This update highlights some recent decisions from the Dutch courts relating to banking relationships, regulatory obligations and transparency in the financial services sector. Contact us if you have any questions or find out more about bureau Brandeis’ Financial Services Litigation here.

No termination of banking relationship without concrete evidence of AML breach
In this case a bank had blocked a client’s bank accounts based on the Money Laundering and Terrorist Financing Prevention Act (Wet ter voorkoming van witwassen en financiering van terrorisme; Wwft) for not providing sufficient information on its suppliers and customers, whilst the account gave signs of involvement in fraud and money laundering. The bank’s client had moved from trading used car parts to selling small electronics and claimed continuation of the account agreement.

The preliminary relief judge of the Amsterdam Court ordered the bank to continue the relationship in the usual manner. According to the court, a bank cannot terminate its relationship with a client and block its accounts if its Anti-Money Laundering (AML) concerns are not sufficiently demonstrated in the specific case.

The court held that the standards of reasonableness and fairness imply that termination of a banking relationship can only be based on sufficiently compelling grounds in the given circumstances. This requires due consideration of all interests.

In this context, the court attached importance to the bank’s duty of care and the access of account holders to payment transactions. At the same time, it also considered important that account holders enable the bank to comply with its obligations towards regulators and to protect the reputation of the bank and the integrity of the financial system.

On the basis of AML legislation and the related obligation to investigate, a bank cannot require evidence excluding involvement of the client’s customers and suppliers in money laundering. The bank’s AML-obligation to investigate, regards the client and who is behind the client. It does not regard who is behind the client’s customers, said the court.

The full decision can be read here in Dutch: Rechtbank Amsterdam 30 april 2019, ECLI:NL:RBAMS:2019:3157.

Is requesting enforcement a successful way to elicit an administrative ruling?
Anyone can request a regulator to take enforcement measures against a market party in case of non-compliance with laws and regulations. Special about this case is that the enforcement request at hand was submitted by a market party in relation to conduct concerning its own product. This market party was the holder of a portfolio of credit agreements, for which a regulated entity acted as its portfolio manager.

The purpose of requesting enforcement against oneself, was to obtain a judgment from the court on certain policy amendments the AFM had requested from the manager. The AFM sent a letter to the manager in which it requested these amendments, whilst the amendments affected the market party.

The market party itself was not a licensed entity, but an affiliated undertaking of the portfolio manager which did hold an AFM license.

In the court proceedings, the AFM took the position that it does not have power to take enforcement action against the – unlicensed – market party. The court agreed with the AFM and considered that market conduct supervision of affiliated undertakings takes place through the central regulated legal entity. The latter is supposed to exercise control over the affiliated entities’ compliance with the rules and legislation.

In addition, the market party attempted to object and appeal against the AFM’s letter. The court confirmed however that no appeal lies against the AFM’s letter to the portfolio manager. The reason for this was that the letter was just a confirmation of what was discussed, and not a definitive administrative ruling on applicability of a legal provision.

The full decision can be read here in Dutch: Rechtbank Rotterdam 23 april 2019, ECLI:NL:RBROT:2019:3688.

Limited transparency and public access to information at financial regulators
Under the Government Information Public Access Act (Wet openbaarheid van bestuur), anyone can request a government body for information about an administrative matter. The Dutch Central Bank (De Nederlandsche Bank, ‘DNB’) and its regulatory counterpart the Netherlands Authority for the Financial Markter (Autoriteit Financiële Markten) however, are in principle excluded from the applicability of this Act.

The key question in this case was whether or not this exception for the financial regulators merely regards confidential information relating to supervision of individual financial institutions. This in view of the duty of secrecy as laid down in the Netherlands Financial Supervision Act with regard to confidential information obtained pursuant to supervisory powers.

According to the applicant in question, information on the financing of, in this case, DNB and the funding of financial supervision does not fall under the exception and should be made public.

The Council of State (Raad van State), the highest administrative court for these matters, found that the exception makes no distinction between types of documents. Therefore all documents following from and relating to supervision of financial institutions are excluded from requests to disclose such information.

Also in respect of the requested documents in this case, the Government Information Public Access Act does not apply to DNB. The fact that DNB did provide some information on the topic without being obliged to do so was not considered arbitrary.

The full decision can be read here in Dutch: Afdeling Bestuursrechtspraak van de Raad van State, 17 april 2019, ECLI:NL:RVS:2019:1236

First compulsory transfer of shares following transfer plan of DNB upheld
This case regards the first compulsory transfer of shares of banks or insurers to a new owner ordered by the Dutch Central Bank (De Nederlandsche Bank, ‘DNB’) and discusses the intensity of the court’s assessment thereof. This specific case regards the transfer of assets in a life insurance company that created quite some media attention.

Given developments potentially jeopardizing the assets and solvency of the life insurer, financial regulator DNB intervened and prepared a plan for transfer of the shares in the life insurer, which instrument DNB has to execute the compulsory transfer of an ailing bank or insurer. In the eyes of DNB, the insurer’s board and shareholders failed to take sufficient measures to strengthen the capital position of the life insurer. DNB ultimately requested the Amsterdam Court to approve its transfer plan and pronounce the transfer regulations.

The courts’ decision was only subject to appeal in cassation with the Supreme Court of the Netherlands.

It has confirmed that the court can approve a transfer plan if it summarily appears that there are dangerous developments regarding the assets, solvency, liquidity or technical facilities.

Although there has been a change in legal terminology to bring the relevant criterion of the Financial Supervision Act (Wet op het financieel toezicht, ‘Wft’) in line with the Bankruptcy Act (Faillissementswet, ‘Fw’), this did not change the extent of the review says the Supreme Court. The court still is to perform a cautious review of such situation.

