Contributed By Wiersma Mensonides
The Dutch Civil Code (DCC) does not contain a specific maritime finance section, but does contain provisions on recourse against a specific asset or against an entity or person. The specific asset security interests for ship finance structures usually consist of a registered ship mortgage, a pledge over the receivables of the financed entity and a pledge over the insurance rights of that entity. This is often combined with a parent company guarantee or, in some cases, with a guarantee issued by the ultimate beneficial owners of the financed entity.
The concept of a ‘maritime finance entity’ is alien to Dutch law. Most vessels are operated in single-ship companies. These are usually limited liability companies (besloten vennootschap met beperkte aansprakelijkheid) with a closed group of shareholders or partnerships (commanditaire vennootschap), consisting of one managing partner (a limited liability company) and a group of silent partners (investors).
In a partnership (commanditaire vennootschap), the liability of a silent partner is limited to their equity contribution, provided that the silent partner does not externally represent the partnership. There are no Dutch restrictions on foreign lending to Dutch shipping companies.
There are no rules under Dutch law as to who can or cannot receive a ship finance loan. It is up to the lender to decide on the entity’s eligibility.
The are no rules under Dutch law as to what constitutes a maritime finance project. Most ship finance structures are organised in the manner as specified in 1.1 Draft of Maritime Finance Law and 1.2 Maritime Finance Entity, above.
See 1.6 Fiscal Incentives, 1.7 Labour Incentives, 1.8 Immigration Incentives and 1.9 Documents Required for Authorisation, below.
In order to decrease profit tax, Dutch shipping companies may apply either a tonnage tax or a five-year depreciation scheme. The core of the Dutch tonnage tax system is that shipping companies are taxed on the basis of an assumed profit, calculated using the vessel's net tonnage. The consequence is that a vessel’s true profit (or loss) is of no relevance.
Applications for tonnage tax are filed with the Dutch tax authorities. A number of strict conditions apply; the shipping company must, for example, have substantial presence in the Netherlands.
The alternative to tonnage tax is to apply a five-year depreciation scheme to the vessel's value. This may not, however, result in a negative result during any fiscal year. In general, the Dutch tax authorities are open to negotiate fair tax solutions for shipping activities.
For foreign seafarers employed by a Dutch shipping company, a 30% tax ruling may apply, which means the employer is entitled to apply a fixed tax-free allowance for that foreign seafarer. This is to reimburse that seafarer for extra expenses incurred due to working outside of his or her home country. If a seafarer is subject to a Dutch salary withholding tax and/or Dutch national insurance contributions, the employer may apply a wage tax relief.
This relief can be up to 40% of the seafarer’s salary if he or she resides in the Netherlands or in the EU/EEA. For seafarers not residing in the EU/EEA, this tax relief is capped at 10% of their salary, provided the salary is subject to the withholding of tax and/or national insurance contributions.
No work permit is required for seafarers employed on a Dutch-flagged sea-going vessel, provided that they do not reside in the Netherlands. For the employment of Masters of non-EU/EEA nationality on a Dutch vessel, one has to apply for a specific (permit) exemption.
The concepts of maritime finance entity or maritime project are alien to Dutch law. To apply for Dutch tonnage tax, one must have substance in the Netherlands and perform one or more of the following activities:
There is no maritime finance authority in the Netherlands.
The tonnage must be applied for at least ten years and it is usually not possible to exit that scheme earlier due to losses. The depreciation scheme spans a period of five years.
The Netherlands is a party to LLMC 76. In the Netherlands, this convention entered into force on 1 September 1990.
The Netherlands also ratified the 1996 protocol. In the Netherlands this entered into force on 23 March 2011 and, as such, the amended limitation amounts have been applicable as of 8 June 2015.
In addition to the convention and protocol, provisions in the DCC have been incorporated. Articles No 8:750-8:759 DCC contain the national legislation in respect of limitation of liability for maritime claims, the provisions of which do not materially differ from LLMC 76. The Dutch Civil Procedure Code contains the procedural steps to be followed in relation to limitation of liability matters.
LLMC 76 does not contain a provision in respect of a time-bar for filing a limitation of liability action. Also, Dutch (procedural) law does not provide such a time-bar. In the Harns (Rotterdam Court, 6 September 2017, S&S 2018/28), the court ruled that on the basis of the wording of Article No 11 sub 1 LLMC 76, one can conclude that a request for limitation of liability is not confined to when liability has not been established. Therefore, if liability has already been established, a request for limitation thereof can be filed.
