Multifaceted constitutional restructuring of the Dutch Kingdom

and the preservation of trust

On the tenth of October of 2010, [better known to the people involved as ten-ten-ten], we have seen a fundamental change in the constellation of the Kingdom of The Netherlands. The country the Netherlands Antilles – comprising the islands of Curaçao, St Maarten, Bonaire, St Eustatius and Saba – ceased to exist. 

The Kingdom of The Netherlands which once was comprised out of three countries as from the aforementioned date comprises four constituent countries: the Netherlands, Aruba, Curaçao and St Maarten, each having an autonomous status, subject to and in accordance with the “Charter of the Kingdom of The Netherlands” (Statuut voor het Koninkrijk der Nederlanden).

The other former islands of the Netherlands Antilles, being Bonaire, St Eustatius and Saba, also jointly referred to as the BES-islands, have become individual public entities (municipalities) within the Netherlands1. In this context the physical changes will become evident to outsiders. What tends to be less visible to many outsiders is how these changes were brought about and what implications these changes have on a day to day basis.

With this article we want to provide a general insight into the following two issues relating to the constitutional changes within the Kingdom of the Netherlands:

  • To give a brief background concerning the prerequisites to bring about the changes we observe in the constellation of the Kingdom of The Netherlands.
  • To briefly indicate which changes there have been made in the constellation of the Kingdom of The Netherlands.

This leads us to the focus of this article, which can be firmly found in the practical context concerning the legal changes that form the bedrock of the new constellation within the Kingdom of The Netherlands. For the new (Dutch Caribbean) countries Curaçao and Saint Maarten, generally spoken, most existing laws in the Netherlands Antilles have now been renamed as laws of the respective countries or public entities.

Do note that the laws that govern them are now referred to as to the laws of, for example, Curaçao or St Maarten, and not as the laws of the Netherlands Antilles (but they have not undergone any changes as to their content). For Bonaire, St Eustatius and Saba several specific Dutch laws are effective or will become effective shortly. Hence we describe the focus of this article as follows:

What implications will the changes finalised on ten-ten-ten bring about for suppliers of the former country known as the Netherlands Antilles versus the implications these changes will bring about for investors in government debt pertaining to the Netherlands Antilles?

The goal of the dismantling of the Netherlands Antilles is to be viewed as twofold, first to bring about sustainable economic and social development and second to eliminate the Netherlands Antilles multi-layer government structure which was perceived to be unviable. To address the first part of the dismantlement goal, public finances and the judicial chain were selected as crucial areas in achieving the goal of sustainable economic and social development.

As for the second part, the multi layer structure of the Netherlands Antilles contributed to the specific problems of each island and started to form a burden for the islands. This multi-layer government structure was viewed as an unviable system, in essence it was supported by a far too small country. The goals for the negotiations concerning the country status both Curaçao en Saint Martin were opting for, must be seen as a distillation from the earlier formulated overarching goal.

The prerequisites that were formulated for the negotiations concerning the changes in the constellation of the Kingdom of The Netherlands were envisioned with the existing problems of the Netherlands Antilles in mind. In the eyes of all parties that were involved in the negotiations, the goal was to give the new to be countries Curaçao and Saint Martin a “healthy” start as a new country within the constitutional framework of the Kingdom of The Netherlands. These prerequisites had to be and indeed were fulfilled in a satisfactory manner which led to the creation of the countries Saint Martin and Curaçao within the constellation of the Kingdom of The Netherlands.

We can conclude that the biggest problems facing the Netherlands Antilles could be related to two big themes which in the negotiation process would become the central prerequisites for obtaining country status:

Fiscal problems combined with an unsustainable debt situation and Safeguarding the due process of law in the new to be countries, this included the safeguarding of the entire judicial chain. In other words this means not only a due process in the courts but also safeguarding the effectiveness of the strong arm of the law. The Dutch Supreme Court in The Hague will maintain the position it had, as the highest court for the countries of Curaçao, Saint Martin and Aruba.

As for the islands Bonaire, St Eustatius and Saba, they have been incorporated as special legal bodies into the framework of The Netherlands. The status of these islands can be compared to the French overseas departments, which implies a more or less identical management structure for these islands as is the case for the overseas departments pertaining to France.

The focus of this article is strongly related to the first of the two main prerequisites and therefore a further elaboration is required. The negotiated solutions for the prerequisites cited in the latter part of the article, form important building blocks in understanding the constitutional changes that have taken effect within the Kingdom of The Netherlands.

The first prerequisite addresses the fiscal problems combined with an unsustainable situation of government created debt, the following solution has been negotiated: The Netherlands took on the government debt accumulated by the Netherlands Antilles and the island territories forming part of the Netherland Antilles. In essence the Netherlands committed itself to take on the central government debt as for the local government debt.