In the Supreme Court’s view this is exactly what happened. The court examined the substantive arguments of both parties and did not perform a more cautious review than the law requires. As a result it’s decision is upheld. The full decision can be read here in Dutch: Hoge Raad 17 mei 2019 ECLI:NL:HR:2019:746

This update highlights some recent decisions from the Dutch courts relating to regulatory investigations and enforcement measures in the financial services sector which we think are worth sharing. Contact us if you have any questions or find out more about bureau Brandeis’ Financial Services Litigation here.

AFM fine annulled due to a violation of the principle of equality

In this case, the Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten, “AFM”) concluded that an investment company (beleggingsonderneming) acted in breach of the Dutch Financial Supervision Act (Wet op het financieel Toezicht, “Wft”) and underlying regulations. In addition to imposing measures against the investment company, the AFM decided to impose measures against two statutory directors and one employee who was also (indirect) shareholder for having actual control (feitelijk leidinggeven) of the company’s prohibited conduct.

The AFM imposed a heavier measure on the employee (i.e. an administrative fine) than it did on the two statutory directors (i.e. an instructive letter, including a warning). After an unsuccessful objection, the employee appealed with the Rotterdam Court that decided that a different role for the persons involved can in principle justify unequal enforcement by the AFM, for example, in terms of the amount of a fine.

In this case, the difference in measures imposed by the AFM was not proportionate in relation to the difference in culpability and financial interest of the alleged offenders. The court considered that the AFM did not present sufficient relevant circumstances to justify imposing very different measures. It only claimed that the acts of the employee were more seriously culpable than those of the statutory directors, because of an alleged financial benefit for the employee. According to the court, this factor was insufficient to justify imposing very different measures, especially given that an administrative fine is more onerous because it is in principle published – which has a defamatory effect.

The fact that the employee might have had financial benefit of the violation could have resulted in a difference in fines, but not in the huge difference in measures that the AFM made. In conclusion, the court held the appeal well-founded and annulled the challenged decision of the AFM due to a breach of the principle of equality (gelijkheidsbeginsel).

The full decision can be read here in Dutch:

Rb. Rotterdam 13 juni 2018, ECLI:NL:RBROT:2018:6261.

Investigation by supervisor? Your employees won’t be cautioned

A bank located and licensed in Malta that is allowed to offer consumer credit in its home state, completed a notification procedure to also offer consumer credit from Malta to the Netherlands based on the so-called European passport for banks. The AFM however found that the bank was offering consumer credit from a branch office (bijkantoor) in the Netherlands, for which it had not followed the correct notification procedure.

The AFM therefore imposed an administrative fine of EUR 1,7 million on the bank for offering consumer credit without the required license. The bank argued in these interim relief proceedings that the AFM had no grounds thereto and that the intended publication of the fine should be suspended. The court however, saw no reason to suspend the AFM’s decision to impose a fine or suspend or alter the publication thereof.

Interesting about this decision is that a significant part of the evidence on the basis of which the AFM imposed a fine is derived from statements of an employee of the bank who was heard by the AFM during the investigation. The bank argued that the AFM could not use these statements as evidence, because the AFM did not read the employee its rights.

Based on recent decisions of the Dutch Council of State (Raad van State), the court decided that, in principle, there is no obligation to caution employees of a legal entity. The regulator only has to caution representatives (i.e. board members) and natural persons involved for having actual control (feitelijk leidinggevenden) who might be imposed a personal fine.

In this case, in addition to the employee’s statements, the AFM based its decision on information obtained from the bank’s Dutch website and the online DNB Register. According to the court, this evidence, when viewed in conjunction with each other, formed sufficient evidence for the AFM to impose an administrative fine on the Maltese bank.

The full decision can be read here in Dutch:

Rb. Rotterdam 20 december 2018, ECLI:NL:RBROT:2018:10909.

Notifying unusual transactions and monitoring client relationships

In two recent cases, the highest appeal court (College van Beroep voor het bedrijfsleven, “CBb”) reviewed administrative fines that were imposed by the Financial Supervision Office (Bureau Financieel Toezicht, “BFT”). These fines were imposed against an accounting firm (boekhouder-fiscalist maatschap) and a tax consultant (fiscalist) respectively for allegedly breaching their obligation to (i) notify the Netherlands Financial Intelligence Unit (FIU) about unusual transactions of their clients and (ii) continuously monitor client relationships.

The court considered that in addition to the relevant law, decrees and available AML guidelines, other factors can also be relevant to determine whether or not a transaction is to be considered unusual. In both cases, the court found that BFT failed to prove that the respective parties wrongfully did not notify the FIU about certain transactions. The respective parties either did not have actual knowledge of the alleged unusual transactions or had a decent explanation on why the transaction could not be considered as unusual.

BFT also accused both parties of failing to properly monitor their client relationships. BFT held it against the tax consultant that she could not immediately provide evidence about a transaction of one of her clients. According to the court, the tax consultant managed to provide a well-founded explanation for the transaction during the course of the investigation and the alleged failure to monitor client relationships was therefore not upheld.

BFT was however successful in proving that the accounting firm failed to successfully monitor its client relationship. So whilst it may have lacked knowledge about certain transactions and could not be fined for failing to notify the FIU about these transactions, the court decided that this lack of knowledge was due to a failure to perform proper client monitoring – which in itself is a violation of the Wwft.
Both judgments can be read here in Dutch:

CBb 5 februari 2019, ECLI:NL:CBB:2019:48. CBb 5 februari 2019, ECLI:NL:CBB:2019:58.

