Termination of banking relationship
On August 22, 2022 the District Court of Amsterdam rendered judgment in a case concerning the termination of the banking relationship (ECLI:NL:RBAMS:2022:5062). The Court ruled that the termination by the bank (ABN AMRO Bank N.V. (ABN)) of the banking relationship with a customer (VanEps) was not unacceptable according to the standards of reasonableness and fairness.
VanEps is a law firm incorporated under the laws of Curaçao, with offices on Curaçao, Aruba, Sint Maarten and Amsterdam. VanEps had held a current account with ABN for many years. In this context, an agreement was signed, which was subject to ABN’s general terms and conditions. Under those terms and conditions, ABN has the right to terminate the banking relationship without cause, subject to a 30-day notice period.
At a certain point in time, ABN changed its foreign policy. ABN has commercial banking customers in more than 100 countries, and in all these jurisdictions ABN must comply with increasingly stringent international and local laws and regulations, for example in the context of customer and transaction due diligence for the purposes of preventing money laundering and fraud. This is a costly exercise and was thus reason for ABN to change its foreign policy. Please note that this is in line with a more general development in recent years, as also appears from media reports, including in Het Financieele Dagblad of December 12, 2022.
By letter dated March 3, 2021, ABN informed VanEps that the services with VanEps' Curaçao branch would be terminated as of September 1, 2021. VanEps objected to this in writing. On October 25, 2021, ABN informed VanEps by letter that VanEps’ interests underlying the objections made did not render the termination unacceptable. ABN offered VanEps a three-month extension of the notice period, which was followed by another extension of the notice period until March 31, 2022.
VanEps subsequently started preliminary relief proceedings in which it claimed that ABN should continue the banking relationship. The District Court of Amsterdam prohibited ABN from giving effect to the termination and ruled that VanEps should initiate proceedings on the merits within six weeks of the date of the preliminary judgment, which VanEps did. The issue at stake was whether ABN's termination is unacceptable according to standards of reasonableness and fairness.
Judgment in proceedings on the merits
The Court first noted that ABN has a contractual right to terminate the banking relationship and that the termination occurred in accordance with the applicable terms and conditions. Next, the Court stated that such a termination is nevertheless invalid if, given the circumstances of the case, such termination is unacceptable according to the standards of reasonableness and fairness. In that regard, the Court must balance the interests, taking into account, among other things, the banks duty of due care as set out in the applicable terms and conditions.
VanEps pointed out its interest in maintaining the banking relationship (briefly summarized) in order to:
- be able to make and receive payments at lower costs than when those payments are made or received through a foreign (i.e. a Curaçao) bank;
- not be subject to a foreign exchange rate risk, which VanEps would be subject to if it is only able to do business through a Curaçao bank account as it cannot open a euro account with the Curaçao bank;
- have an account with ABN because such an account establishes confidence among European customers and failing to provide such confidence may result in loss of revenues;
- have an account with ABN because such an account is necessary to receive payments for services rendered by its lawyers in the Netherlands; and
- be able to make payments to parties who apparently only accept payments originating from the bank account with ABN (such as insurers, judicial bodies and the Chamber of Commerce).
In opposition to the interests of VanEps, is ABN's interest in being able to use its contractual termination right in order to:
decrease costs associated with increasing anti-fraud and money laundering efforts, such as compliance and external supervision; and
in that respect, to carry out a strategic reorientation, dismantling the international business branch to the best of its abilities and discontinuing its services in 100 countries (including Curaçao) outside Northwest Europe where ABN provides services to only a limited number of customers.
In balancing the interests involved, the Court noted that ABN has a legitimate interest in being able to strategically reorientate. In addition, the Court noted that VanEps’ business does not depend on the availability of its bank account with ABN, as the majority of the transactions are settled through other banks. Moreover, VanEps is not deprived of its ability to take part in the financial system, as VanEps has other bank accounts at its disposal. Lastly, VanEps did not sufficiently substantiate that it was not able to open a bank account at another Dutch bank.
The Court noted that ABN's freedom of contract should not be restricted to the extent that ABN would be obliged to prevent VanEps from incurring higher costs or delays in settling payments. According to the Court, the interests of both parties carry equal weight. As a result, the Court ruled that ABN's termination was not unacceptable according to the standards of reasonableness and fairness.
Meijburg Legal comments
The judgment of the Amsterdam District Court shows that cases concerning the termination by banks of banking relationships are highly casuistic. We refer in this respect to our previous news item. In each case, it came down to balancing the interests involved, and thus all the circumstances of the specific case should be considered. In this case, the Court concluded that the interests of both parties carry equal weight and that therefore the termination is not unacceptable according to the standards of reasonableness and fairness.
If you face any challenges concerning a bank that wishes to change or terminate its services and need help or advice to mitigate such challenges, please feel free to contact the specialists at Meijburg Legal.