Bob Wessels, The Remmington Rand Affair, Tijdschrift voor Insolventierecht (TvI) 2015/43
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Vindplaats:TvI 2015/43
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Bijgewerkt tot:27-08-2015
Prof. mr. B. Wessels1
The Remington Rand Affair
Samenvatting
This is a slightly adapted version of an article that will appear in the Festschrift in Honour of Professor
Ian Fletcher QC, a Special Edition (Volume 3, 2015) of the Nottingham Insolvency and Business Law eJournal.
1.A 30 years old file
Early 2014, I received a package of documents of some 10 centimetres (3 inches), wrapped with an
elastic, with a white cover sheet, containing the handwritten words De Remington Rand zaak, the
Dutch indication for: ‘The Remington Rand case’. It contained papers and documents concerning
the aftermath of the bankruptcy liquidation, opened on 26 May 1981 by the District Court of ‘sHertogenbosch, against Remington Rand B.V., the Dutch subsidiary of Remington Rand Corporation
1.
Inc. (‘Remington’).2 The unique material reveals a spectacular novel with a Dutch trustee in a
contempt of court situation in the USA and a biased American court with a peculiar view on what
‘comity’ requires of Dutch courts dealing with bankruptcies.3 I had heard about the case in the
early and mid 90s, but my knowledge was limited, because as far as I know the Dutch judgment
had not been published.4
Let’s go back some 30 years in history. My guess is that senior lawyers generally will know the
composition of a (hard copy) file, build up in a pre-email period (with documents from around 1984
until 1994). It contains handwritten and typed letters of Mr Van Dijk (the trustee that succeeded
the originally appointed trustee Mr Banning), bankruptcy reports covering 1987 and 1988, copies
of several American judgments, either in original or in the West publishing version and a Dutch
judgment of the District Court of ´s-Hertogenbosch, dated 14 November 1990 (indirectly
responding to the a judgment of the U.S. Court of Appeals, Third Circuit of 5 October 1987). The file
2.
probably is not complete, but I am quite confident that it contains sufficient information to
reconstruct and describe the case with judgments of the U.S. Court of Appeals, Third Circuit from
1987 (under 2), the District Court ‘s-Hertogenbosch from 1990 (under 3) and again the Third Circuit
from 1993 (under 4). I then will comment on three questions, the meaning of ‘comity’ in this case
and the position the Third Circuit took in this regard (under 5), the matter of ‘contempt of court’ of
the first appointed trustee (under 6) and which solution would follow from present Dutch law
(under 7).
2.U.S. Court of Appeals, Third Circuit, 5 October 1987
In 1978, the Kilbarr Corporation, a Delaware incorporated company, previously called Remington
3.Rand Corporation (‘Remington’), enters into a licence-agreement with its Dutch subsidiary,
Remington Rand B.V. (‘Remington BV’). The licence covers the use of data of the SR-101, an
electronic typewriter.5 In March 1981 The Netherlands Remington BV enters into reorganisation
proceedings (surseance van betaling), in 26 May 1981 converted into bankruptcy liquidation
proceedings (faillissement) by the District Court of ‘s-Hertogenbosch. Two weeks later the
appointed bankruptcy trustee, Mr Banning, sells the factory to Business Systems Incorporated B.V.
(BSI BV). Included as a part in the sale is the knowhow to produce the SR-101. In the USA in August
1981 Remington (itself in chapter 11 proceedings) starts proceedings with a trade-secret
misappropriation claim. Plaintiff Remington Rand US requested equitable relief against BSI BV.
Both the Bankruptcy Court as well as the District Court of New Jersey – Newark, decided to impose
a worldwide constructive trust, i.e. a trust on the assets of the defendant located in the USA as well
as elsewhere in the world (so including The Netherlands) as a remedy for the misappropriation.6
The legal consequence of this decision is that a preference position is created for the beneficiary
(Remington) compared to the position of the unsecured creditors in the bankruptcy of BSI BV.
In addition to BSI BV, also its American parent, BSI US, is included in the proceedings. Moreover,
BSI BV was subject to reorganisation proceedings in the Netherlands since 17 August 1981. Trustee
Banning (among many other defenses) was of the opinion that he only would be influenced by the
American court’s order after it had went through a recognition procedure in The Netherlands and
4.
that he, as court appointed trustee, was in charge of the estate.7 He considered the extraterritorial control over BSI’s assets outside the USA ineffective, and asserted too that the security
interest in BSI’s inventory by Dutch banks to be superior to that of unsecured creditors, such as
Remington. A gruesome insolvency conflict is born.
BSI does not act according to the New Jersey judgment for which reason on 6 February 1985 both
BSI BV and Banning are subject of an order from the District Court of New Jersey – Newark of ‘civil
contempt of court’, i.e. (generally) a criminal refusal to follow up on the instructions of the District
5.Court. A week later, BSI BV is subject to bankruptcy proceedings. BSI appeals.