Unrestricted cooperation charge? Not required to provide will-dependent material

The Dutch Central Bank (De Nederlandsche Bank, “DNB”) investigated whether two related companies were providing payment services without the required license and repeatedly requested them to provide information for this investigation. The companies however claimed they had the right to remain silent. DNB informed them that they had a duty to cooperate (Section 5:20 Awb) and imposed a cooperation charges on each of them, subject to a penalty of EUR 15,000.

The companies only partly complied with the cooperation charges and DNB declared the penalties incurred. In addition, DNB established that the companies violated their duty to assist and imposed an administrative fine of EUR 75,000 on each of them.

On appeal against the cooperation charge, the highest appeal court (College van Beroep voor het bedrijfsleven) held that part of the information requested by DNB was material existing dependent on the will of the companies (wilsafhankelijk materiaal).  DNB therefore should have included a restriction in its cooperation charge, stating that it would not use such will-dependent material for the purpose of imposing a fine or prosecution proceedings.

Given the absence of such restriction, the court declared void the cooperation charge and ordered DNB to amend the decisions. DNB then included the restriction in the cooperation charge and reduced the administrative fines from EUR 75,000 to EUR 65,000.

The court rejected the subsequent appeal of the companies against these amended decisions, as it considered that the companies breached their duty to cooperate. They could – but did not – provide the material that was not will-dependent. The court therefore decided that DNB could rightfully impose the administrative fines. The reduction of the administrative fines was considered proportional. The full decision can be read here in Dutch: CBb 16 april 2019, ECLI:NL:CBB:2019:156.

This is the second bureau Brandeis quarterly report of 2018 on the developments in the area of cartel damage litigation. You may download our quarterly report here.

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Recently, the Global Legal Insights to Cartels 2019 was published. Hans Bousie, Louis Berger en Rieneke Reijnen wrote the chapter on cartel damages litigation in the Netherlands. The authors discuss the advantages of litigation before the Dutch courts in this type of mass damages cases, in light of recent Dutch case law regarding class actions. The whole chapter is available here.

This update highlights some recent decisions from the Dutch courts relating to the financial services sector which we think are worth sharing. Contact us if you have any questions or find out more about bureau Brandeis’ Financial Services Litigation here.

AFM fines both company and director and major shareholder. No double jeopardy.
Where a company breaches the Dutch Financial Supervision Act (Wet op het financieel toezicht, “Wft”), the financial regulators in the Netherlands can also impose a fine on a natural person involved for having actual control of (feitelijk leidinggeven aan) the prohibited conduct of such company.

The highest administrative court in the Netherlands confirms that this is also possible if such person happens to be both the director and major shareholder of the company. In these circumstances the regulator is to verify whether it is proportionate that the two fines effectively punish the same natural person twofold.

In this case, the Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten, “AFM”) fines a company EUR 10,000 for offering investment services (verlenen van beleggingsdiensten) without a license. In addition, its director and major shareholder is fined EUR 200,000 for having actual control of the prohibited conduct.

The director and major shareholder challenges the proportionality of the fine. He also argues that the fine is to be reduced given his financial capacity. Both arguments however are unsuccessful. The two fines are considered proportionate because the fine for the company has already been reduced to EUR 10,000. The director also fails to prove that he has insufficient ability to pay his personal fine of EUR 200,000. Both fines are therefore upheld.

The full decision can be read here in Dutch: CBb, 7 augustus 2018, ECLI:NL:CBB:2018:413.

AFM is to include restrictions in cooperation charge as to use of requested information.
The AFM sends a regulatory information request (inlichtingenvordering) to a company outside the Netherlands in order to determine whether it is offering consumer credit or providing intermediary services on the Dutch market without the required license.

When the AFM does not receive a reaction to two separate requests, it imposes a cooperation charge subject to a penalty (last onder dwangsom). The alleged credit offeror does not provide any information in response to this cooperation charge. According to the AFM the company incurs the penalty payment as a result.

On appeal the company successfully argues that when the AFM is requesting information within control of the company (wilsafhankelijke informatie) by means of a cooperation charge, the AFM can only do so with the explicit restriction that any information within control of the company shall only be used for supervisory purpose and shall not be used for imposing any administrative fines or criminal charges.

Since the cooperation charge in question did not include a restriction on the use of the requested information, the Trade and Industry Appeals Tribunal (College van Beroep voor het bedrijfsleven, “CBb”) annuls it.

The full decision can be read here in Dutch: CBb, 4 september 2018, ECLI:NL:CBB:2018:444.

Custodian, depository and administrator not found liable for Ponzi-scheme damages.
A fund manager managing three off-shore funds appoints a securities trader as sub-investment manager with the power to invest all assets of the three funds. The fund manager also appoints a financial enterprise as its custodian, depository and administrator. In addition, it requires the custodian to appoint the sub-investment manager as sub-custodian.

The sub-investment manager turns out to be deploying a world wide Ponzi-scheme and goes bankrupt when this is discovered. As a consequence, the three funds also go bankrupt.

Investors in the three funds set up a claim foundation and commence legal proceedings against the financial enterprise that acted as custodian, depository and administrator, arguing that the financial enterprise (i) acted in breach of regulatory obligations regarding outsourcing and protection of investor funds, (ii) breached a duty of care towards the investors, (iii) committed a wrongful act (onrechtmatige daad) against the investors and (iv) issued misleading information.

