For years lawyers in The Netherlands have pondered whether a
creditor has the option of seizing the unused portion of a line
of credit that the creditor's debtor maintains with its bank.
It all started in 2001 with the decision of the German Supreme
Court (Bundesgerichtshof) dated March 29 2003 answering the
question in the affirmative. Almost instantly it was said that
the outcome of a Netherlands seizure on the unused portion of a
line of credit with a Netherlands bank could be identical or
similar to the German conclusion. So all eyes were on the
Supreme Court of The Netherlands (Hoge Raad der Nederlanden) as
the most senior court to settle the matter, which it duly did
in a ruling handed down on October 29 2004.
It concerned the following case: A had a claim against B,
whose bank was C. B had withheld payment from A, so A had
prejudgment garnishment levied upon C, for B's account.
Although B did not have a credit balance with C when this
occurred, it did have a credit relationship with C, enabling it
to draw down funds to a maximum of X in the context of a line
of credit that C had previously extended to it. X had not been
reached at the time prejudgment garnishment was levied, B
merely having drawn down an amount of Y, meaning a residual
line of credit in the amount of X - Y = Z was at B's disposal.
According to A, Z represented a claim on the part of B against
C and, as such, was an asset open to seizure for B's account.
Not wishing to be caught out, C suspended payment under the
line of credit to the amount in which A had levied attachment.
B demanded that the attachment be repealed.
The Supreme Court in its ruling argued that "according to
Netherlands attachment and execution law, the option of seizure
of the unused portion of a line of credit was not deemed
acceptable as the nature of the association between the lending
bank and the client, the system of Netherlands bankruptcy and
attachment law and objections of a practical nature dictated
The Supreme Court based its decision on five grounds. The
first is that, when a bank provides a line of credit to its
client, the obligation to pay under that line of credit is
created only when the client uses its right to draw under the
line of credit. Consequently, a mere line of credit does as
such not constitute a - for the time being - conditional claim
of the client against its bank and, therefore, where there is
no claim, there is nothing to seize.
The second ground is that the right of will
(wilsrecht) that lies in the power to draw under the
line of credit cannot be seized because this right - given the
personae intuitu character of the relationship between
the bank and its client - cannot be transferred. Also, it
cannot be exercised by the bank client's creditor.
The third reason is based on the bank's right of set-off. If
the bank is obliged to pay to the bank client's creditor the
residual part of the line of credit, the claim against the
client would be immediately set-off by the bank against the
claim of the creditor. This is permitted under Netherlands law,
as both claims derive from the same legal relationship
(rechtsverhouding) that existed at the time of the
As a fourth argument, the Supreme Court points out that the
legislator has been concerned with seizures that lack a
realistic chance for success. The client's right to draw under
the line of credit will normally not be exercised, because
money will not flow to the client but instead to its creditor,
so there is no motivation for the client to exercise this
right. No exercise means no claim, which means nothing to get
out of the seizure.
Lastly, as a fifth reason, the Supreme Court points at
practical objections in the light of well-established case law,
saying that the legal position of a party under which the
seizure took place, in this case the bank, should not differ
from its legal position towards its client before the
Matthieu Ph van Sint Truiden