Article No 3 LLMC 76 and Article No 8:752 DCC set out the type of claims for which liability can be limited. These include:
Articles No 3 and 5 LLMC 76 and Article No 8:753 DCC contain the type of claims that are not subject to limitation of liability:
No party is allowed to invoke the limitation of liability in case it is (ultimately) proven that the damages have occurred by their own actions or neglect – performed either with the intent to cause these damages, or recklessly and with the knowledge that these damages would probably be the result thereof. This is based on Article No 4 LLMC 76 and Article No 8:754 DCC. The burden of proof in establishing said conduct lies with the claimant (Explanatory Memorandum, Parliamentary History, Book 8, page 680).
The limitations of liability are as per the amendments to the limits of liability in the protocol (IMO LCR LEG.5 (99), of 19 April 2012), which entered into force in the Netherlands on 8 June 2015. The limits are as follows:
A claimant/creditor can block the ship-owner’s right to limit liability, if they can prove conduct that bars the right to limitation of liability, as per 2.7 Conduct Barring Right to Limitation of Liability, above.
Traditionally, bank guarantees from first-class Dutch banks or International Group P&I Clubs have been accepted. In addition, the Dutch Maritime Law Association has introduced a demand guarantee form for limiting liability under LLMC 76.
It is a standard form, developed by the market and called the Rotterdam Guarantee Form Limitation 2017. In addition to this, a cash deposit with the court can be sufficient to constitute a limitation fund.
P&I Club guarantees are accepted, provided the P&I Club is a member of the International Group. Guarantees issued by other P&I Clubs do not necessarily have to be accepted.
Article No 642e DCCP (Dutch Code of Civil Procedure) arranges for the lifting of previous arrests and return of securities issued. Once a limitation fund has been constituted, the ship-owner can request that the court issue an injunction in respect of the release from previous arrest and the return of all previously provided security.
In order to have a vessel sold in a judicial sale before the court, the creditor must obtain an enforceable title against the vessel’s owner. This can be either a Dutch judgment containing an order for payment, an EU judgment enforceable in the Netherlands or a notarial deed holding an acknowledgement of debt from a Dutch civil law notary. A Dutch mortgage or EU mortgage enforceable in the Netherlands can also constitute such an enforceable title.
When it comes to the day of the judicial sale, the court must establish that all requirements under the Dutch procedural law have been complied with before proceeding with the auction, such as verification of the service of various documents.
Another of the requirements to proceed with the judicial sale is the proper notification of all parties involved. The Dutch Code of Civil Procedure contains various articles in respect of the judicial sale. In accordance with these provisions, notifications must be published in a local newspaper, as well as a newspaper published in the flag state (custom has grown that publication in Lloyd’s List is also accepted by the court). Notifications must also be published in the court building and via a poster on or in the vessel.
For judicial sales, a vessel need not be appraised. The judicial sale consists of an open bidding system. Pending the process of a judicial sale, a private sale with the court’s approval may also be requested, for which two separate appraisals must be filed with the court, together with a conditional sales agreement that at least matches the average of the two appraisals.
In a judicial sale of a vessel, the court applies the so-called ‘Dutch auction’ process. This is a two-tier system. The first consists of a bidding process, ending with the highest bid. The highest bidder is not automatically awarded the vessel. Instead there is a second tier, in which the bidding process is reversed from high amounts to zero. The purchase price comprises the highest bid in the first tier plus the amount of the final bid in the second tier. If no bid is made in the second tier, the highest bidder of the first tier is awarded the vessel.
The Dutch Code of Civil Procedure does not contain a provision in respect of minimum bids. However, it is possible that the enforcing party will incorporate a minimum bid in the auction conditions.
The auction is held before three judges and a lawyer representing the enforcing party. The enforcing party also instructs a bailiff to assist in the bidding process. The court will investigate whether all legal requirements have been met in order to proceed with the judicial sale. Once this has been confirmed, the bailiff will lead the actual bidding procedure, including an explanation of the auction conditions and bidding process. For the bidding process itself, see 3.4 Judicial Sale Proceedings, above.
The Dutch Code of Civil Procedure does not contain a provision in respect of representation during the judicial sale. This is arranged for in the auction conditions, which can vary. However, it is customary that auction conditions will allow bidding by a Dutch Bar-registered lawyer representing the interested party, or by a party duly represented with confirmation that a deposit has been paid in advance.