The court disregards the assertions and rejects the investors’ claims. According to the court, there is no proof that the custodian knew or should have known that the sub-investment manager never actually invested the money from the funds and was essentially running a Ponzi-scheme. At the time, the financial enterprise also had no reason to suspect the fraud. Moreover the court considers that the custodian did not choose to appoint the fraudulent sub-custodian but was required to do so by the fund manager.

The full judgment can be read here in Dutch:
Rb. Amsterdam 22 maart 2017, ECLI:NL:RBAMS:2017:10601.

Both bank and customer have duty of care towards one another. Access to bank account.
While a company is under investigation of the public prosecutor due to suspicions of money laundering and drug trafficking, the police carry out a raid at its offices and seize its bank accounts. As a consequence, the bank terminates its relationship with the company. The company does not accept the termination and commences interim relief proceedings against the bank.

Between May 2017 and January 2018, parties go to court four times. The company states that in the given circumstances it cannot open a bank account with another bank. It therefore argues that its interest in access to a bank account must weigh heavier than the bank’s interest to terminate the relationship due to potential reputational and AML risks. The court finds that the bank was allowed to terminate the relationship because the company had not taken sufficient compliance measures. This has made it impossible for the bank to comply with requirements of the Dutch Anti Money Laundering Act (Wet ter voorkoming van witwassen en financiering van terrorisme, “Wwft”).

However, new facts come to light and the company starts new interim relief proceedings in order to re-open its bank accounts. And with success.

Given the changed circumstances (i.e. the public prosecutor dropped the investigation and the company took serious measures to strengthen its compliance and reduce AML-risks) the court now rules that the bank should allow access to the bank accounts again. In this latest decision the court emphasizes that both parties have a duty of care (zorgplicht) towards one another, and the fact that the company took serious measures to reduce AML risks shows that it has fulfilled this duty towards the bank.

The full judgment can be read here in Dutch:
Rb. Amsterdam 2 november 2018, ECLI:NL:RBAMS:2018:7931.

Decision to place payment service provider under administration can be published.
The Dutch Central Bank (De Nederlandsche Bank, “DNB”) decides to appoint an administrator (curator) at a payment service provider (betaaldienstverlener, “PSP”) for not complying with the Dutch Financial Supervision Act (Wft), the Dutch Anti Money Laundering Act (Wwft) and the Sanctions Act 1977 (Sanctiewet 1977). DNB also decides to publish this decision, since it is in principle obligated to publish administrative sanctions (bestuurlijke sancties) pursuant to section 1:97 Wft.

The PSP commences interim relief proceedings in an attempt to prevent publication. It argues, among other things, that (i) being placed under administration is not an administrative sanction that is to be published pursuant to section 1:97 Wft and (ii) PSD1, which is implemented in the Wft, does not provide a specific ground for publishing these types of sanctions (i.e. being placed under administration). The PSP’s arguments do not succeed.

Even though the appointment of an administrator in principle has an internal effect and does not necessarily have to be disclosed, the interim relief judge considers the appointment of an administrator at the PSP an administrative sanction within the meaning of section 1:97 Wft that can be made public.

The judge also holds that, although PSD1 does not provide a specific possibility for publishing these types of sanctions, publication is possible under the Wft. PSD1 gives Member States the liberty to enforce the directive in a manner they deem fit, as long as the enforcement measures are effective, proportionate and dissuasive. According to the interim relief judge, this is the case with publishing the decision to place the PSP under administration.

The full decision can be read here in Dutch:
Rb. Rotterdam 18 juli 2018, ECLI:NL:RBROT:2018:8284.

Bank may have certain duty of care vis-à-vis professional third-party investors.
It is settled case law of the Dutch Supreme Court (Hoge Raad, “HR”) that under circumstances banks have a special duty of care not only vis-à-vis its clients but given their social function also vis-à-vis non-expert third parties. The Amsterdam Court of Appeal now rules that banks, to some extent, also have a duty of care towards third parties that are acting in a professional capacity.

The Court of Appeal considers that, although professional parties are expected to be able to make their own investment decisions and ask for advice when needed, a bank may have a duty of care towards third parties acting in a professional capacity when it discovers irregularities on accounts held with the bank. When determining the scope of the bank’s duty of care, the fact that parties are acting in a professional capacity can be taken into account.

In this case, a client of the bank has embezzled money from investors using a main account at the bank. The investors have been invited to deposit money to sub accounts that would be invested via the main account.

The Court of Appeal considers that the irregularities on the accounts in question became known to the bank. It also considers that the bank identified representatives of the investors in person at a local bank office in Brussel when they opened the sub accounts and that it was aware of the investors’ co-signing rights on the sub accounts. The fact that the bank nevertheless has failed to inform the investors when it closed the main account and all sub accounts, is considered a breach of its duty of care towards these third party investors.

Although the bank successfully argued that it could not disclose that it was investigating potential fraud of its client, also given the general prohibition from disclosing (tipping-off) reports of suspicious transactions (ongebruikelijke transacties), it should have neutrally informed the investors that the sub accounts were closed, says the Court of Appeal.

The full judgment can be read here in Dutch:
Hof Den Haag 25 september 2018, ECLI:NL:GHDHA:2018:2417.

December 2018.

Simone Peek & Casper Rooijakkers

This is the first bureau Brandeis quarterly report of 2018 on the developments in the area of cartel damage litigation. You may download our quarterly report here.

Would you like to receive the next edition of our quarterly report by email? Please subscribe to our mailinglist by filling in this form or sending us an email through this link.

We are very excited to invite you to join our Litigators Sunrise Run during the IBA in Rome, 2018. An early morning run with colleagues from all over the world.

