6.1 Enforcement of Collateral by Secured Lenders
Under which circumstances can a secured lender enforce its collateral? Provide an overview of the methods, procedures, restrictions and concerns relating to the enforcement of loans, guarantees and typical security interests.
A collateral can only be enforced if the debtor has failed to meet:
- a payment obligation on maturity date; or
- any other obligation deemed of essence under the loan agreement.
A collateral can also be enforced if it is obvious in the circumstances, beyond any reasonable doubt, that the debtor will fail to meet his obligations in the near future. The debtor should be given notice that he must comply with his obligations on the due date. The secured lender can enforce his rights and start enforcement proceedings in any of the following circumstances:
- the debtor fails to remedy his breach within the cure period granted to him.
- the debtor does not respond.
- it is obvious that the debtor is no longer able to meet his obligations.
6.2 Foreign Law and Jurisdiction
Will a choice of a foreign law as the governing law of the contract, the submission to a foreign jurisdiction and a waiver of immunity be upheld in your jurisdiction?
According to Regulation (EC) No 593/2008 of 17 June 2008 on the law applicable to contractual obligations (“Regulation Rome I”), which is applicable to contracts that are entered into after the date of 17 December 2009, contracts are governed by the law elected by the parties.
The law elected by the parties may be set aside by virtue of the application of other conflicts of law rules contained in the Regulation Rome I, such as: (i) the application of lex contractus may be set aside by the principles of Belgian international public policy; (ii) if at the time of the choice-in-law, all elements relevant to the situation (except the lex contractus elected by the parties) are connected with a particular country, a court may need to apply mandatory provisions of law of such country; (iii) the law elected by the parties cannot interfere with mandatory rules of lex fori, which are applicable to the situation whatever law governs the contract. This implies that the law elected by the parties is likely to be set aside if, inter alia, it interferes with insolvency laws; (iv) the law elected by the parties may also be impacted by overriding mandatory provisions of the law of the country where the obligations arising out of the contract have to be or have been performed, in so far as those overriding mandatory provisions render the performance of the contract unlawful.
6.3 A Judgment Given by a Foreign Court
Would a judgment given by a foreign court or an arbitral award against the company be enforceable in your jurisdiction without a retrial of the merits of the case?
Generally, a judgment given in another country would be recognized and enforceable in Belgium without a retrial of the merits of the case.
With respect to judgment given in another EU Member State, Article 45 Regulation 1215/2012 provides that recognition shall be refused in specific circumstances (the recognition is manifestly contrary to Belgian public policy; the judgment is irreconcilable with a Belgian judgment given in a dispute between the same parties, …).
A decision of a court of a state which is not a EU Member State will not be recognized and enforced in specific circumstances, such as the consequences of the decision would be manifestly contrary to Belgian public policy; the rights of defence were not respected; the judgment is not final pursuant to the laws of such state; …
Belgium is a contracting state to the New York Convention on the recognition and enforcement of foreign arbitral awards.
Belgian law does not distinguish between local and foreign awards. A party can enforce a foreign or local award if the award can no longer be contested before the arbitrator(s) or where it is declared provisionally enforceable. The grounds for refusal of the recognition or enforcement of an award are limited to those listed in the Judicial Code, such as the party to the arbitration agreement was under some incapacity, the arbitration agreement was invalid under the law agreed by the parties, due process was violated (except if it can be established that the irregularity had no effect on the arbitral award); the award relates to a dispute not provided for in the arbitration agreement or contains matters beyond the scope of the agreement, …
6.4 A Foreign Lender’s Ability to Enforce Its Rights
Are there any other matters which might impact a foreign lender’s ability to enforce its rights under a loan or security agreement?
A foreign lender is recommended to pay attention to issues of corporate interest and capacity and the legal status of the collateral provider. Certain Belgian companies may only buy, hold, and/or take security on shares and certificates issues by them up to a threshold and subject to certain conditions.
Moreover, a secured lender’s exercise of its enforcement right could also be restricted if it would constitute an abuse of right, i.e. if the damage caused to one party upon the exercise of this right by another party is not in proportion with the advantage which the latter party derives therefrom.
Finally, reorganisation proceedings and bankruptcy proceedings under Book XX of the Code of Economic Law have an impact on the ability to enforce rights (see question 7).