In the auction conditions, it is commonly included that a prospective bidder must timely pay a deposit (of an amount to be determined by the enforcing party). If represented by a lawyer, this lawyer must issue and sign a declaration that they received in escrow the amount of the deposit and upon award of the vessel will pay this amount immediately to the advocates of the creditor. If the prospective bidder is not represented by a lawyer, then a bank guarantee must be issued by a first-class Dutch bank, confirming that the deposit will be paid immediately at first request should the vessel be awarded to this prospective bidder.
The time a successful bidder has to post the sale price once a vessel has provisionally been sold to them depends on the wording of the auction conditions. Usually the successful bidder has to pay the full purchase price within eight days of the adjudication. Payment is to be made into the accounts of the advocates of the creditor.
Any party that meets the requirements of the auction conditions may place a bid during the judicial sale auction, including the enforcing party/creditor. However, the creditor must pay cash to complete the sale as, after the sale, a formal division of proceeds is drafted. Often the creditor holds the first priority mortgage, outranking other creditors, and so the amounts paid will be returned to said creditor.
If the auction conditions do not contain a clause allowing the creditor to reserve the right to award the vessel or not, then the judge will approve the sale to the highest bid, even if this does not cover arrest expenses.
The Netherlands is a party to the Hague-Visby Rules (HVR), including the Special Drawing Rights Protocol, in respect of the carriage of goods by sea under a bill of lading.
With two bills submitted to the Dutch Parliament in 2018, the Netherlands is preparing to adopt the United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea (the Rotterdam Rules) into Dutch law.
The parliamentary approval of the bills will not yet trigger the immediate ratification of the convention or entry into force of the national legislation, the date of which the government will decide in due course. The decision will most likely depend on the ratification of the Rotterdam Rules by neighbouring countries (eg, Germany and France) and major trading partners (eg, China and the US).
The HVR contain no jurisdiction provisions in respect of their application to cargo claims. Following new legislation coming into force on 1 January 2017, the First Instance Court of Rotterdam and the Court of Appeal in The Hague have, within the boundaries of EU legislation, exclusive jurisdiction in maritime matters (Section 625 et seq Dutch Code of Civil Procedure).
The Hague-Visby Rules (if the requirements as set out in Articles No I and X have been complied with) have direct effect, pursuant to Section 8:371(3) of the Dutch Civil Code. The Netherlands has also incorporated the HVR into Book 8 of the DCC (Sections 8:382 to 386 and Section 8:1712); this legislation applies if and when, in respect of the carriage of goods by sea under a bill of lading, the HVR have no direct effect.
Moreover, the DCC provides general rules for the carriage of goods under time and voyage charters, including provisions on liability, lay time, demurrage, time-bars, etc. The application of this regulation’s rules, however, is not mandatory.
As with a booking note or other document that, in effect, provides that one party agrees with the other party to carry goods (Section 8:20 DCC), the bill of lading must be regarded and can be construed as a contract of carriage under Netherlands law.
Section 8:20 DCC identifies ‘the carrier’ as one party and ‘the shipper’ or ‘the consignor’ as the other party under the contract of carriage of goods (either by sea or, for example, by inland waterways or road). The shipper or consignor (in Dutch de afzender) is the contractual party to the contract of carriage but not necessarily the party that delivers the goods for the carriage to be performed by the carrier.
Under Netherlands law, a contractual claim against the carrier (ie the title to sue) can be instituted only by the so-called lawful holder of a bill of lading. This holder is entitled to claim damages from the carrier, irrespective of whether they suffered a loss (Section 8:441(1) DCC). A non-contractual claim in tort against the carrier can be filed by the owner of the lost or damaged goods.
In respect of the contractual claim, it is relevant to note that Dutch law identifies three types of bill of lading:
The lawful holder of an order bill of lading is the person or entity to whose order it was endorsed. Endorsement in blank modifies the order bill of lading to a bearer bill of lading; the person or entity holding an order bill of lading endorsed in blank qualifies as the lawful holder.
The lawful holder of a straight bill of lading is the consignor, as long as this consignor (or their financier) holds the bill. The named consignee will qualify as the lawful holder from the moment the named consigned receives and possesses the bill of lading (decision of Supreme Court of the Netherlands 29 November 2002, NJ 2003 (the Ladoga 15).
