article 3:83(1) DCC.
2. Is the non-bank to which a claim is transferred bound by a duty of care? If so, how does this duty of care relate to the regulatory obligations of a bank and to the duty of care that applies to a bank?
The Supreme Court confirmed that, in short, a non-bank assignee can also be required to observe the same duty of care towards debtors as would apply to a bank under the given circumstances.
Strictly speaking, the duties that a bank must observe towards its debtors are not transferred pursuant to the assignment. However, the legal relationship between the assignee and the debtor is governed by the principle of reasonableness and fairness (article 6:2 DCC). What this means in practice depends on the circumstances of the case, including that the claim has been assigned by a bank, which has certain special duties of care towards its debtors. This means that the non-bank assignee is required to take into account the legitimate interests of the debtors.
This can also include the non-bank assignee being bound to a duty of care which, in certain circumstances, can entail that it must act towards the debtor in the same way as can be expected of a reasonably acting bank. This applies regardless of whether the underlying loan is non-performing or has been terminated, and of whether the debtor is a consumer.
3. Do the answers to the previous questions differ if the bank’s client has fully performed its obligations under the credit agreement and/or if the bank has terminated the credit agreement?
The Supreme Court decided that whether the bank’s client has fully performed its obligations under the credit agreement and/or if the bank has terminated the credit agreement, is irrelevant for questions 1 and 2. In all of these cases, the credit claims are transferable and the duty of care of the non-bank assignee can be similar to the duty of care that applies to a bank (please see above).
4. Which rights can the client exercise against the assigning bank if the non-bank acts differently from what can be expected from a bank based on the public law obligations that apply to banks and on the bank’s duty of care?
The Supreme Court did not deem it necessary to answer question 4, because this issue was not at stake in the proceedings in which the Amsterdam District Court asked the prejudicial questions.
Securitisation of non-performing loans is an important instrument for banks to clean up their balance sheets and meet capital requirements. The decision of the Supreme Court confirms that securitisation of credit claims is possible, also in the case of non-performing loans or where the loans have been terminated. Additionally, the Supreme Court has confirmed that non-bank assignees must live up to the same standards as banks when exercising their rights, depending on the circumstances. As such, this decision not only confirms existing practice, but also provides guidance for future securitisations of Dutch loans.
The decision can be found here (Dutch only).
For more information, contact Bart Fleuren and Reinout Vriesendorp, who represented Van Lanschot before the Supreme Court.
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