On 5 October 1987, the U.S. Court of Appeals for the Third Circuit decided in this case.8
The Third Circuit observes that the case:
‘… presents substantial equities on both sides. We view this to be a very difficult case.’
The Court presents the interests that are at stake:
‘From Remington U.S.’s, an American court has resolved a dispute after the defendant voluntarily
submitted to jurisprudence over here. Realistically, the only certainty of recovery on a judgment lies
in levying against the funds located in this country and subject to the constructive trust, which acts
essentially as a security device.’9
On the other hand there is BSI BV’s perspective that the judgment represents at least in part an
unsecured debt, and the constructive trust grants a preference to Remington Rand US over the other
unsecured creditors. The Court observes:
‘To the extent that the judgment is entitled to priority as the equivalent of an administrative claim
(boedelschuld in the meaning of Article 249(1)3° Dutch Bankruptcy Act; Wess.), satisfaction of
Remington U.S.’s claim by means of the attached funds in the United States without considering
others in the same category offends notions of fairness …’10
Recognising that the defendants were really arguing for the benefit of the creditors not involved in
the dispute at hand, the Third Circuit has to decide on the way to solve the controversy. The Court
observes:
‘… the path to solution of this vexing problem lies in general precepts of transnational business
affairs, especially those that apply to commercial reorganizations of bankruptcies.’11
After considering American court cases, literature and the Congressional history of § 304 U.S.
Bankruptcy Code12, the Court applies ‘these somewhat conflicting precepts’ to events as they
9.
stood on September 1984, when the District Court entered its constructive trust order. How to
achieve this? The Court decides (footnotes omitted):
‘… Having obtained a judgment on liability, it follows that Remington will obtain a money damage
award at the re-trail of the assessment proceedings and that this award will be reduced to judgment.
What then should be done about the judgment that Remington is due to receive? The proper
procedure is described in the famous early English case, Solomons v. Ross. There, a Dutch trustee in
bankruptcy claimed assets in London, which has been attached there by an English creditor after the
debtor had become insolvent. Following proof that Dutch law recognized foreign and domestic
creditors on the same footing, the English court held in favour of the Dutch trustee.’13
The Court continues:
‘… In a similar vein, before the district court makes a final decision on damages and equitable relief,
Remington should request assurances from the Dutch courts that any judgment rendered by the
district court in its favour will be recognized in The Netherlands. In this respect, because the unusual
circumstances present here, we believe that comity has to be a two-way street (italics by me; Wess.).
Although reciprocity is no longer an absolute condition precedent to comity …, it is always a
permissible consideration …, and here we believe it to be a consideration of extreme importance.’14
The Court concludes that ‘that the solution to this very difficult problem’ must be followed by four
discrete steps:
BSI goods that are located in the USA must continue to fall under the scope of the constructive
1.trust for the benefit of Remington, whilst the court should decide on the amount of damages to
which it is entitled;
Remington must reduce any damage award it receives from the district court to judgment. Then
follows:
2.‘It must carry this judgment across the sea to the Dutch bankruptcy court and seek a declaratory
10. judgment as to whether the Dutch court will properly recognize the American judgment in the
claim against the bankrupt’s estate. The declaration should state that the American judgment
has the same force and effect as a judgment obtained in The Netherlands.’
‘If the Dutch court does not timely rule on Remington U.S.’s request or fails to accord the
3.district court’s judgment proper respect, the district court is free to reconsider a proper
remedy.’15
Is the Dutch court giving full force and effect to the judgment, then the district court after
hearing will have to decide ‘… under concepts of equity, what, if any, portion of the constructive
4.
trust imposed on BSI assets in the United States should be forwarded to the Dutch court for
distribution.’
The Third Circuit expresses that the chosen solution affords appropriate protection to an American
creditor but yet acknowledges that the Dutch court would have the primary role in equitably
distributing the available funds. It adds that the District Court’s order for sanction and the finding of
contempt will be vacated.
3.District Court ‘s-Hertogenbosch 14 November 1990
As a result of step 1, in 1988 the District Court of New Jersey decides on Remington motion for
summary judgment, which is granted, and the court enters judgment for damages (over
220,000,000 US dollars).16 This judgment is affirmed on 23 January 1989 by the U.S. Court of
Appeals for the Third Circuit.
