Category Archives: Law and Language

Proprietary effect of Dutch non-transferability clauses no longer default

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.
 
The Law
 
 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.

 

Perilous Punctuation, Verbose Vocabulary and Treacherous Translations making Lethal Law

… [A] man do levy war against our Lord the King in his realm, or be adherent to the King’s enemies in his realm, giving to them aid and comfort in the realm, or elsewhere… – Treason Act 1351

Written by a non-native speaker, this submission might have a few grammar, spelling and/or punctuation mistakes. While my mistakes may make this text far from perfect, they will hardly be met with fatal consequences. Yet, a misplaced comma in the context of a legal text or provision can have a devastating effect.

A perfect illustration of this is the 1916 case of Sir Roger Casement. He was hung for having committed treason, based on the  provision cited above. What was remarkable about Sir Roger Casement’s trial was the pivotal role played by a comma. At the time of Sir Roger’s “levying”, he was outside the realm. Still, the court did not consider this an impediment to Sir Roger’s prosecution and stated that the comma before “or elsewhere” meant that these words were to be associated with everything previously mentioned in the sentence. Had the comma been interpreted as to mean that the “or elsewhere” was only applicable to the “giving [of] aid and comfort”, as was hitherto thought, Sir Roger Casement would have been proclaimed innocent. Instead, they found Sir Roger Casement guilty by opting for the first interpretation. Hung by a comma, indeed.

Another example, albeit with less severe consequences. The story goes that one day a lawyer said to his client: “I must ask the judge for his fiat.” To which the client replied: “I should prefer his BMW”. Whether fact or fiction, I could have easily replaced this example with one of my own experiences in studying law for the past four years. The language used to denote legal provisions at times makes me wonder if a degree in English should be a prerequisite for studying law. When the vocabulary used in law is of such a nature that it becomes unintelligible to those that are meant to be subjected to the law, law is faced with a particular kind of language barrier. Consequently, one can wonder whether the extensive use of legal jargon in combination with verbose vocabulary might not put the principle of ‘ignorance of the law is no excuse’ under some pressure.

And what to think of the language barriers all too present when it comes to translating legal texts and provisions? Take, for instance, the original Council Directive 70/220/EEC on measures to be taken against air pollution by emissions from motor vehicles, in which the English word ‘fuel’ was translated to the equally authentic ‘Benzin’ in German, causing the exclusion of all other types of fuel. Translation barriers are not only present in written texts, but can also exist in oral exchange(s), for example, in submissions before European or international courts of justice as well as in discussions within the chambers of these courts.

Perhaps we can learn from the past when looking at the future. I put forth that it is not such a coincidence that ancient law often took the form of poetry. Rules were expressed in incantatory rhythms; the oldest Greek and Latin words for poetry were also the eldest words for law (cf. the Latin “Carmen”, “Carminis” for “ song”, “statute”) (see extensively Thomas Lundmark, Astrid Wallow (eds.), Law and Language – Recht und Sprache, (Lit Verlag, 2006)). While I am not advocating drafting the law of the future in the form of poetry, I am willing to submit that the exact opposite – law devoid of poetry – does not make law any more intelligible nor better. Currently, there are certain provisions which are phrased in such a technical manner that they require extensive studying. This can hardly be considered ideal.

To conclude, in the context of the law of the future, I would like to see more attention paid to the language of the future law(s). Language is, after all, the only instrument in which law can be expressed, now and in the (foreseeable) future.

This post was earlier posted on the Innovating Justice Forum