1. As I have explained at several places in the last three years, it is well possible (from a legal point of view) and makes good sense (from a policy point of view) to introduce a Dutch business judgment rule in Dutch corporate law, specifically in inquiry proceedings and in certain director liability proceedings. See, e.g.:
- Rechterlijke toetsing van bestuurlijk gedrag, Deventer: Kluwer 2007, chapter VI;
- Ondernemingsrecht 2008-6, no. 66; and
- Facetten van verantwoordelijkheid in hedendaags ondernemingsbestuur, Deventer: Kluwer 2009, no. 3.3.3.
2. In last year's post No. 190, I said a few things about the recent draft proposal by the Ministry of Justice, that aims to make some important but relatively modest statutory changes to the right of inquiry. The explanatory notes to the draft basically suggest that, when the Enterprise Chamber is asked to rule whether 'well founded reasons' (gegronde redenen om aan een juist beleid te twijfelen) or 'obvious mismanagement' (wanbeleid) exist as to matters that fall in the business judgment realm, the focus points applied in US case law could be helpful in this respect in the Dutch setting (thereby referring to the Delaware business judgment rule). This suggestion was inspired by a 2008 report from the Dutch Social-Economic Council, arguing for introduction of a Dutch business judgment rule in inquiry proceedings.
3. Not surprisingly, this suggestion in the explanatory notes is a step in the right direction in my view. As I explained in that post, Prof. Gerard van Solinge's remarks earlier in November - at least that's how I interpreted them - that the draft proposal effectively cut-off the SER's suggestion to restyle the court's review model in the business realm, were incorrect. So far so good.
4. This week Van Solinge published a two-page column in WPNR (Naar een evenwichtig enquêterecht, 2010/6825, p. 1-2) about the draft proposal and the explanatory notes, also touching on the above issue. He now takes as a given that the explanatory notes indeed include the - what I would call - 'Dutch business judgment rule' suggestion, but proceeds with arguing that this suggestion is wrong. I won't rehash here the reasons why Van Solinge's arguments are not convincing at all, but do offer a summary.
- The explanatory notes do not suggest to copy the Delaware business judgment rule 1-to1, but to finetune the Dutch system with elements of the Delaware system that are of added value policy wise. In other words, to shape an autonomously operating Dutch version of the business judgment rule, well embedded in Dutch corporate law.
- This obviously doesn't imply that the Enterprise Chamber - or counsel to the parties before the court - should continue to look at corporate case law developments in Delaware and take those into account, let alone explicitly, when deciding cases. We're talking about an autonomously operating model of judicial scrutiny here.
- And yes, doing so would imply that the way director conduct is reviewed would become a more structured exercise, that is the whole idea behind it in the first place. But no, that would not mean the court could only move in a mechanical fashion, that it would become an inflexible excercise; circumstances of the case at hand would still - and inevitably! - play an important role, while the framework of the business judgment rule still consists of standards, not rules.
- It simply isn't true that the Delaware business judgment rule is only applied in director liability proceedings, so his argument that for this reason the right of inquiry is not suited for a Dutch business judgment rule is of no moment.
- The fact that not all disputes before the Enterprise Chamber in inquiry proceedings concern business judgment related disputes, doesn't take away the fact the a court when confronted with such issues has to deal with them in a fairly predictable and responsible way; a Dutch business judgment rule would facilitate that. This is also a non sequitur.
- Although the suggestion in the explanatory notes does not relate to a proposed amendment of statutory wording, the suggestion should be seen against the backdrop of the core notions 'well founded reasons to doubt the correctness of the company' (section 2:350(1) DCC) and 'obvious mismanagement' (section 2:355(1) DCC). The fact that the explanatory notes do not propose to change the wording of these core notions (correctly in my view; see Ondernemingsrecht 2008-6, no. 66, p. 236: "Aan de bestaande enquêterechtelijke begrippen (...) dient niet te worden gemorreld. De door mij bepleite systematiek van bestuurlijke gedragsnormen en gerelateerde rechterlijke toetsingsnormen kan worden ingepast in deze vertrouwde, overkoepelende normatieve begrippen waarover veel rechtspraak bestaat."), does not take away the fact that it falls well within the legislator's powers to clarify its views on how these notions should be applied.
If you read Facetten van verantwoordelijkheid in hedendaags ondernemingsbestuur, Deventer: Kluwer 2009, no. 3.3.3 you will see that introduction of a Dutch business judgment rule indeed is well possible and preferable policy wise (Van Solinge doesn't respond to my analysis in that publication, that predated his). I do want to clarify that a Dutch business judgment rule would not be applicable when the Enterprise Chamber has to decide whether or not to take a provisional measure (section 2:349a(2) DCC). I explained this in Ondernemingsrecht 2008-6, no. 66, p. 234-235). Van Solinge incorrectly suggests that I argued differently, in his footnote 7.
5. Discussion about this important topic is a good thing, even a must; no doubt about that. But let's stop putting forward uninformed/flawed arguments in this whole discussion, to attack the suggestion that is on the table to start working on a Dutch business judgment rule, and get to the point: do we believe it is advisable to have a Dutch business judgment rule or not, policy wise (as it is legally possible)? That is the core issue, not really addressed by Van Solinge or other sceptics so far. My answer is a bold YES, for reasons explained elsewhere. So far, I haven't seen any convincing arguments supporting a clear no. Maybe this suggests there aren't any really...
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