On the 5^th of April, the Enterprise Chamber of the Amsterdam Court of Appeal pronounced an important judgment in the VEB/Ageas case. Although the decision was primarily addressed at the establishment of mismanagement on the part of Fortis (the legal predecessor of Aegas), the Enterprise Chamber also made some interesting general statements about the fiduciary duties of the executive and supervisory boards of banks.

In general, this fiduciary duty entails that both the executive and the supervisory board, in fulfilling their tasks, must be guided by the interests of the company and its business. These interests consist of the interests of shareholders, employees and creditors of the company. In its judgment however, the Enterprise Chamber expands the interests of the company and its business of the Fortis Bank by including the interests of depositors, other debt and bondholders, other (systemic) banks and the general public.

The Enterprise Chamber considers that due to the magnitude of its activities, Fortis was deeply rooted in the daily course of finance and business and fulfilled a ‘utility function’ in that daily course. Such a bank is called a systemic bank nowadays. When a systemic bank, under certain circumstances, cannot duly perform its role in the daily course of affairs or even threatens to collapse, this implies a risk of highly severe damage to the financial and economical system. To avoid this risk, the executive board has to take the general interest into consideration with regard to its business considerations and decisions, without losing sight of the other aforementioned interests. This was especially the case here, as Fortis, being a systemic bank, participated in the takeover of another systemic bank, ABN Amro.

Moreover, the Enterprise Chamber elaborates on the possible hindsight bias. The Enterprise Chamber considers that as and when a severe responsibility rests on a (legal) person, this person should base his decisions on prudent information, analysis and assessment of all relevant facts and circumstances. This implies that what could be considered to be hindsight in understanding certain circumstances, should be foresight in understanding others. In concrete terms, with regard to a ‘normal’ takeover, a company has to take the most foreseeable developments into account, but in the ABN Amro takeover, Fortis should have taken less foreseeable developments into account, like for instance the possibility that normal ways of financing weren’t possible due to the credit crisis. In this case, it is the general interest involved that tightens the standard in the sense that Fortis should have had better foresight (and perhaps control) to understand the risks related to the prospective takeover.

Both general statements of the Enterprise Chamber can be considered to be striking and it will be interesting to see, as Aegas plans to take the appeal to the Supreme Court, how the Supreme Court will assess these statements. The first statement seems to be in line with current (legal) considerations about banks, but I question if this also applies to the second one. The consideration is in order to ‘protect’ the daily course of finance and business, but the tightening standard of foresight could precisely impede that daily course. This tightening standard can impede or at least delay prospective takeovers or other important business decisions in the banking sector as banks will exercise restraint in applying such decisions.