Together we will run through the city center of Rome, passing some of the most beautiful sites. Whether you are a casual runner or an Olympic athlete, join us for 4 miles of celebrating health and newfound friendship.

We look forward to seeing you on 10/10/18!

The route:

The finer details:

Wednesday 10 October 2018 07:15 AM

Via dei Cerchi 00186 Roma RM, Italy

Our bus will take you from several conference hotels to the start of the run. A delicious Italian breakfast will be served on the bus. You will be back in time to start your IBA conference day, fully energized.

To ensure your spot, please rsvp via sunriserun@bureaubrandeis.com

or contact Simone Peek or Frank Peters of bureau Brandeis.

On 25 May 2018 the General Data Protection Regulation (“GDPR”) comes into effect. From that date the GDPR will have a direct effect on all EU Member States, and must be complied with. The current Dutch Personal Data Protection Act (“Wbp”) based on the Privacy Directive of 1995 (Directive 95/46/EC) will then cease to apply.

The GDPR radically alters the legal framework for the protection of personal data. It introduces new concepts, contains comprehensive new obligations for business, and strengthens the rights of data subjects (individuals whose data is being processed). Furthermore, the GDPR introduces hefty maximum fines of € 20 million or 4% of an organisation’s global turnover.

The GDPR has implications for virtually every company or organisation not only in the European Union, but also beyond its borders. Given strict regulations combined with high fines, it is prudent for companies to be aware of the content of the GDPR at an early stage, and to prepare themselves accordingly. We will show how our clients and business contacts can prepare for the GDPR as efficiently as possible in twelve steps. bureau Brandeis regularly assists parties with respect to the application of privacy legislation and has plenty of experience with the GDPR. Naturally, we will be happy to assist you with your preparations for the GDPR.

Scania, one of the six large truck manufacturers was fined by the European Commission today, 27 September 2017, for € 880 million for participating in the so called trucks cartel. Earlier, on 19 July 2016, the other five participants in the same cartel were fined as well after reaching a settlement with the European Commission. Because of their participation in the investigation of the European Commission the other truck manufacturers, Daimler, DAF, Iveco, Volvo/Renault and MAN received discounts under the leniency notice and the settlement notice on their fines. MAN as the whistle blower even received a 100% reduction. With todays fine added to it, the European Commission sets a record fine of a staggering 3.8 billion Euros.

Because the other five truck manufacturers have reached a settlement with the Commission, their case is closed, meaning no appeals are pending. Because Scania did not cooperate with the Commission, it took more than a year extra to complete the case against Scania. Scania was found guilty of fixing the prices of trucks and colluding on passing on the costs of new technologies to meet stricter emission rules.

The Commission in its press release expresses her relieve on ending her investigation in this especially long lasting cartel (over fourteen years), covering over 90% of all truck sales in Europe in the period of 1997 until 2011.

That Scania did not cooperate with the Commission has a threefold effect. In the first place the decision of the Commission against Scania is open for appeal, and we are pretty sure Scania is about to appeal the decision. In the second place since Scania did not comply, her fine was not reduced, neither under the leniency nor under the settlement notice, thus resulting in this massive fine of

€ 880 Million, only topped by the fine of over 1 Billion Euros by Daimler and that was even after a 40% reduction.

In the third and not in the last place, the effect on follow on damages litigation. Over the last five years, there has been a steep rise in damages litigation following cartel decisions by the European Commission. These so called follow on cases can lean on tow presumptions. The first being that the Case law of the Court of Justice and Council Regulation 1/2003 confirm that in cases for national courts, a Commission decision constitutes binding proof that the behavior took place and was illegal. In the second place following the so called Cartel Damages Directive cartels are supposed to cause harm and thereby result in the obligation to pay damages.

So for all six manufacturers there is this binding decision. But Scania still has a chance to escape, she alone can and will appeal the decision against her. Nevertheless follow on cases have already been filed in Ireland, Germany and the Netherlands already and there are more to come. The truck manufacturers are up for another battle.

Hans Bousie

On 7 July 2017 Elliott rang the bell for the second round of its fight with AkzoNobel. The first round ended when the Enterprise Chamber of the Amsterdam Court of Appeals (“Enterprise Chamber”) dismissed Elliott’s request to order AkzoNobel to call an extraordinary general meeting of shareholders (“EGM”), more specifically an EGM to vote on the dismissal of the chairman of the supervisory board (the “Agenda Proposal” and the “Chairman”). In the second round Elliott will request the Interim Relief Court (“IRM”) for authorization to convene such an EGM itself. The Enterprise Chamber explicitly left open this possibility.

Elliott’s new request also sparked a new round of speculation over the outcome in the Dutch media. Here are my thoughts.

The commentary on the Elliott/AkzoNobel-matter reflects a wider Dutch discussion on the right of shareholders to place items on the agenda of the general meeting:

• The old school approach is rather skeptical about this right, particularly if the shareholders challenge the status quo. The adherents of this approach assume that the courts can thoroughly review any request of shareholders to place items on the agenda. They also assume that such a request can be denied on the basis of a weighing of interest, in which they tend to give more weight to continuity than to the wish of shareholders to shake things up. Such views were on offer in a 7 July 2017 article in Financieel Dagblad. A Dutch lawyer was quoted arguing that the dismissal of the Chairman had such far reaching consequences that a vote on this matter should only be allowed for compelling reasons. He even considered it insufficient that that Elliott was dissatisfied by the way AkzoNobel had brushed-off PPG’s € 29 billion take-over bid. This approach echoes the Stork-decision of 17 January 2007 in which the Enterprise Chamber enjoined two hedge fund’s efforts to force Stork to change its strategy by putting the dismissal of the supervisory board on the agenda, because the current strategy was considered successful and the alternative was insufficiently clear.
• Others – including me – argue that this approach is antiquated by the EU Shareholders’ Rights Directive of 11 July 2007 (the “Directive”). Article 6 obliges the EU’s member states to ensure that shareholders have to right to put items on the agenda and to table draft resolutions. Article 6 does not provide any room to limit these rights on the basis of a weighting of interest. The Directive’s preamble explains that “holders of shares carrying voting rights should be able to exercise those rights given that they are reflected in the price that has to be paid at the acquisition of the shares” and that “effective shareholder control is a prerequisite to sound corporate governance and should, therefore, be facilitated and encouraged.” Therefore the pre-existing possibility to deny a request to put an item on the agenda for the reason that there is a serious conflicting interest of the company was deleted from article 2:114a Dutch Civil Code when the Directive was implemented by the Dutch legislator. The Dutch legislator explained that a request to put an item on the agenda could only be refused in case of abuse of rights. This should be understood as a reference to the Court of Justice of the European Union’s case law with regard to abuse of rights conferred by EU law. Such abuse only exists if it is apparent from a combination of objective circumstances that (i), despite formal observance of the conditions laid down by EU rules, the purpose of those rules has not been achieved and (ii) the essential aim of the person invoking the concerned right is to obtain an undue advantage. In this approach there is almost no room to review or deny a request of shareholders to place items on the agenda.

I note, however, that Directive does not provide a explicit right to convene an EGM. The Directive therefore leaves room for the IRM to find that the Agenda Proposal can wait until the next annual general meeting of shareholders in 2018 and that Elliott has insufficient interest to convene an EGM earlier. Yet such a finding would hardly be convincing, considering that the trust of the shareholders or the lack thereof in the Chairman is not a matter that should be allowed to simmer for months.

It should, furthermore, be noted that a quirk of procedural law may have profound consequences for Elliott’s request to the IRM: no judicial remedy is possible against the decision of the IRM in this particular matter¹ (article 2:111 (3) Dutch Civil Code).

• The first consequence is that the IRM needs to consider whether article 267 of the Treaty on the Functioning of the European Union obliges it to ask a preliminary question to the CoJEU. If so the Chairman may well have stepped down before the CoJEU has answered the preliminary question. Since the Chairman reportedly steps down in April 2018 Elliott will need to convince the IRM that there is nothing for the CoJEU to clarify, since it is clear enough how article 6 of the Directive should be interpreted (acte clair) and the CoJEU has already clarified how much room the national courts have to deviate from EU law (acte eclaire).
• The second consequence is that the Dutch State may be liable to Elliott in case the IRM incorrectly applies article 6 of the Directive. That would require that article 6 is intended to confer rights on shareholders; the breach of article 6 is sufficiently serious; and that there is a direct causal link between that breach and the loss or damage sustained by Elliott. In order to determine whether the breach is sufficiently serious, it is necessary to take account of all the factors which characterize the situation brought before the national court, including the degree of clarity and precision of article 6, the scope of the room for assessment that article 6 allows for the IRM, whether the infringement and the damage caused were intentional or involuntary, whether any error of law was excusable or inexcusable, whether the position taken by an EU institution may have contributed to the adoption or maintenance of national measures or practices contrary to EU law, and whether the IRM was under an obligation to make a reference for a preliminary ruling but failed to honor this obligation.

As an aside, I note that the Directive is obviously not to the taste of the Dutch Minister for Economic Affairs who recently made several firm statements about the need to provide more “protection” to Dutch public companies (i.e. protection against shareholder influence). It should, however, be kept in mind that the Directive was recently revised and amended. The revision process was pending during the period that the Netherlands held the rotating Presidency of the Council of the European Union and hence could determine the EU’s agenda. It is striking that the concerned Minister did not use this opportunity to amend the Directive in order to allow for the denial of a request of a shareholder to put an item on the agenda on the basis of a weighting of interest.

There is must more to be said about this matter, but I leave it here for now. For further reading I refer to chapter 7 of my Ph.D.-thesis and the series of articles Frank Peters and I have published on the right to put items on the agenda (‘Vrijheid van meningsuiting – Over de Europeesrechtelijke verplichting om aandeelhouders aan het woord te laten’ in published in Makkink and others, Ik ben niet overtuigd, liber amicorum voor Peter Ingelse ter gelegenheid van zijn afscheid als voorzitter van de Ondernemingskamer; ‘De strijd over het agenderingsrecht tussen Boskalis en Fugro’, published in WPNR, 2015/7061; and ‘De strijd over het agenderingsrecht tussen Elliott en Akzo’, published in WPNR, 2017/156).

¹ Except for cassation in the interest of the law, but the decision in such proceedings can have no consequences for the parties to the proceedings (article 78 (6) of the Dutch Judiciary Organization Act).

‘If there be time to expose through discussion the falsehood and fallacies, to avert the evil by the processes of education, the remedy to be applied is more speech, not enforced silence. Only an emergency can justify repression.’

These words were spoken by Justice Mr. Brandeis during a trial in 1927 by the U.S. Supreme Court   (Justia U.S. Supreme Court Center, 274 U.S. 357, 1927 (Whitney v. California)).

Justice Brandeis’ opinions provide refreshing insights and vivid contributions to a debate which, though essential and urgent, in modern times is often dominated by clichés.

This particular case dealt with the California Criminal Syndicalism Act in relation to the provisions of the 14^th Amendment to the Constitution of the U.S.: to what extent may the State infringe any right of free speech, assembly or association? The Supreme Court at the time concluded that the beforementioned rights were not absolute, allowing the State to lawfully punish those abusing these freedoms if they were threatening the public space.