On the basis of step 2 Remington was instructed to obtain a declaratory judgment from the Dutch
court ‘… whether the Dutch court will properly recognize the American judgment in the claim
against the bankrupt’s estate.’ Its Dutch representative sends in the request, nearly verbatim
following the words chosen in the court’s judgement. The District Court of ‘s-Hertogenbosch
decides, after hearing BSI BV’s bankruptcy trustee Van Dijk (who succeeded Banning), that based
11.on existing law17 Remington’s request should be disallowed, which the applicant recognises, but
it has submitted that in this case the request can be complied with based ‘on the international law
principle of “comity”.’On the basis of step 2 Remington was instructed to obtain a declaratory
judgment from the Dutch court ‘… whether the Dutch court will properly recognize the American
judgment in the claim against the bankrupt’s estate.’ Its Dutch representative sends in the
request, nearly verbatim following the words chosen in the court’s judgement. The District Court
of ‘s-Hertogenbosch decides, after hearing BSI BV’s bankruptcy trustee Van Dijk (who succeeded
Banning), that based on existing law Remington’s request should be disallowed, which the
applicant recognises, but it has submitted that in this case the request can be complied with
based ‘on the international law principle of “comity”.’
The District Court of ‘s-Hertogenbosch observes that indeed the case is extremely complex,
including the question whether the judgment should be recognised. In addition, in The
Netherlands BSI BV is bankrupt and by way of law (the court refers to Article 119 of the Dutch
Bankruptcy Act) creditors have the right to contest the verification of claims of other creditors,
among which Remington. This right would be frustrated by allowing and sustaining Remington’s
12.request. The ‘s-Hertogenbosch court disallows the request, which also means ‘… that the question
as to the effect of comitas, which she has to present to the Dutch court via the appropriate way,
does not have to be discussed further. Because BSI BV is bankrupt, this appropriate way is either
the lodging of the claim in the bankruptcy estate, possibly followed by a verification dispute, or
file a suit against the bankruptcy trustee, in case the claim would be seen as an administrative
expense’, the court concludes.18
4.U.S. Court of Appeals, Third Circuit 9 March 1993
Remington does not appeal this decision in The Netherlands, but moves directly to the district
court in New Jersey to reinstate equitable remedies vacated in the decision of the Third Circuit of
October 1987. The District court of New Jersey denied the motion as Remington has not appealed
13.
the Dutch court’s decision. In appeal the Third Circuit found that the Dutch court had not been
given a reasonable opportunity to state its position regarding the American judgment of October
1987:
‘Step two of our mandate directs Remington to take its judgment to the Dutch bankruptcy court and
seek determination of whether the judgment would be recognized and enforced by that court. The
express purpose of this requirement is to allow the Dutch court to give same effect to Remington’s
judgment as it would a judgment entered in The Netherlands, in which event reciprocity would
preclude a world-wide trust for Remington’s sole benefit. The issue now before us is whether the
Dutch court has had a fair opportunity to do so. We conclude that is has not.’
The Third Circuit holds that its submission that comity must be a ‘two-way street’ means that the
14.
Dutch court should assure that the New Jersey district court’s judgment would not be ignored:
‘The district court is entitled to have that assurance come from, or denied by, a court of The
Netherlands, not by a court appointed trustee in bankruptcy’.
The Third Circuit therefore holds that to satisfy step two of its mandate:
‘… Remington must return to The Netherlands and follow the proper procedure for verification of a
claim.’19
The Third Circuit is mindful that the controversy is over twelve years old. However, as the court has
stressed:
‘… the issue on which this appeal focuses is a serious and sensitive one that will have ramifications
far beyond the private interests of the parties before us. If Remington had but taken van Dijk’s
treatment of its claim letter before the supervisory judge, the present record suggests that it and the
New Jersey district court would already have the answer they seek. Its failure to do so will not justify
a failure on our part, in the name of expediency, to give the courts of The Netherlands a fair chance
to speak.’
It is here, that the information in the file stops.20
5.Comity
One may wonder why the Third Circuit court was so committed to a requirement of reciprocity. In
the context of the UNCITRAL Model Law it can be noted that several countries have indeed
included the requirement of reciprocity. Although it was rejected as an approach during the
negotiations of the Model Law in the mid 90s, a number of countries have adopted provisions
applying the Model Law on a reciprocal basis, although the nature of these reciprocity provisions
varies, see e.g. British Virgin Islands, Canada, Mexico, Romania and South Africa. I have submitted
15.that the concept of reciprocity is quite outdated in terms of cross border insolvency issues
concerning business undertakings (which is the focus of the Model Law). Moreover the Model
Law’s neutral, procedural nature respects a State’s political and legal integrity, whilst ensuring
cooperation among courts allowing the administration of international insolvency cases to be
dealt with effectively, equitably and efficiently. Furthermore, Article 6 Model Law, if enacted
literally, allows a domestic court to refuse to take action if such an action would be manifestly
contrary to the public policy of the domestic State.21
Should ‘comity’ have the urgent and pervasive effect that the Third Circuit has in mind?
