Continuation banking relationship pending main procedure
The Amsterdam Court of Appeal recently issued a judgment in preliminary relief proceedings focusing on the bank's termination of a banking relationship (Amsterdam Court of Appeal, 17 January ECLI:NL:GHAMS:2023:85).
Background
Cases like this are highly case-specific in nature. The Amsterdam Court of Appeal's ruling relates to the following situation.
ABN AMRO terminated the banking relationship with a group of companies (the Group). The Group consists of a wholesale business in the production, development and sale of horticultural and related products (the Wholesaler), a shop selling garden products to consumers (the Shop), a real estate company and a holding company with a director and major shareholder. The entities within the Group maintain bank accounts with ABN AMRO and also use other services from ABN AMRO.
ABN AMRO and the Group have been in discussion with each other since 2015 regarding reducing cash deposits to the Wholesaler’s and Shop’s bank accounts. For example, ABN AMRO requires these entities to limit cash deposits to a maximum of 25% of their total revenues. While the Wholesaler complied with this requirement, the Shop continued to receive an unchanged and unacceptably high amount of cash deposits to its bank account. The Shop argued that its agreement with ABN AMRO does not include any limitation on cash deposits either in a certain frequency nor in quantities and/or percentage. In response, ABN AMRO argued that denying the requirement agreed upon in 2015 seriously undermines the mutual trust that underpins a banking relationship. It remains unclear whether the Store ultimately did comply with the requirement agreed upon.
Furthermore, ABN AMRO requested a variety of information from the Group as part of its customer due diligence. The Group's initial response to this was reluctant. The Group indicated, among other things, that it would not provide any third-party documentation to ABN AMRO, but that ABN AMRO could instead visit the Group's office to inspect the Group’s administration. ABN AMRO indicated that the information provided was insufficient to complete the customer due diligence, that a customer visit was not in line with its policy and again requested to provide the requested information and documentation. The Group did not comply with this request, after which ABN AMRO finally requested all information and documentation and asked some additional questions. The Group subsequently responded to these requests and additional questions.
Subsequently, ABN AMRO terminated the banking relationship with the Group on the grounds that, in the absence of information and insight, it could not comply with its own legal obligations and ABN AMRO could not rule out improper and/or illegal use of the products and/or services. The Group asked ABN AMRO on several occasions to reconsider its decision and to indicate what information ABN AMRO requires to meet its obligations. Meanwhile ABN AMRO upheld the termination.
Following ABN AMRO's termination of the banking relationship, the Group commenced a preliminary relief procedure, demanding a provision where the banking relationship would be continued, or at least that it would continue to have access to the bank accounts with ABN AMRO during the preliminary relief procedure. The preliminary relief judge dismissed the Group's claims. The Group subsequently appealed judgment.
Assessment of the appeal
In accordance with case law, the Amsterdam Court of Appeal states that in today's society it is virtually impossible for the Group to participate in the social community and to operate a business without a bank account. In this respect, according to the Amsterdam Court of Appeal, starting point is that the social position of ABN AMRO and ABN AMRO's duty of care may entail that it enables or continues to enable the Group to participate in the social community and to operate a business using a bank account, and that that exercising the power to terminate a banking relationship is subject to restrictions. In this regard, the Amsterdam Court of Appeal refers to the Yin Yang judgment (Supreme Court 5 November 2021, ECLI:NL:HR:2021:1652 (Yin Yang); see also our earlier newsitem on this subject: Obligation of a bank to provide a bank account to a non-consumer customer). The Amsterdam Court of Appealconcludes that it is sufficiently plausible that the termination of the banking relationship will result in a situation in which it becomes nearly impossible for the Group to participate in society and to operate a business.
Subsequently, the Amsterdam Court of Appeal addressed ABN AMRO's reasons for termination. ABN AMRO based its decision to terminate the bank account on the fact that it cannot fulfil its legal obligations due to lack of information and insight and that it cannot exclude the possibility that the Group's products and/or services are being used improperly and/or unlawfully. Therefore, ABN AMRO argued that it had a legal obligation to terminate the banking relationship. The Amsterdam Court of Appeal found that ABN AMBRO, with regard to the real estate company and the holding company, did not specify any concrete questions that remained unanswered. With regard to the Wholesaler and the Shop, the Amsterdam Court of Appeal considered that although they initially responded reluctantly to ABN AMRO's requests, they were willing to give an employee of ABN AMRO the opportunity to inspect the administration at their offices and eventually provided information and documentation. In addition, the Shop and the Wholesaler have sufficiently motivated that they have taken measures to ensure that the products are not used for illegal activities and to reduce cash payments at the Shop in particular as much as possible. That there is an imminent and unacceptable danger of illegal activities is, according to the Amsterdam Court of Appeal, insufficiently plausible for the time being. As a result, it is also insufficiently conclusive that the bank was obliged to terminate the banking relationship.
The Amsterdam Court of Appeal concludes that the question of whether there was a legally valid termination of the banking relationship is subject to dispute and will not be resolved in this preliminary relief procedure. The Amsterdam Court of Appeal further finds that, all things considered, the Group should be given the opportunity to submit the dispute with ABN AMRO to a Amsterdam Court of Appeal hearing the case on the merits. This requires maintaining the status quo. The Amsterdam Court of Appeal therefore grants a provision requiring ABN AMRO to continue its services as far as the unrestricted use of the payment accounts is concerned.
Conclusion
The Amsterdam Court of Appeal did not address the question of whether ABN AMRO terminated the banking relationship validly. The Amsterdam Court of Appeal limited itself to a practical approach and solely examined whether there was an imminent and unacceptable risk of illegal activity and therefore whether there was a legal obligation for ABN AMRO to terminate the banking relationship.
However, the Amsterdam Court of Appeal does list various aspects should be considered, such as: (i) the nature, scope and manner of making information available in the context of the client screening procedure, (ii) the question as to when a client screening procedure can reasonably be deemed to have been performed and completed within the meaning of the Wwft and (iii) whether the bank is entitled to prevent further operation of a business by denying access to the banking system solely on the basis that a business is suspected to be involved in illegal activities.
The dispute between ABN AMRO and the Group will (most likely) continue, which will once again show that the circumstances of each specific case will play a key role.
If you would like more information or advice regarding the termination of banking relationships, please feel free to contact Meijburg Legal's Banking & Finance specialists.
