Dutch Civil Code

Book 7 Particular agreements

Title 7.2 Financial collateral agreements

Article 7:51 Definitions
In this Title is understood by:
a. a 'financial collateral agreement': a financial collateral agreement to transfer collateral or a financial collateral agreement to establish a pledge;
b. a 'financial collateral agreement to transfer collateral': an agreement under which collateral as meant in point (d), (e) or (f) is transferred as security for an obligation;
c. a 'financial collateral agreement to establish a pledge': an agreement under which a pledge is vested on collateral as meant in point (d), (e) or (f);
d. 'money': a money debt-claim regarding money that previously was credited to an account or that is held on deposit;
e. 'financial instruments': shares in companies and other participations equivalent to shares in companies and bonds and other forms of debt instruments if these are negotiable on the capital market, and any other participations which are normally dealt in and which give the right to acquire any such shares, bonds or other participations by subscription, purchase or exchange or which give rise to a cash settlement (excluding instruments of payment), including units in collective investment undertakings, money market instruments and debt-claims relating to or rights in or in respect of any of the foregoing;
f. 'credit debt-claim': a money debt-claim resulting from a contract under which a bank as referred to in Article 1:1 of the Financial Supervision Act grants a credit by way of a loan, with the exception of money debt-claims against a debtor who is a natural person and who, when accepting the debt, did not act in the conduct of his business or professional practice, unless the collateral taker or collateral provider of such a credit debt-claim is one of the institutions as mentioned in Article 7:52, paragraph 1, under (b);
g. 'equivalent collateral':
1° in relation to cash: a payment of the same amount and in the same currency;
2° in relation to financial instruments: financial instruments of the same issuer or debtor, forming part of the same issue or class and of the same nominal amount, currency and description or other assets, where a financial collateral arrangement provides for the transfer of them following the occurrence of any event relating to or affecting any financial instruments on which the debtor has established a pledge.
h. 'ground for enforcement': an event of default or any similar event on the occurrence of which, under the terms of a financial collateral arrangement or by operation of law, the collateral taker is entitled to realise or to annex the pledged collateral or to make a set off on account of a close-out netting clause (set-off clause);
i. a 'close-out netting clause': a contractual term or provision of a financial collateral agreement, or of a number of connected agreements of which a financial collateral agreement forms a part, or any rule of law by which, on the occurrence of a ground for enforcement:
- the obligations of the parties immediately become due and demandable and are converted into an obligation to pay an amount representing their estimated current value or the obligations of the parties are terminated and replaced by an obligation to pay such an amount, or;
- the obligations of the parties are settled by means of a set-off and only the net sum surplus has to be paid.

Article 7:52 Necessary parties to a financial collateral agreement
- 1. The present Title (Title 7.2) shall only apply to financial collateral agreements if at least one of the involved parties is:
a. a government agency, including:
- public sector bodies of Member States of the European Union charged with or intervening in the management of public debts and;
- public sector bodies of Member States of the European Union authorised to hold accounts for customers.
b. a central bank, the European Central Bank, the Bank for International Settlements, a multilateral development bank, the International Monetary Fund and the European Investment Bank.
c. a financial institution subject to financial supervision, including a bank, a management company, an investment institution, a placement venture, a financial institution, a life insurer or a damage insurer as meant in Article 1:1 of the Act on Financial Supervision.
d. a central counterparty, a settlement agent or a clearing house as meant in Article 212a, point (c), (d) and (e) of the Bankruptcy Act, including similar institutions regulated under the national law of the Member States of the European Union, acting in markets for futures, options and derivatives and a person, not being a natural person, who acts in a trust or representative capacity on behalf of any one or more persons that includes any bondholders or holders of other forms of securitised debt or any institution as defined in points (a) (b) (c) or the present point (d);
- 2. The present Title (Title 7.2) is not applicable if one of the parties to a financial collateral agreement is a natural person who, when entering into this agreement, does not act in the course of his professional practice or business.

Article 7:53 Financial collateral agreement to establish a pledge
- 1. A financial collateral agreement to establish a pledge may stipulate that the collateral taker may use the pledged collateral or sell it and keep the sale proceeds.
- 2. Where a collateral taker exercises a right of use or a right of sale, he thereby incurs by operation of law an obligation to transfer equivalent collateral to the collateral provider in order to replace the original financial collateral, at the latest on the due date for the performance of the relevant financial debt-claim covered by the security of the pledge. The collateral taker acquires a pledge on what is acquired as a result of the previous sentence. Such pledge is deemed to be acquired on the moment that the financial collateral agreement was concluded.
- 3. The collateral provider shall obtain a privilege as security for his debt-claim in regard of the transfer of equivalent assets meant in paragraph 2, which privilege is attached to all money (including bank accounts) and negotiable securities present at the collateral taker.
- 4. In derogation from paragraph 2, the financial collateral agreement may stipulate that the collateral taker may set-off the debt-claim, that is secured by the pledged collateral, against the value of the equivalent assets, at the date for the performance of the relevant debt-claim or at the date, when this is sooner, that a ground for enforcement occurs.
- 5. The present Article does not apply when the financial collateral agreement serves (intends) to establish a pledge on a credit debt-claim within the meaning of Article 7:51, under (k).

Article 7:54 Rights of the collateral taker with a pledge
- 1. Unless the financial collateral agreement to establish a pledge provides otherwise, the collateral taker is entitled, when the requirements for a ground for enforcement are met:
a. to sell the financial instruments encumbered with the pledge and to recover his debt-claim from the sale proceeds or to annex these financial instruments and settle his debt-claim through a set-off against their value
b. to settle his debt-claim through a set-off against the money that is encumbered with the pledge;
c. to settle his bedt-claim by transferring the credit debt-claim encumbered with a pledge, and to set-off the transfer proceeds against what is due to him.
- 2. A sale of the financial instruments takes place on a market by intervention of a commission agent in the profession or on a the stock exchange or commodity market by intervention of a competent commission agent in accordance with the rules and usages that apply to an ordinary sale.
- 3. The collateral taker may annex the financial instruments if he has reserved this right in the financial collateral agreement to establish a pledge and the value of the financial instruments is based on the value at a market or stock exchange.
- 4. Contrary to paragraph 2 and paragraph 3, the financial collateral agreement may stipulate that the provisional relief judge of the District Court may order, upon the request of the collateral taker or collateral provider, that the pledged financial instruments have to be sold in a different way than mentioned in the previous provisions or that the provisional relief judge may order, upon the request of the collateral taker, that the pledged financial instruments shall belong to the collateral taker for a value to be assessed by the provisional relief judge.
- 5. Articles 3:235, 3:248, paragraphs 1 and 2, 3:249, 3:250, 3:251 and 3:252 of the Civil Code do not apply to the pledged collateral.

Article 7:55 No prohibited fiduciary transfer of ownership
A transfer in order to comply with a financial collateral agreement to transfer collateral is not a legal act as meant in Article 3:84, paragraph 3, of the Civil Code, that purports to transfer a property right as security (fiduciary transfer of ownership), nor is it a transfer which lacks the intention to make the transferred asset indeed a part of the property of the acquiring party. The rules for pledges do not apply to a such an agreement or its execution, nor do they apply accordingly to it.

Article 7:56 (repealed on 01-05-2008)