Taking into account the concept and system of the identity of carrier under Dutch law, these two questions are better answered simultaneously. In matters where the contract of carriage is evidenced by (the issuing of) a bill of lading, more than one person or entity may become and qualify as the carrier under the bill of lading. This mainly depends on the use of the form and signing of the bill of lading (Section 8:461 DCC).
Any of the following persons or entities can be sued for cargo claims as carrier under the bill of lading:
In the Netherlands, legal proceedings in respect of cargo claims are directed towards particular persons or entities, who must be sued in personam.
Unlike specific claims relating to or originating from, for example, salvage and general average, which, under Netherlands law, have some resemblance to the concept of a maritime lien under certain foreign systems of law (Section 8:211 DCC), cargo claims do not give rise to a right in rem or maritime lien.
A non-contractual claim in tort against the carrier for loss of or damage to goods carried can be filed by the owner of the lost or damaged goods (see 4.6 Cargo Claims, above). Dutch law (Book 8 DCC) provides detailed and rather complex rules in respect of claims in tort.
In general, a claimant can sue a carrier in tort and the carrier shall be liable towards such claimant only to the extent as provided in the contract of carriage entered into by the claimant itself – if and when the carrier would have been a party to such contract (Section 8:363 DCC) or if the claimant is the owner of the goods and not the contracting shipper – to the extent as provided in the last contract of carriage in the chain of contracts of carriage of the goods (Section 8:364 DCC).
Dutch courts accept and recognise the concept, aim and effectiveness of Himalaya clauses where they exempt a contractual carrier’s or other contracting party’s servants, agents or subcontractors from liability under a contract of carriage; and/or to confer on such servants, agents and subcontractors all the rights, limits, defences and exemptions from liability enjoyed by the contractual carrier under that contract of carriage.
For the carriage of goods under a bill of lading and pursuant to Section 8:381(1) DCC, the carrier is not liable for loss of or damage to the goods arising or resulting from the vessel’s unseaworthiness, unless caused by want of due diligence on the part of the carrier to ensure that:
Other defences that can be relied upon by the carrier – irrespective of whether a bill of lading is issued or not – are provided in Section 8:381(2) DCC (which is a translation of the 17 exonerations of Article No IV(2) of the HVR) and concerns, among others, errors in navigation, fires, perils of the sea, acts of God, inherent vice and insufficient packaging.
Unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading, neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the goods in an amount exceeding SDR666.67 per package or unit, or SDR2 per kg of gross weight, of the goods lost or damaged, whichever is the higher. The Netherlands has implemented and translated this Article No 4(5) of the HVR into Section 8:388 DCCP.
In respect of sea-going vessels, the Netherlands is a party to LLMC 76 and the 1996 protocol. Overall limitation for carriers that qualify as the ship-owner (Article No 1(2) LLMC) is thus subject to the amended limitation amounts applicable since 8 June 2015.
In order to actually limit the overall liability, a limitation fund must be established in accordance with the provisions of Sections 642(a) to (z) DCCP. Such fund will consist of a cash deposit to the court or, more often, an A1 bank or International Group P&I Club guarantee.
Under Dutch law, the claimant (cargo interests) must prove that damage or loss occurred during the period of the contracted carriage of the goods. In principle, in the case of carriage of goods under a bill of lading, the carrier is released if it demonstrates that an event as referred to in Section 8:383 (1) or (2 a-p) DCC (or Article No IV (1) or (2 a-p) HVR if and when these rules apply) has occurred and the loss or damage was the result thereof.
The claimant may subsequently prove that the ship was unseaworthy (seaworthiness being an overriding obligation as per Supreme Court 11 June 1993, NJ 1995, 235, Quo Vadis), after which the carrier may still prove that it fulfilled its obligation to exercise reasonable care for the seaworthiness of the ship.
Under Dutch law, notice of loss or damage must, in the event of visible damage, immediately be given by written notification. In the event of non-visible damage, it must be given within three days (Section 8:492 DCC or Article No III (6) HVR).
In the case of carriage of goods under a bill of lading, Dutch law provides that the period of expiry is one year from the date on which the goods were delivered or should have been delivered, but parties may agree to extend this period after causation of the loss or damage (Section 8:1712 DCC).
In the case of other carriage of goods by sea, the limitation period is one year. This period may be interrupted (Section 3:317(1) DCC) or extended (Section 8:1701 DCC). Dutch law provides an extra period of three months for recourse claims (Sections 8:1712 (2) and 8:1720 DCC).
