INSOL VENCY OF PUBLIC ENTITIES OTHER THAN THE STATE UNDER DUTCH LAW Johannes A F. Peters and reinout D. Vriesendor IV DI Introduction The question of whether a govemment can go bankrupt in the Netherlands is not a new one. The Supreme Court, for example, was asked as early as 1922 whether a municipality(in this case, Wormerveer)could be decared bankrupt. Through the appeal in cassation, the court did not reach a principled verdict in this matter. Ever since, it has remained a vexed question that regularly kept rearing its head, both in the literature and in case-law. There were some striking cases in which bankruptcy proceedings were filed against a foreign state, such as the Republic of Zaire 2 and the Republic of Surinam In both cases, immunity was assumed on account of the infringement of sovereignty of the state in question. But the question of the position of Dutch public entities-leaving the State of the Netherlands aside-is certa inly still in order at the present time Does a bankruptcy belong to the possibilities for a lower govemment that finds itself in serious financial problems? hat could be done if the prelim inary financing of the Victory Boogie Woogie(more than EUR 36 million!) by the municipality of The Hague had gone awry? What was the situation like when the Dutch province of Zuid-Holland incurred a financial setback running into millions in the Ceteco affair?5 What would happen if the municipality of Enschede were held liable for the many victims of the fireworks disaster in May 2000?6 What will be the consequences of the millions lost in the Dutch province of Gelderland a result of actions by events organizer Gelderland Events?7 In this contribution, the issue is approached from two perspectives. First, the concept of government'is too vague and must be defined more closely( 2 ). The Johannes A. Peters s(university) lecturer of administrative law and Reinout D. Vriesendorp ofessor of civil and commercial law at the Faculty of Law, Center for Company Law, University of Tilburg. the netherlands. Hoge Raad [ Supreme Court]23 June, 1922, W.10933, NJ1922, P 1030 See Jacomin J. van Hof, Barbara Reinhartz, and Liwen Veraart De faillieterklaring van Zaire [The bankruptcy of Zaire), NB 1988, pp. 636-637, and Hof Den Haag [The Hague Court of Appeal18 February 1988, NJ1989, p 602 3 Hoge Raad [ Supreme Court 28 September, 1990, NJ1991, P 247 This concemed the md-1998 purchase of the famous Piet Mondriaan painting by De Nederlandsche BankNV'[The Dutch Central Bank]as a present to the Dutch people. This was a type of risk investment involv ing serious losses, of govemment funds by the ov ince in the commercial trade corporation bank Cetec N V. which was declared bankrupt. As to possible bankruptcy consequences for the province of Zuid-Holland nvolved, see B. Wessels, Kan en provincie faillietgaan? [ Can a province be declared bankrupt?]. NTBR 1999/9, pp. 289-291 On May 13, 2000, the SE Fireworks factory, in the centre of Enschede, exploded, killing 22 people and caus ng enormous damage in the city of Enschede. One of the causes seems t have been gligence on the part of the 7. Gelder land Event s a commercial company which, us ng govemment money supplied by the province of Gelderland, was ping to put the prov nce on the map, an adventure n whch the rovince invested, and possibly lost, several million of euros( November 2001).INSOLVENCY OF PUBLIC ENTITIES OTHER THAN THE STATE UNDER DUTCH LAW Johannes A.F. Peters and Reinout D. Vriesendorp* IV D 1 1 Introduction The question of whether a government can go bankrupt in the Netherlands is not a new one. The Supreme Court, for example, was asked as early as 1922 whether a municipality (in this case, Wormerveer) could be declared bankrupt.1 Through the appeal in cassation, the court did not reach a principled verdict in this matter. Ever since, it has remained a vexed question that regularly kept rearing its head, both in the literature and in case-law. There were some striking cases in which bankruptcy proceedings were filed against a foreign state, such as the Republic of Zaire2 and the Republic of Surinam.3 In both cases, immunity was assumed on account of the infringement of sovereignty of the state in question. But the question of the position of Dutch public entities - leaving the State of the Netherlands aside - is certainly still in order at the present time. Does a bankruptcy belong to the possibilities for a lower government that finds itself in serious financial problems? What could be done if the preliminary financing of the Victory Boogie Woogie (more than EUR 36 million!) by the municipality of The Hague had gone awry?4 What was the situation like when the Dutch province of Zuid-Holland incurred a financial setback running into millions in the Ceteco affair?5 What would happen if the municipality of Enschede were held liable for the many victims of the fireworks disaster in May 2000?6 What will be the consequences of the millions lost in the Dutch province of Gelderland as a result of actions by events organizer Gelderland Events?7 In this contribution, the issue is approached from two perspectives. First, the concept of `government' is too vague and must be defined more closely ( 2). The * Johannes A.F. Peters is (university) lecturer of administrative law and Reinout D. Vriesendorp professor of civil and commercial law at the Faculty of Law, Center for Company Law, University of Tilburg, the Netherlands. 1. Hoge Raad [Supreme Court] 23 June, 1922, W.10933, NJ 1922, p. 1030. 2. See Jacomijn J. van Hof, Barbara Reinhartz, and Lidwien Veraart, De faillietverklaring van Zaïre [The bankruptcy of Zaire], NJB 1988, pp. 636-637, and Hof Den Haag [The Hague Court of Appeal] 18 February 1988, NJ 1989, p. 602. 3. Hoge Raad [Supreme Court] 28 September, 1990, NJ 1991, p. 247. 4. This concerned the mid-1998 purchase of the famous Piet Mondriaan painting by De Nederlandsche Bank NV [The Dutch Central Bank] as a present to the Dutch people. 5. This was a type of risk investment, involving serious losses, of government funds by the province in the commercial trade corporation bank Ceteco N.V. which was declared bankrupt. As to possible bankruptcy consequences for the province of Zuid-Holland involved, see B. Wessels, Kan een provincie failliet gaan? [Can a province be declared bankrupt?], NTBR 1999/9, pp. 289-291. 6. On May 13, 2000, the SE Fireworks factory, in the centre of Enschede, exploded, killing 22 people and causing enormous damage in the city of Enschede. One of the causes seems to have been negligence on the part of the municipal authority. 7. Gelderland Events is a commercial company which, using government money supplied by the province of Gelderland, was going to `put the province on the map', an adventure in which the province invested, and possibly lost, several million of euros (November 2001)