Leiden Law Blog

Unsuccessful SNS appeal leaves investors with questions about Dutch Intervention Act

Unsuccessful SNS appeal leaves investors with questions about Dutch Intervention Act

After the expropriation, which took place on 1 February 2013, the legitimacy of this expropriation was challenged at the highest administrative court. It ruled that the expropriation was legitimate, except where it concerned future claims. An appeal was then brought against the judgement, which took place just over three weeks after the expropriation. By declaring this appeal inadmissible (certain complaints were introduced too late and others were premature), the Court failed to  answer some interesting questions with respect to the Dutch Intervention Act. This Act constituted the legal basis for the expropriation.

The SNS investors made several complaints, of which I will discuss two. For both complaints, I will discuss the main questions that the Court would have had to answer, if the appeal had been held admissible. The first complaint was that the procedure followed in connection with the expropriation constitutes a breach of Article 6 of the Convention of Human Rights (‘the Convention’). This Article, in short, entitles everyone to a fair hearing by a tribunal. SNS investors argued that a breach of Article 6 of the Convention took place because, inter alia, the time limit for lodging an appeal at the highest administrative court was too short (only 10 days) and the fact that the Minister of Finance’s statement of defence was lodged late in the afternoon on the day before the hearing.

In answering the question whether or not these elements would represent a breach of Article 6 of the Convention, I assume the Court would have argued that EU Member States have a relatively wide margin of appreciation in restricting the ‘fair trial’. As long as the rules restricting access to a court do not affect Article 6 of the Convention in its core, serve a legitimate aim and are proportionate, the Court will not intervene in national law. It is my opinion that a fast determination of the legality of the expropriation can be seen as a legitimate aim, because of the need for expeditious judgements in times of financial distress. Also, the fact that the expropriation could be challenged at the highest administrative court, suggests that Article 6 of the Convention is not affected in its core. Therefore, the key question in this case would have been whether or not the restriction of the time to lodge an appeal was proportionate. Since investors argued that only a week of extra time would already have made a huge difference, the Court might find the 10-day time limit disproportionate.

A second complaint was made under Article 1 of Protocol No. 1. This Article, in short, entitles every natural or legal person to the peaceful enjoyment of his possession. A breach of this right can only be justified if (i) the breach is made on sufficient legal basis; (ii) the breach has a legitimate aim in the common interest; and (iii) there is a fair balance between the common interest and the position of the individual fundamental rights.

In regard to points (ii) and (iii), European case law following the Northern Rock expropriation has shown  that ‘the Court will generally respect the legislature’s policy choice unless it is “manifestly without reasonable foundation”’. Thus, I would not expect the Court to find the expropriation unnecessary or not in the common interest. As regards point (i), the Court could have answered an interesting question. Let me explain this. Beside the shareholders and subordinated debt holders, private loans (onderhandse leningen) were also expropriated. The Dutch Intervention Act clearly foresees in the possibility to expropriate shareholders and bondholders. In contrast, the Minister of Finance justified the expropriation of private loans with reference to the Parliamentary Proceedings, in which was stated that private loans fall within the scope of the Intervention Act. The question the Court would have had to answer is whether this reference constitutes a sufficient legal basis, i.e. whether the expropriation of private loans was sufficiently accessible, precise and foreseeable, just as the expropriation of shares and subordinated bonds was.

In conclusion, should the Court have admitted the SNS investor’s appeal, the Court would have had to answer some interesting questions in regard to the first ever application of the Dutch Intervention Act. By declaring the appeal inadmissible, it still remains uncertain whether the Intervention Act is fully ‘European (human rights) law-proof’. This lack of legal certainty for investors might prove to be of no benefit to the Dutch investment climate.

1 Comment

Nicolas
Posted by Nicolas on June 16, 2014 at 21:24

Well-written, interesting article, Sander! Especially at the second argument on the legal basis the Court is in a difficult position.

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