16.It might be instructive to point at a mirror situation, in which Dutch trustees try to create certain
legal effects in the USA, based on ‘comity’. The case relates to a claim of the joint trustees in
KPNQuest22 against four defendants for damages based on ‘… fraud, deceit, corporate
mismanagement and other misconduct of the Defendants’. The joint trustees submit that
jurisdiction of the court in the USA flows from a general rule of international private law that the
court of the residence of at least one defendant will have jurisdiction. The defendants’ motion, on
the contrary, is that the American court is a ‘forum non conveniens’. The US court follows the
latter submission.
Furthermore, the joint trustees submit that a ‘Dutch bankruptcy court’s decision is entitled to
comity and deference’, referring to the Dutch court’s approval for the joint trustees to file a claim
in the USA. The US District Court dismisses this argument: ‘[I]n Anglo-American law, the extension
of comity to another nation is viewed as an unilateral decision of the forum, not as an act
required by a rule of the public international system … [I]t could be relevant only to such matters
as legislative acts, executive orders or dispositive judicial rulings … No ‘authorization’ to sue in the
foreign forum is subject to the discretionary considerations of the comity doctrine, and such
authorization certainly cannot be read as a mandate to deny defendant’s Motion.’ After an
extensive explanation of the principle of comity and its meaning, the Court draws its conclusion:
‘[T]his Court finds Plaintiffs’ arguments based on Chapter 15 and the concept of comity without
merit and irrelevant to this Court’s balance of private and public interest factors.’
In the KPNQuest case indeed the facts are different. ‘Comity’ as a legal norm has the advantage of
being elastic, allowing courts in each individual case to provide the content of this norm.
17.Obviously, the disadvantage is that the concrete content of ‘comity’ itself cannot be anticipated.
Sometimes its specific meaning in a given case can be determined only in lengthy and costly
proceedings for which the Remington Rand affair is exemplary.
6.Contempt of court
On 6 September 1984, the U.S. District Court of New Jersey determined that BSI BV and its US
affiliate BSI Office Equipment Inc. (BSI US) were liable to Remington for misappropriating
Remington’s trade secrets. The same day an order was issued imposing the constructive trust
18.
mentioned earlier. On Remington’s application, dissatisfied with the degree that BSI BV and BSI
US complied with September 6 order, the district court issued an order, on 15 October 1984, to
both companies commending them:
‘… to show cause why a citation of contempt should not be entered, against defendants for failure to
comply with this Court’s Order of September 6, 1984 …’.
I note that Banning, the trustee of BSI BV, was not mentioned by name or title in the order.
On 21 January 1985 – oh, horror – the district court held Banning in contempt of the September 6
order and on 6 February 1985 the district court ordered
‘… that a warrant be issued for Banning’s arrest and that he be held liable with BSI for attorneys’ fees
incurred by Remington seeking to enforce the September 6 order.’23
It is evident that this order raised commotion in the (rather small at that time) insolvency
community in The Netherlands. Banning appeals and challenges the contempt citation and the
19.order holding him and BSI BV liable for $ 86,685.20 in attorney’s fees. In his appeal Banning is
assisted by the Government of the Kingdom in the Netherlands, which presented an ‘amicus
curiae’.24 The reason follows from its Motion for Leave to File an amicus curiae (the Court
permits to file the Brief amicus curiae). The Government’s main argument is weather it is
appropriate for a US court (i) to purport to create summarily in favour of an American judgment
creditor a security interest in the Netherlands assets of a Dutch judgment creditor, without
determining whether and to what extent such an interest is permitted under Dutch law, and (ii)
then to bypass the requirement of Dutch law that Dutch courts are to recognise, and if so to what
extent recognition shall be given to a foreign judgment, by seeking to coerce a Dutch trustee in
bankruptcy with the threat of imprisonment when he declined to comply with an order which
violated his strongly felt duty to administer such assets for the benefit of all creditors pursuant to
the dictates of Dutch law and under the supervision of the Dutch courts. It is a very serious
matter, as in the Motion for Leave to File the amicus curiae, the Dutch Government adds:
‘These matters are not only matters of vital concern to the Kingdom of The Netherlands – whose
court-appointed trustee faces arrest and imprisonment – but also gravely impact amicable relations
between nations generally. Accordingly, the Government of the Kingdom of The Netherlands, a
sovereign member of the community of nations with many important and friendly ties to the United
States, seeks this opportunity to present to this Court its perspectives as to the important principles
of international comity that ought to have barred the District Court’s action, and otherwise assist the
Court in its decision in this proceeding.’25
With its 42 pages amicus curiae ‘a panoply of defenses to the contempt order’ is raised, which the
Third Circuit hardly addresses, for it considers the failure to name Banning as a respondent in the
order to show cause to be dispositive of his appeals. Banning is not a named defendant. To
20.
