Hoofdstuk 23 Summary

860. This PhD research in the field of patrimonial law is about ‘supplementing rights’ (aanvullen van subjectieve rechten). The topic may not be familiar to English-speaking lawyers. In fact, it is probably unfamiliar to those speaking Dutch. The reason for this unfamiliarity is that the term has not been used before. It is used here to denote a variety of legal mechanisms that all have in common that they supplement a right belonging to a party with extra entitlements in such a way that successive acquirers of the right automatically also obtain the accompanying entitlements. Many examples of these mechanisms at work can be found in civil law property systems. For example, the buyer of a house may (under certain conditions) also make use of, among other things, any easements attached to the land, shared ownership rights that are held together with the neighbors, and guarantees (such as those given by a contractor) issued in favor of the previous owner of the house. Similarly, the acquirer of a monetary claim may (under certain circumstances) make use of, among other things, rights of pledge, mortgage rights, sureties, (bank) guarantees, liens, and insurances that were held by the previous owner of the claim. The transferor and transferee do not have to arrange for any of these supplemental rights to transfer; the transfer takes place by operation of law. Whereas in common law systems such automatic transfer (at least of security interests) is increasingly recognized in case law (see footnote 16 of chapter 6), civil law systems know many different legal concepts to achieve the same result: accessory rights (afhankelijke rechten, akzessorische Rechte, droits accessoires), rights held in certain capacity – mostly that of owner (kwalitatieve rechten, qualitative Rechte, droits qualitatifs) – and ancillary rights (nevenrechten, Nebenrechte, droits accessoires). It is often unclear whether and why a particular entitlement amounts to an accessory right, a qualified right, an ancillary right, or none of the above (see chapter 1).

861. In this PhD research, I present a way to determine whether – and, if so, how – rights should be supplemented. In part I of this book, I propose a theoretical framework on the basis of which such analysis can take place (see chapter 2). This theoretical framework draws on Hohfeldian analysis (see chapter 3) and law and economics theory (see Chapter 4) to explain how rights are constituted (see Chapter 5), how rights can be supplemented (see Chapter 6) and what criteria can be used to determine whether and how rights should be constituted and supplemented (see chapter 7). The conclusion is that rights can be supplemented in three separate ways, according to the extent to which the government interferes in the supplementation of these rights. These three ways are further expounded upon in part II of the research, in which I analyze Dutch patrimonial law on the basis of the distinction that is made (see chapter 10).

862. The first of these three ways of supplementing rights involves the most direct form of government intervention. It entails the government stipulating that anyone holding a specific right is (if specific conditions apply) also conferred certain entitlements. As a result, these entitlements can be invoked by any party holding the required right. Since the rights-holder does not have to bargain for these entitlements with his counterparty and will obtain them by operation of law, the transfer of the right automatically entails the transfer of the additional entitlements. Although the government may have several reasons to intervene in intraparty relationships in this way, all of these rationales boil down to a wish to increase of social welfare. Whether this goal is actually achieved by the rules imposed, cannot be said with certainty (see section 7.5.3). Examples of entitlements granted by the government to anyone holding a specific right (and meeting certain additional conditions) are nonconsensual liens, easements by necessity, and the right for a creditor to seize assets, request the bankruptcy of the debtor, set off his claim with a counter-claim or to invoke transaction avoidance rules (see chapter 13).

863. The government is not involved in the second way to supplement rights. This second way entails a party voluntarily granting specific entitlements to anyone holding a specific right (if specific conditions apply). As a result, these entitlements can be invoked by any party holding the required right. This means that the transfer of the right automatically entails the transfer of the additional entitlements, as the new rights-holder automatically qualifies to invoke the entitlements without having to bargain for them separately. The party granting the entitlements will only do so if it is sufficiently compensated. As a result, one can be certain that the transaction under which the entitlements are granted increases social welfare (see section 7.5.5). Examples of entitlements that are granted to anyone holding a specific rights are the right of a creditor to call on a bank guarantee and the (distinctively European) right of the creditor of a subsidiary to call on the guarantee offered by a parent company that consolidated the annual accounts of its subsidiaries (article 57 Directive 78/660/EEC) (see chapter 17).

864. The third way of supplementing rights combines elements of the other two, and takes center stage in this research. On the one hand, this way of supplementing rights is structured as a government-imposed mechanism dictating that certain entitlements are transferred by operation of law upon the transfer of the right that they supplement. On the other hand, it is up to parties themselves to decide whether or not to grant these entitlements to another party. The result is that any such entitlements can be invoked by the successive holder of the right they supplement, without having to bargain with the party that granted the entitlements. The reason for the government to determine that such entitlements automatically transfer with the right they supplement, is to reduce transaction costs and increase social welfare. Such will only occur, however, if the original parties involved in the transaction of creating the supplementary entitlements are not worse off due to the government-imposed rule. This means, firstly, that the entitlements that are automatically transferred are to have no remaining value to the original beneficiary of the entitlement upon the transfer of his right, or he might not transfer the right. Secondly, the party granting the entitlement must be sure that the entitlement cannot be invoked against more onerous conditions by a successive rights-holder, or he might not grant the entitlement. To be sure that the party granting the entitlement is, in fact, willing to do so, it is necessary for him to have the option to restrict the automatic transfer of the entitlement in cases where he foresees a successive rights-holder invoking the entitlement against more onerous conditions. If both the party originally benefiting from the entitlement and the party granting it are in no way prejudiced by the automatic transfer of the entitlement, such automatic transfer will increase social welfare (see section 7.5.4). Examples of mechanisms in Dutch patrimonial law through which the government imposed the automatic transfer of entitlements that supplement rights are those of accessory rights (afhankelijke rechten, see chapter 14), rights held in certain capacity (kwalitatieve rechten, see chapter 15) and ancillary rights (nevenrechten, see chapter 16). Examples of accessory rights are rights of pledge, mortgage and consensual easement. Examples of rights held in certain capacity are a guarantee to the owner of a bought item to repair it, and a non-compete clause for a certain geographical area granted to the owner of an immovable property. No examples are offered of ancillary rights in this research, as I am of the opinion that the term 'ancillary rights' is an empty phrase lacking distinctive force.

865. Part III of the research draws on the earlier two parts of the research. It answers the question of how well Dutch patrimonial law as discussed in part II adheres to the theoretical framework that I developed in part I (see chapter 18). From analyzing the two, it follows that the rationale for supplementing rights as formulated in Part I – reducing transaction costs and (thus) increasing social welfare – can in theory be achieved very well with the instruments offered by Dutch patrimonial law (see chapter 19). In practice, however, many of the mechanisms for supplementing rights are misunderstood, sparking confusion about whether and how entitlements can be invoked by the successive holder of the right these entitlements supplement. For this reason, I present a step-by-step plan for supplementing rights to answer such questions (see Chapter 20). This step-by-step plan makes it easier for the government, legal scholars and parties operating in the market to determine whether it is possible for entitlements to be (automatically) transferred together with a right, and, if so, how. The framework offered in this research thus enables parties to more easily supplement rights in a way that increases social welfare (Chapter 21).