Justice Brandeis concurred with the decision reached by the Supreme Court, but on an alternative account. Brandeis reasoned that:

‘although the rights of free speech and assembly are fundamental, they are not absolute. Their exercise is subject to restriction when free speech would produce, or is intented to produce, a clear imminent danger of some substantive evil to society.’

When is such a danger to be deemed clear beyond doubt? In order to reach an answer to this question, he suggested to bear in mind under what circumstances a State is – ordinarily – denied the power to restrict freedom of speech, referring back to the US founding fathers:

‘They believed that freedom to think as you will and to speak as you think are means indispensable to the discovery and spread of political thruth: that, without free speech and assembly, discussion would be futile; that, with them, discussion affords ordinarily adequate protection against the dissemination of noxious doctrine; that the greatest menace to freedom is an inert people. Believing in the power of reason as applied through public discussion, they eschewed silence coerced by law – the argument of force in its worst form.’ 

Brandeis stated that if, and only if there is a reasonable ground to fear serious evil as a result of freedom of speech, restriction is justified:

‘If there be time to expose through discussion the falsehood and fallacies, to avert the evil by the processes of education, the remedy to be applied is more speech, not enforced silence. Only an emergency can justify repression.’

Brandeis, reluctantly, held that the facts of this particular case demonstrated such an emergency to be present. Many read his opinion, whilst concurring, as a protest against the Supreme Court’s restrictive interpretation of free speech. Brandeis wanted to maintain public order by debate. Like Thomas Jefferson and John Stuart Mill, Brandeis believed that:

‘we have nothing to fear from the demoralizing reasonings of some, if others are left to demonstrate their errors and especially when the law stands ready to punish the first criminal act produced by the false reasonings; these are safer corrections than the conscience of the judge.’

Last week, Frank Peters attended the 2nd DRRT U.S. Conference on Global Investor Protection (23rd and 24th of October 2014, Miami) as a guest speaker. In exploring new developments in the field of investor protection and alternatives for loss recovery actions in the U.S., DRRT invited several  experts from overseas to  shed light on the jurisdiction in each of their represented countries. As representative of the Netherlands, Frank Peters held two presentations on the respective subjects of Investor Protection in Europe and Financial Market Manipulations. Let’s recap!

As an international law firm and litigation funder, DRRT (part of Diaz Reus & Targ LLP) assists both domestic and global institutional investors with compliance and shareholder protection matters.  Cooperating with a global network of experienced specialty firms, DRRT’s services include the recovery of losses resulting from misstatements by public companies. The decisions of the U.S. Supreme Court in Morrison v. National Australia Bank of June 24, 2010 forecloses investor lawsuits in the U.S. for purchases on non-U.S. stock exchanges. This will give rise to non-U.S. investor right and loss recovery lawsuits.

Against this background DRRT has organized the 2nd U.S. Conference on Global Investor Protection thus creating a platform for the exchange of experiences and viewpoints from experts across the globe, demonstrating the significance of Europe as an alternative to U.S. based securities litigation.

Frank Peters’ first presentation gave a general outline of the sophisticated Dutch class action system. Contrary to the U.S. system, the Dutch system is based on claims issued by a plaintiff foundation acting for the benefit of a certain class of interested parties, rather than a class action on behalf of the damaged parties themselves. Foundations are allowed to litigate in the interest of all who are affected without any member or participant being named or becoming party of the litigation and concerning liability only. Monetary damages are therefore to be claimed individually, in follow-on proceedings once liability has been established in the initial foundation litigation. However, a new proposal  to allow for monetary damage claims in the initial proceedings as well  is currently pending before the Dutch House of Representatives. Also, since 2005, collective settlements can be declared binding for an entire class on an opt-out basis, which is enforceable throughout Europe.

Dutch law is strict on discovery – only specific documents known to exist are discoverable – but allows for a low threshold for pre-trial witness hearing. Also and as a possible alternative to discovery, Dutch law allows for an invasive inquiry carried out by court appointed investigators on the request of qualifying shareholders

Next, Frank Peters spoke as a panel member on the question of how the Dutch system deals with financial market manipulations and illustrated the general outlines of the Dutch system with the case of Rabobank’s  involvement in the manipulations of the LIBOR and EURIBOR rates.

Did you miss this edition of the DRRT U.S. Conference on Global Investor Protection and are you interested in Frank Peter’s contribution to this event? No worries: the 26th and 27th of January, he will speak at yet another DRRT conference in Frankfurt. For more info, check their website.

In May 2014, we initiated summary proceedings against the State by the Stichting Bescherming Burgerrechten (a civil rights foundation) and Lucas Kruijswijk regarding the so-called “stemfies”. We claimed that stemfies infringe the secrecy of the ballot. The Dutch District Court of The Hague ruled that stemfies are in violation with the secrecy of the ballot. However, since there is no Dutch law explicitly prohibiting stemfies, the Court felt it had no other choice than to deny the claims. Thus, stemfies were still allowed. Today, the Election Board (Kiesraad) recommended the Dutch minister of Internal Affairs to prohibit stemfies.

Stemfies are “selfies” – pictures taken of yourself – of filled out ballot papers taken in the polling booth. These photos were very popular during the last municipal election in March 2014. Especially because the Dutch minister of Internal Affairs encouraged voters to make such photos on Twitter.

The District Court of The Hague
On 9 May 2014, the Dutch District Court of The Hague ruled that

“it is not to the courts to rule whether it was wise of the minister to communicate that it is allowed to take photos of ballot papers in the polling booths.”

