Basic Elements Of Ship Finance In The Netherlands – New York Office Snippet

Loyens & Loeff New York regularly posts 'Snippets' on a range of EU tax and legal topics. This is our latest Snippet on ship finance in the Netherlands.

The Netherlands is considered a creditor-friendly jurisdiction. However, there are some aspects of Dutch law that US financial institutions considering ship finance in the Netherlands should be aware of. Below is an overview of these aspects.

Parallel debt

In Dutch (ship) finance transactions, it is customary to use a security agent (the Agent), which holds the security rights on behalf of the lenders. If a new lender comes in, the existing security rights will then not be affected.

It is generally assumed that a Dutch security right cannot be validly created in favor of a person who is not the creditor of secured liabilities (i.e., the Agent). To allow structures whereby an Agent is used, practice has developed the parallel debt, a separate claim owed by the borrowers to the Agent that equals the total