Dutch pragmatism in the Mercon B.V. WHOA-proceedings

20-03-2024

The Mercon Coffee Group is one of the worlds largest coffee traders. The group is headquartered in the Netherlands, operates in the United States and trades in a variety of coffee producing nations like Brazil, Vietnam and Nicaragua.

Parallel proceedings

Rising interest rates, poor harvests in Brazil and logistic issues resulting from the COVID-19 pandemic have led to insolvency. The group is thus expediting an orderly wind-down of worldwide activities via parallel Debtor-in-Possession schemes in the United States (Chapter 11) and the Netherlands (‘WHOA’) that were initiated in December 2023. 

To facilitate cooperation between national courts in parallel proceedings, the Judicial Insolvency Network has drawn-up guidelines with best-practices for communication and cooperation between the courts (JIN Guidelines and JIN Modalities). In Mercon’s Chapter 11 proceedings, the New York court applied the aforementioned guidelines and modalities and added specific provisions tailored to the Mercon-case (‘Mercon-protocol’).

On the 29th of January 2024, Mercon B.V. petitioned the District Court of Amsterdam to apply the Mercon-protocol in the Dutch WHOA-proceedings. The request was based on article 379 of the Bankruptcy Act (BA) which allows the court to make any provision it deems fit to safeguard the interests of the creditors or the shareholders.   

Judgement

The District Court issued its judgement on the 27th of February 2024 (published last Sunday) (ECLI:NL:RBAMS:2024:1154). Although the court finds that Mercon B.V.’s request falls within the scope of article 379 BA and affirms that it supports close cooperation with foreign courts in cross-border cases, the petition is denied. In a ruling that is illustrative for the pragmatic nature of the Dutch legal system, the court rules that it does not wish to face the administrative burden borne from parts 10 and 11 of the Mercon-protocol (the special provisions added by the New York court). These broadly formulated provisions call for ‘Any Report’ filed by the debtor or ‘Authorized Representative’ to be shared between the courts. This is an obligation that the court does not find compatible with the Dutch procedural principle that only documents are handled insofar they directly relate to a specific legal question at issue.

Conclusion

A key takeaway from this case is that Dutch courts have no principal objection against applying the JIN Guidelines and JIN Modalities in parallel WHOA-proceedings. However, debtors wishing to apply the guidelines in the Netherlands, should be wary of foreign courts adding extra provisions that could increase the administrative burden for the Dutch courts. 

Would you like more information about (international) reorganization plans or WHOA proceedings? Please feel free to contact me or one of our specialists from the Restructuring & Insolvency team.

This is a Legal Update by Daniël Schuilwerve. 

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