Remington’s assertion that oral notice is sufficient to forewarn that someone is in jeopardy of
being held in contempt, the Court replies that a notice must inform one that he personally is
threatened with contempt:
‘Because whatever oral notice Banning may have received never included the critical element that
would alert him that he personally was in jeopardy, it is not sufficient.’
The Third Circuit reverses the order of contempt and attorney’s fees to the extent they apply to
Banning. On its merits, what could have become a fierce debate, it did not come off the ground.
7.The solution according to present Dutch law
The Netherlands26 long have been deemed to embrace the so-called territorial principle, in
insolvency matters generally shielding assets located in the Netherlands from foreign
interference. I have challenged this view and have submitted that in questions of private
international insolvency law the principle is to be viewed in the narrow context of garnishment.
With regard to garnishment a distinction has to be made between questions relating to the
seizure of the estate to which the foreign insolvency proceedings relate, and questions concerning
individual claims and the recourse that creditors in The Netherlands can take. For this reason, I
have argued, that ‘territorial effect’ should be considered to be less broad than sometimes has
21.
been suggested. In relation to this discussion, I would hold that (i) on the one hand, assets of the
estate are not subject to foreign insolvency proceedings, however, (ii) on the other hand the
foreign liquidator is indeed authorized to act in The Netherlands and has the power to dispose of
goods or assets. This is because the foreign insolvency proceedings (where garnishment is
concerned) do not have exclusive effect as garnishments in the Netherlands do not expire, and,
individual actions of execution, after the date of the opening of foreign insolvency proceedings
will continue to be possible in the Netherlands. When I see this correctly the Netherlands
Supreme Court does hold this view in its decision of 13 September 2013.
The Netherlands Supreme Court had to decide in the matter of the insolvency of the Russian oil
giant Yukos, and it clarified that the appointed Russian trustee (Mr Rebgun) may in principle
22.
exercise the power to sell the debtor’s assets located in the Netherlands, that has conferred on
him under the foreign (Russian) lex concursus. The Supreme Court considers:27
The Supreme Court in its judgment of 19 December 2008, ECLI: NL:HR:2008:BG3573, held that,
insofar as has not been decided otherwise in pursuance of an international regulation that is
binding to the Netherlands, a bankruptcy declared in a different country has territorial effect,
not only in the sense that (a) the bankruptcy attachment levied on the assets does not also
include the assets situated in the Netherlands, but also in the sense that (b) the legal
‘3.2.1.consequences of the bankruptcy law of that other country be attached to bankruptcy can not
be invoked in the Netherlands in so far as they might result in unsatisfied creditors no longer
being able to take recourse – either during bankruptcy or after the bankruptcy – against the
assets of the (former) bankrupt, that are situated in the Netherlands. (c) The principle of
territoriality does not obstruct the operation in the Netherlands of other consequences of a
bankruptcy proceeding opened abroad.
These rules, in which the decision of three previous judgments is repeated (Netherlands
Supreme Court 2 June 1967 …, Netherlands Supreme Court 31 May 1996 …, Netherlands
Supreme Court 24 October 1997), imply with respect to a bankruptcy opened abroad (assuming
that judgment was not established in a manner which is contrary to Dutch public policy) that
the trustee in that bankruptcy in principle also with respect to the assets situated in the
Netherlands and belonging to the bankruptcy estate – but which are not encumbered by the
bankruptcy attachment – can perform acts of administration and disposal, provided that the
trustee is empowered to do so under the laws of that other country (lex concursus) (line (c)).
Accordingly, the foreign trustee can, if he derives the power to do so from the lex concursus,
alienate the assets located in the Netherlands and have the proceeds benefit the bankruptcy
3.2.2.
estate, on the understanding that by rule (a) attachments levied up to the moment of transfer
must be respected, as those assets do not fall under the bankruptcy attachment. Rule (b) does
not stand in the way to the above. In order to do justice to that rule it is sufficient that, as long
as during or after the bankruptcy assets belonging to the (former) bankrupt are situated in the
Netherlands, unsatisfied creditors can take recourse against them.
Rule (b) does not extend so far that those assets would have to be kept fully out of the normal
settlement of the foreign bankruptcy. The territoriality principle does not preclude that the
power to dispose of the debtor transfers to the foreign liquidator, so he can also liquidate the
assets located in the Netherlands – respecting the attachments levied thereupon in the
meantime – for the benefit of the joint creditors.’
23.
