The Supreme Court of the Netherlands has in its recent ruling of 21 March in Coface/Intergamma
, shed a new(-ish) light on non-transferability clauses in contracts. It uses the layer of ‘interpretation’ to make a change in the way in which we’ve seen the non-transferability clauses. The practical effects however will be minimal.
Unlike the law in neighbouring countries, Dutch law allows for the possibility of making claims (as objects of property rights) non-transferrable. I have discussed the lack of acceptance of non-transferability of objects here before
, and the arguments hold true in this case as well. Wide-spread acceptance of non-transferability of objects would bring a halt to trade. The lack of acceptance of these clauses is therefore widespread. Dutch law however allows for a non-transferability clause, but restricts its effect to only claims.
Article 3:83(2) BW (Dutch Civil Code):
‘The transferability of a debt-claim may be excluded by an agreement between creditor and debtor’.
The inclusion of such a clause with proprietary effect would not only mean that the claims would no longer be allowed to be transferred, but could not be transferred. This has significant ramifications for third parties. The object itself would be rendered non-transferable, rather than the person entitled to the claim lacking the power to dispose over the claim. A lack of the power to dispose may be remedied by third party protection rules, however, these are not applicable to the situation in which the object itself was not transferable. A non-transferability clause therefore, really means, non-transferable. Not even a good faith acquirer for value can do anything about it. The validity of the proprietary effect of these types of clauses was the subject of the case.
The Supreme Court decision: They are valid, but not the default.
The Supreme Court first states that its decision of 2003 in Oryx
in which it accepted the proprietary effect of a non-transferability clause, will hold, even though the decision has been heavily criticised in the literature given the limping effect on trade. Opting for one of the alternatives which are available in legal systems around the Netherlands, would not be possible according to the Supreme Court as this would “go beyond the lawmaking function
of the Supreme Court.” Furthermore, the Supreme Court stated that practice has come to accept, or at least, take the 2003 ruling and its consequences into account in their daily dealings.
Secondly, the Supreme Court adds a layer of interpretation of these types of clauses to the mix. It states:
“A clause as in casu (a non-transferability clause) which, by its nature, is intended to influence the legal position of third parties that do not know the intention of the contracting parties, and with the legal aims to regulate their status in a uniform way, has to be explained by objective criteria, taking into account the Haviltex-criterion. The starting point of the interpretation of clauses that exclude transferability is that they only have a contractual effect, unless the wording of the clause – to be interpreted using objective criteria – appears to aim for the proprietary effect in art. 3:83 (2) BW.”
Thus, the clauses are valid, but the default is that they are considered to only have contractual effects, and if breached they lead to a breach of contract. The claims subjected to the clause however, are still transferred. Should the proprietary effect, ie. actual non-transferability, be preferred, one will have to clearly express this intended effect. This changes the view held since 2003, that any mentioning of a non-transferability clause will automatically carry the proprietary effects. The default has been changed. A non-transferability clause is contractual, unless specifically stated that it is a proprietary non-transferability.
The practical effect
For practice, the judgement is just a lot of extra work. Current contracts will be modified from ‘these claims are non-transferable’ to ‘these claims are non-transferable, with not merely a contractual effect but also a proprietary one’, and standard models for contracts will be adapted accordingly.
Is it a change at all? Yes. Is it a big change? No, not really. A phrasing that used to be interpreted in a singular way (non-transferability, is non-transferability) now has two ways in which it may be interpreted, contractually or proprietary. Practice will most likely adapt accordingly, and simply be more explicit in the future.