This in turn would secure a start for the new to be countries Curaçao and Saint Martin with a sustainable debt. In return for taking over the debts of the Netherlands Antilles, it was agreed that the budgets of Curaçao and Saint Martin will be scrutinised by an independent body3. In other words Curaçao and Saint Martin must clearly outline their expenditures taken up in their budgets and these expenditures must fall within the fiscal rules that were negotiated leading up to the takeover of the debt by The Netherlands.

The debt takeover by The Netherlands is structured in two big chunks; these chunks can be described in the following manner:

  • The bonds that were written out by the governments of the Netherlands Antilles, which were in the hands of investors, form the first part of the process of debt overtaking by The Netherlands. Within this first group we can distinguish between big institutional investors, like local banks, and “regular” investors in government bonds written out by the Netherlands Antilles.
  • The debt that the Netherlands Antilles had accumulated in loans, these loans will form the second part of the process in which The Netherlands will take over the debt of the Netherlands Antilles.

Until the ten      th of October 2010 the Netherlands paid the bonds and loans according to the maturity schedule. As of the tenth of October 2010 the Netherlands has fully taken over the remaining stock of outstanding government bonds.

Concerning the group of investors, no matter whether they are institutional investors or regular investors, they have taken a calculated risk of investing and thus buying government debt from the Netherlands Antilles. The risk of buying government debt pertaining to the Netherlands Antilles, was accompanied by an interest rate on government bonds issued by the Netherlands Antilles that incorporated the risk on the initial investment of the investors. With The Netherlands effectively taking over these debts, these investors will now automatically own government bonds of an AAA rated country, The Netherlands.

After the Netherlands Antilles ceases to exist and the two countries Curaçao and Saint Martin are born within the constellation of the Kingdom of The Netherlands, there are different ways in which both government bond investors and suppliers are being guaranteed their respective payouts. These guarantees for both investors and suppliers are laid down in a bilateral agreement4, carrying force of law, specifically focused on the need of maintaining judicial protection of investors and suppliers after implementation of the new constitution and when the Netherlands Antilles does not exist anymore.

The bilateral agreement, giving protection to both investors and suppliers, can be described as follows:

  • The bilateral agreement, agreed upon by the two countries and The Netherlands in order to fulfil financial obligations that have not been met accordingly. This agreement rules that there will be a commission that takes upon it the responsibility to fulfil the financial obligations to suppliers and investors that have not been met accordingly after the dismantlement of the Netherlands Antilles.

We can conclude by saying that both investors and suppliers to the former Netherlands Antilles will in principle enjoy an equal level of guarantees, by the applicable laws, in receiving their respective financial compensations. The legal protection that has been given by the laws mentioned above, have played a crucial role in maintaining investor as supplier trust in not only Curaçao and Saint Martin, but in the Kingdom of The Netherlands as a whole.

These so to speak trust building/maintaining legal guarantees should have a positive effect on making an already difficult transition, a less complicated one guaranteeing the continued supply of services and goods by suppliers and a continued flow of financing by investors of the new countries of Curaçao and Saint Martin due to an adequate legal protection for all parties involved.

Endnotes: 

  1. Wijziging van verschillende rijkswetten in verband met de verkrijging van de hoedanigheid van land binnen het Koninkrijk door Curaçao en Sint Maarten en de toetreding van Bonaire, Sint Eustatius en Saba tot het Nederlandse staatsbestel (Rijkswet aanpassing rijkswetten aan de oprichting van de nieuwe landen) 
     
  2. Wijziging van het Statuut voor het Koninkrijk der Nederlanden in verband met de wijziging van de staatkundige hoedanigheid van de eilandgebieden van de Nederlandse Antillen (Rijkswet wijziging Statuut in verband met de opheffing van de Nederlandse Antillen) 
     
  3. Regels voor het financieel toezicht op de landen Curaçao en Sint Maarten (Rijkswet financieel toezicht Curaçao en Sint Maarten) 
     
  4. Onderlinge regeling in de zin van artikel 38, eerste lid, van het Statuut voor het Koninkrijk inzake de verdeling over de lands Curaçao, Sint Maarten en Nederland van de economische waarde van de rechten en verplichtingen die van het land de Nederlandse Antillen overgaan op Curaçao, Sint Maarten of Nederland 
     
  5. Onderlinge regeling in de zin van artikel 38, eerste lid, van het Statuut voor het Koninkrijk inzake de verdeling over de lands Curaçao, Sint Maarten en Nederland van de economische waarde van de rechten en verplichtingen die van het land de Nederlandse Antillen overgaan op Curaçao, Sint Maarten of Nederland

 

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