The result of the Supreme Court’s decision is that – outside the scope of the Insolvency
Regulation – a foreign insolvency office holder (IOH) can effectively exercise its powers in the
Netherlands, provided that his actions follow from the lex concursus and these respect all
existing individual creditors’ attachments on assets located in the Netherlands. The foreign IOH
can act without prior court decision on for instance recognition of its foreign proceeding or
relief (as is required under the UNCITRAL Model Law), or for instance an exequatur. The only
defence interested parties have is the submission that an action of the foreign IOH is against
Dutch public policy. The Yukos judgment therefore results, for non-Dutch colleagues (but for
many Dutch too!) probably surprisingly, in its effects in universality: the Netherlands is open for
foreign insolvency proceedings.28 With the judgment it should be rather easy for foreign IOH’s
to include Dutch assets in the foreign insolvency. In a Code loving nation as the Netherlands it is
wondered whether the radical judicial rule is the best option. I submit, that our legislation
should be made globalisation proof with an Act, based on the draft of 2007, which was received
by foreign experts quite positive. Legislation as in the draft Act would be in line with the
systems of the countries surrounding us (UK, Belgium and Germany) and with recently included
systems in e.g. Poland, Rumania and Greece. Presently, The Netherlands follows a retrograde
and isolated policy.
Assuming BSI BV also had assets outside of The Netherlands, the American decision to establish a
constructive trust covering all the debtor’s assets, wherever they are located, may find an
obstacle in Article 203 of the Dutch Bankruptcy Act. This provision, already included in the Act in
1896, provides: ‘A creditor who after the declaration of bankruptcy has recovered his claim
separately, either in whole or in part, from goods situated abroad of a debtor declared bankrupt
in the Netherlands, which are not subject to a priority right in his favour, must pay the amount so
recovered into the estate.’ The term ‘priority right’ has been assessed on its meaning by the
Netherlands Supreme Court in its decision of 11 July 2014.29
In the case at hand Seacastle ContainerLeasing (USA) concludes in 2006 a leasecontract
24.concerning regard to seacontainers with Europe West-Indië Lijnen B.V. (‘EWL’). EWL does not pay.
On 24 June 2008 the New York court permits a so called ‘Rule B Attachment’ (‘RBA’). With its
order of 18 August 2008 the New York court allocates US$ 472.592 to Seacastle (via the RBA the
amount was attached under two NYC banks). However, by a decision of the District Court of
Rotterdam of 9 July 2008, EWL was subject to reorganisation (surseance van betaling), on 14 July
by the same court ‘converted’ in bankruptcy liquidation (faillissement), with the appointment of
mr Peters as trustee. Peters claims that under Article 203 of the Dutch Bankruptcy Act Seacastle
should pay the amount recovered (its equivalent of € 298.222) to the estate. Both the District
Court of Rotterdam as the Court of Appeal The Hague decide in favour of Peters, and Seacastle
appeals to the Netherlands Supreme Court.
25.The Supreme Court decides:
‘Pursuant to Article 203 of the Bankruptcy Act a creditor who after the declaration of bankruptcy has
recovered his claim separately, either in whole or in part, from goods situated abroad of a debtor
declared bankrupt in the Netherlands, which are not subject to a priority right in his favour, must pay
the amount so recovered into the estate. It is clear from the legislative history that the legal basis of
the reimbursement obligation referred in Article 203 lies in the fact that the creditor who recovers
property of the bankrupt located abroad infringes the principle of equality of creditors … In the
present case, the central question of priority as provided in Article 203 exists if the creditor invokes a
right of priority under foreign law. To answer this question it must be assessed, given the object and
purpose of Article 203, whether that right results on the basis of foreign law to a priority position and
whether that preferential position given its content or meaning can be equated with a Dutch priority
right.30 The opinion of the Court of Appeal means that the RBA is a measure of attachment and,
according to Dutch law an attachment does not create a priority right. The Court of Appeal has rightly
concluded that the right on which the plaintiff relies, can not be considered a right of priority in the
sense of Article 203.’
The Court denies cassation.