It is up to the Dutch minister to decide whether stemfies should be prohibited. As a consequence, stemfies were not prohibited during the European Parliament election on 22 may 2014, but allowed them as long as they

“do not disturb the public order, or harm other voters right to secrecy of the ballot.”

The Election Board
Today, the Election Board concluded in their recommendation on the evaluation of the last two elections that the Dutch minister should prohibit stemfies. According to the Board, photos in polling booths might violate the freedom to vote and the secrecy of the ballot. These fundamental principles require that

“every possibility that voters might be coerced or feel pressured to vote for a certain party and/or candidate, must be prevented.”

This is in line with our pleadings (Dutch only) in the stemfie-case, of May 2014. The Board recommends to prohibit pictures in the polling booth that show both the voter and the vote.

The Board also refers to several domestic traditions. For example, Belgium, South-Africa, the Philippines and several States in America prohibit pictures that show both the voter and its vote. In other countries, such as Finland, pictures as such are prohibited in polling booths.

The Dutch District Court and the Election Board have given their judgement and recommendation on the stemfies, now it is up to the Dutch minister of Internal Affairs to end the debate.

Author: Sam van Velze

On January 9, 2014 Advocate General (AG) at the European Court of Justice (ECJ) Cruz Villalón released a much awaited Opinion (Dutch, English not yet available) in a case regarding the Dutch private copying system. Dutch law currently allows copying of protected works for personal use and has been interpreted such as to also allow copies made from illegal sources on the internet. The Dutch Supreme Court was not sure that this interpretation was in line with article 5(2)(b) of the European InfoSoc Directive and asked the ECJ for an explanatory judgment.

In his opinion, AG Cruz Villalón advises the ECJ to rule that copies from illegal sources should not be covered under the private copying exception in the InfoSoc Directive.

If the ECJ will follow its AG’s advice, downloading from illegal sources will no longer be legal in the Netherlands. This could have a huge impact, especially on the income of authors and artists. They will most likely no longer receive compensation from levies for private copying from illegal sources, while enforcement of their rights on the internet will prove extremely difficult.

Douwe Linders

Eight American technology companies sent an open letter to the Obama administration to ask for government surveillance reforms. The group – consisting of Facebook, Google and Microsoft, among others – asks to limit government authorities over data, for more oversight and more transparency.

On Dutch radio show BNR, Christiaan Alberdingk Thijm explains the interest these companies have in restoring trust in the data market. “They are at the center of the NSA affair, because they gave access to the data.” “The business model of these companies is based on the collection of data. […] This reaction seems to be to protect their own interests too, as they notice that consumers are now looking for comparable services outside of the United States.”

Christiaan spoke about second screens during the annual Mipcom conference in Cannes. The Guardian attended it too and quoted Christiaan on the legal headaches that may lie ahead if Shazam, Zeebox and their rivals are used for ambush marketing.

“Second-screen is what you’d call a lawyer’s paradise,” said Christiaan Alberdingk Thijm from Dutch law firm bureau Brandeis

Recommended reading.

Spotify and Deezer have a new competitor in the Dutch music streaming market; Google. Google Play Music is Google’s solution to the music downloading issues of the last decade. They offer over 18 million tracks which can be streamed on desktop computers, tablets and phones. Customers are able to create playlists and save up to 20.000 songs in the cloud.

Google offers a free version and a version with an all access subscription of Play Music for 7,99 euro per month for a short introduction period.

Dutch TV-show PowNews asked us about Apple’s new iPhone 5S. It will have the possibility to use your fingerprint as a password for the phone and the iTunes store. From minute 2:17 on, you can watch the part where they interviewed Christiaan about the privacy risks.

Christiaan Alberdingk Thijm comments in De Telegraaf on the activities of Debtscan, a company that scans license plates in order to track down debtors. “The practice is in violation of the Dataprotection Act,” says Alberdingk Thijm.

Dutch tv-show Editie NL interviewed Christiaan Alberdingk Thijm on privacy concerning the so called Boyfriend Tracking app. After a big success in Brazil, Google decided to withdraw the app from the Play Store. “You may not place software on another persons phone without his or her consent. Same goes for GPS tracking or the registration of communication.” explains Alberdingk Thijm.

Justice Minister Ivo Opstelten wants to expand the use of drones for surveillance purposes. He has introduced a bill that should create “flexible camera surveillance”. Christiaan Alberdingk Thijm comments on BNR news radio and explains that there are still many legal hurdles to take. One of them is the legal obligation of transparency. “People should know when they are being filmed and it should be necessary to film them.”

eReaders.nl reveals that Dutch anti-privacy group BREIN wants to force e-booksellers to retain customer data for two years. The purpose is to track down e-book piracy through a watermarking system. Boing Boing’s Cory Doctorow is appalled.

Gmail users have no reasonable expectation of privacy, claims Google’s counsel in a legal brief in a class action about its service. Untrue and not a very fortunate statement, says Christiaan Alberdingk Thijm on BNR news radio.

The artist Prince pays a suprise visit to Amsterdam. Visitors that take pictures during the show are removed from the venue. Security personel force them to delete pictures from their camera’s and phones. A clear breach of their privacy, says Christiaan Alberdingk Thijm in Dutch newspaper de Volkskrant.

David Cameron wants to hold social network sites accountable for abusive behaviour of its members, he told BBC News. Cameron’s statement follows the tragic death of 14-year-old Hannah Smith, victim of web bullying. “Social network sites are not liable for the conduct of its users,” comments Christiaan Alberdingk Thijm on Dutch Business News Radio, BNR.