On application of the HVR by the Dutch courts, an action must be brought before the courts within one year of the date on which the goods were delivered or should have been delivered. Extension of this period is allowed (Article No III (6) HVR). There is an extra period of three months for a recourse claim (Article No III (6 bis) HVR).
See 4.15 Time-Bar in Cargo Claims, above.
(International) jurisdiction of Dutch or foreign courts and validity of choice of law provisions contained in a bill of lading or other contract of carriage should be determined by the Dutch courts on the basis of international regulations (including the recast EU Brussels I Regulations, EVEX Convention and HVR) and/or the DCC and/or the DCCP.
As of 1 January 2017, the Court in Rotterdam has exclusive jurisdiction in respect of matters in the Netherlands involving issues or aspects of maritime law, but international choice of (other Dutch) forum clauses must be given effect.
Arbitration clauses are recognised in accordance with the requirements of the New York Convention 1958 and the arbitration rules as contained in the DCCP.
The Netherlands is a party to the Geneva Convention for Inland Waterway Navigation 1960. Although directly applicable, the same is (also) incorporated in the DCC, Article No 8: 1000-1007 DCC. In addition to this, the Ships Traffic Act, the Inland Waterways Police Regulation and the Rhine Police Regulation contain relevant provisions.
Waterways are all waters situated on the inner side of the so-called ‘baseline’. This is the line distinguishing the sea from other waters and is defined in specific legislation. The waterways include rivers, canals and lakes on which inland navigation vessels can sail, as well as bays, estuaries and sea ports. For the Netherlands specifically, the Waddenzee is included in inland waterways.
On certain designated waterways the use of a pilot is compulsory for certain sea-going vessels. However, exemptions can be obtained.
Although the use of pilots may be compulsory, since 1988 pilots have become independent through privatisation and are not on board as part of a given authority. Article No 3 of the Act on Pilotage states that a pilot is liable only for damages caused with intent or with gross negligence (see Solon, Supreme Court 4 February 2000, S&S 2000/62). It should be noted that under Article No 8:1007 DCC, the ship-owner is not relieved from liability if the collision damages are caused by the fault of a pilot, even if the use of such a pilot is compulsory.
In the Netherlands, the Dutch Safety Board (Onderzoeksraad voor de Veiligheid) has jurisdiction to investigate maritime accidents.
The Dutch Safety Board is obliged to investigate marine accidents when it concerns a ‘very serious’ maritime casualty involving a sea-going vessel: if a vessel flying the Dutch flag is involved; if the incident is in the territorial waters of the inland waterways; or if the Netherlands has a substantial interest.
A very serious maritime casualty is defined a one resulting in a fatal injury of a person and/or causing very serious damages to the environment, or when a vessel is considered a total loss.
The Dutch Safety Board has the discretion to investigate serious marine accidents. If it is decided that no further investigations are performed, this will be reported to the European Commission.
The Dutch Safety Board investigates maritime incidents and issues its conclusions in a report. A hearing before the Safety Board is not part of this procedure.
Due to the fact that the pilots have become independent contractors, the legal position is rather different from what it would be under a given authority. It therefore does not seem not possible to initiate (successfully) claims against the given authority. If a ship-owner wishes to initiate a claim against a pilot, then they should start legal proceedings.
See 5.4 Damage Recovery by Ship-owners and 5.10 Time Bar for Filing Administrative Claims, above. The relationship between a pilot and ship-owner is not regulated by administrative laws, so administrative action does not seem possible.
See 5.4 Damage Recovery by Ship-owners and 5.10 Time-Bar for Filing Administrative Claims, above. If a pilot is successfully held liable, that pilot is liable for all damages caused.
As mentioned above, a pilot successfully held liable is liable for all damages caused.
As mentioned in 5.9 Initiating Claims for Damages, above, it does not seem possible to initiate (successfully) claims against the given authority.
See 5.4 Damage Recovery by Ship-owners and 5.10 Time-Bar for Filing Administrative Claims. If action is to be taken against a pilot, this is to be done by initiating civil law proceedings before the Civil Court.
See 5.4 Damage Recovery by Ship-owners and 5.10 Time-Bar for Filing Administrative Claims. Civil claims against a pilot become time-barred five years after the damages were caused.
See 5.4 Damage Recovery by Ship-owners and 5.10 Time-Bar for Filing Administrative Claims. On the basis of Article No 625 DCCP, the Court in Rotterdam would have jurisdiction to hear the claims against a pilot.
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