To conclude. In the area of international insolvency law the pendulum of its foundation is from ‘clash’
to ‘cooperation’. At the request of the American Law Institute (ALI) and the International Insolvency
Institute (III) Ian Fletcher and I drafted – being advised by some 100 consultants from over 30
jurisdictions and having had discussions in e.g. Berlin, Rome, New York, Washington and Paris – the
Global Principles for Cooperation in International Insolvency Cases. The Global Principles include as
an integral part a set of Global Guidelines for Court-to-Court Communications in International
Insolvency Cases.31 We also published on this subject32 as we did with the hot topic (even until 10
years ago a taboo) of harmonisation of insolvency laws in Europe in a report, presented to the Dutch
Association of Civil Law and discussed in a meeting in 2012 in the building of the Netherlands
Supreme Court in The Hague.33 Since early 2013 we have collaborate (myself as drafter, Ian chairing
a 40+ Review & Advisory group) in the ‘JudgeCo-project’, sponsored by the European Union. It has
resulted, early 2015, in a Report containing EU Cross-Border Insolvency Court-to-Court Cooperation
Principles as well as EU Guidelines for Court-to-Court Communications in Cross-Border Insolvency
Cases, a European focused reworking of the Global Guidelines. It is expected in January 2015.34 The
motto in the international insolvency arena is cooperation between legal systems. Recital 48 in the
Amended Insolvency Regulation (‘Recast’) stresses, as the 1346/2000 Regulation does, the
importance close cooperation between insolvency practitioners in concurrent insolvency
proceedings. The Amended Insolvency Regulation will require courts to cooperate in cross-border
cases: ‘… In their cooperation, insolvency practitioners and courts should take into account best
practices for cooperation in cross-border insolvency cases as set out in principles and guidelines on
communication and cooperation adopted by European and international organisations active in the
area of insolvency law, and in particular relevant guidelines prepared by UNCITRAL.’ In Europe, the
JudgeCo Principles and Guidelines may contribute to effective and efficient coordination of cases.
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Please quote this article as: B. Wessels, ‘The Remington Rand Affair’, TvI 2015/43. Prof. mr. B.
Wessels is Em. professor international insolvency law at the Universiteit Leiden and External
1.
Scientific Fellow Max Planck Institute Luxembourg for International, European and Regulatory
Procedural Law.
Remington Rand was originally named E. Remington & Sons and produced sewing machines and
weapons. In 1873 it produces the first series of 25 typewriters, using the QWERTY-keyboard. In
2.1886 the company was sold and in 1920 its name was changed to Remington Typewriter Company,
merging in 1927 with Rand Kardex Company, as of then named Remington Rand. In the early 50s
the company became a part of the Sperry Rand group.
3.The file was given to me by a former justice who has been for four years a supervisory judge in
bankruptcy cases in one of the Dutch District Courts in the 80s and 90s of the last century. A former
partner of one of the larger Dutch law firms at that time served as special counsel for the attorney
of Kilbarr advising about Dutch law, facts in The Netherlands and documents in Dutch. I thank them
both for their comments on my draft and for additional information provided. Any errors in the
contribution are mine.
For some comments on the Remington Rand case, based on study of the American judgments, see
4.Bob Wessels, International Insolvency Law, Deventer: Kluwer, 3rd ed. 2012, paras. 10049 and
10050.
5.On eBay this type of typewriter is still for sale.
6.D.C. Civil No. 84-0261.
This is still standing practice. Compare e.g. District Court Amsterdam 4 April 2012
(CalPERS/Bankruptcy trustees van der Moolen Holding N.V.) in which California Public Employees’
Retirement System (California, USA), CalPERS, claims the verification of her claim (of over 34
7.million euros) with as a reference a judgment from a New York court. The trustees refuse
verification, rightfully, so the court, because: ‘… even in case the decision of the New York court
would be recognised, the sole recognition – given the undetermined contents of the New York
court decision – would not lead to granting the claim.’
In consolidated cases Nos. 86-5587, 86-5588, 86-5589, 88-5590, 88-5591 and 86-5750. Remington
8.
Rand Corporation – Delaware vs. Business Systems Inc. and others, 830 F.2d 1260.
9. Ibid., at 1270.
10.Ibid., at 1271.
11.Ibid., at 1271.
12.§ 304 has been repealed in 2005, when it was replaced by Chapter 15 U.S. Bankruptcy Code.
In the margin of the judgment a nameless person wrote: ‘A case of 1764!’. Solomons v. Ross is
one of the earliest cross-border landmark decisions (in an England-Dutch case), see Ian F. Fletcher,
13.‘Ancient and Modern: meditations on the Anglo-Dutch dimension in the evolution of cross-border
insolvency law’, in: Bernard Santen and Dick van Offeren (eds.), Perspectives on international
insolvency law. A tribute to Bob Wessels, Deventer: Kluwer 2014, 55ff.
In Hilton v. Guyot, 159 US 113, 40 L.Ed.95, 16 S. Ct. (1895) the term comity is explained: ‘Comity,
in the legal sense, is neither a matter of absolute obligation, on the one hand, nor of mere
14.courtesy and good will, upon the other. But it is the recognition which one nation allows within its
territory to the legislative, executive or judicial acts of another nation, having due regard both to
international duty and convenience, and to the rights of its own citizens, or of other persons who
are under the protection of its laws’. The cited words have been repeated in In re Maxwell
Communications Corp., 93 F.3rd 1036, at 1046 (2nd Cir. 1996), resulting in a limitation of the
applicability of Chapter 11, as this would thwart English insolvency proceedings.
15.Here the anonymous wrote in the margin: ‘For crying out loud!!’.
16.Civil Action No. 84-261.
17.The court refers to Articles 431 and 985 Dutch Code on Civil Proceedings.
18.District Court ’s-Hertogenbosch 14 November 1990, rekestnummer 82/90.
Kilbarr Corporation v. Business Systems Inc. 990 F 2nd 83 (3d Cir. 1993), also holding (at 89), that,
pending the final determination of the Dutch courts on whether Remington’s judgment will be
19.
enforced, the Third Circuit will vacate that portion of the of the district court’s order imposing a
constructive trust on assets beyond the territorial limits of the United States.
In a press-clipping of the Dutch newspaper Trouw, 21 November 1995, it is stated that two banks
20.
(ABN Amro and MeesPierson) have settled with Remington for an unknown amount.
21.See Bob Wessels, International Insolvency Law, Deventer: Kluwer 3rd ed. 2012, para. 10385.
US District Court of New Jersey 17 October 2006, JOR 2007/23 (Curatoren KPNQwest Windt and
22.
Meijer vs. Qwest Communications International Inc., et al.).
During a conference in Toronto (I was there too; we believe it was 1994), the supervisory judge
who is my source had a conversation with (now) Lord Hoffmann regarding the Remington case.
23.
He recalls that Lord Hoffmann has said: ‘Yes, I know the case. The Americans behaved
outrageously.’
Facts and citations are taken from cases Nos. 86-5587 and 86-5750. US Court of Appeals for the
Third Circuit 5 October 1987 (Remington Rand Corporation – Delaware vs. Business Systems Inc.
and others, J.A.M. Banning, Appellant). An amicus curiae as a production in proceedings is hardly
24.known in the Netherlands. Literally it means ‘friend of the court’ and it can be regarded as a legal
opinion, delivered by someone who is not a party to a case, but who offers information that bears
on the case, independently, not solicited by any of the parties to assist a court, to make sure that
a court will decide not solely on the arguments of the parties directly involved in the case.
Although the file is silent on its authors, my sources recollect that they are Hon. Justice Sonja
25.Boekman (retired member of the Netherlands Supreme Court) and professor J.C. Schultz,
professor op private international law University of Leiden.
What follows is based on the presumption that Articles 431 and 985 Dutch Code on Civil
26.
Proceedings do not apply.
Netherlands Supreme Court 13 September 2013, ECLI:NL:HR:2013:BZ5668. The translations are
27.
mine.
The Dutch Supreme Court’s decision clearly goes much further then the framework included in
the pre-draft of a new Bankruptcy Act for The Netherlands, published in 2007, which includes a
system of over 30 articles on international insolvency (beyond the EU Insolvency Regulation), with
a set of rules for recognition, to be decided by one court (The Hague). See Bob Wessels,
28.
‘International Insolvency Law in the Netherlands: The Pre-Draft of Title 10’, in: 17 International
Insolvency Review, Spring 2008, pp. 143-162. The pre-draft is politically dead; the Minister of
Security and Justice has decided (on unconvincing grounds) not to use the pre-draft as a basis for
new legislation.
29.Netherlands Supreme Court 11 July 2014, ECLI:NL:HR:2014:1630.
30.At this juncture the Court refers to its decision of 14 December 2001, JOR 2002/70 (Sisal II).
See for the full text http://www.iiiglobal.org/component/jdownloads/finish/557/5932.htm or
www.bobwessels.nl, weblog, Archive 2006-2013, document 2012-06-doc1. The black letter text of
the Global Principles for Cooperation in International Insolvency Cases is published as Annex in:
Ian F. Fletcher and Bob Wessels, ‘A Final Step in Shaping Rules for Cooperation in International
31.Insolvency Cases’, International Corporate Rescue – Special Issue 2012, 13pp, and by Ian F.
Fletcher, ‘Editorial Notice: Documentation – Transnational Insolvency: Global Principles for
Cooperation in International Insolvency Cases; Global Guidelines for Court-to-Court
Communications in International Insolvency Cases’, in: 23 International Insolvency Review 2014,
221ff.
See Ian F. Fletcher and Bob Wessels, ‘A Final Step in Shaping Rules for Cooperation in
International Insolvency Cases’, in: 9 International Corporate Rescue, Issue 5, 2012, p. 283ff; Ian F.
32.
Fletcher and Bob Wessels, ‘Global Principles for Cooperation in International Insolvency Cases’, in:
4 International Insolvency Law Review 1/2013, 2ff.
Ian F. Fletcher and Bob Wessels, Harmonization of Insolvency Law in Europe, Preadvies 2012
33.
uitgebracht voor de Vereniging voor Burgerlijk Recht, Deventer: Kluwer 2012, 135 pp.
34.See for the latest developments: www.tri-leiden.eu (search for JudgeCo).