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[No. 46] Relying on Information in Fulfilling Directors' Duties

Tomorrow at 11.30 hrs sharp, Maarten Mussche wil defend his PhD thesis on Relying on Information in Fulfilling Directors' Duties.  A business edition of the thesis will be published in the "Instituut voor Ondernemingsrecht" series as nr. 83. His thesis not only focuses on Dutch, American and German corporate law, but also on criminal law and - shocker - notions from the law & economics realm. I will be one of the professors "questioning" Maarten tomorrow, but of course I cannot disclose my question(s) at this time. After all, as one can read here (a link to a legal "glossy" (no kidding)) Maarten is a regular reader of this blog.

[No. 45] Endemol's Leveraged Buy-Out

Today the Dutch Financial Times reports on Endemol, a big media company that currently is experiencing financial difficulties. In the summer of 2007, when money was cheap and equity-finance (as well as lunch) was for wimps, Endemol was bought by Cyrte, Goldman Sachs and Mediaset through a leveraged buy-out. The takeover was financed with a substantial amount of debt that was pushed on the balance sheet of Endemol. The article in the Financial Times states that the projections at the time of the LBO were incredibly optimistic; to be able to service its debt, Endemol needed to produce a mega hit almost every year. According to the newspaper, some insiders doubted if this would be possible at the time of the deal. Endemol did not produce the stream of mega hits and instead the financial crisis hit the globe.

Endemol is just one of the many companies that recently have gotten into financial troubles after a LBO. Although it is unlikely that the company will enter formal bankruptcy proceedings (the Netherlands lack a procedure similar to Chapter 11 in the US), I would like to use the opportunity to draw attention to my recent contribution to the yearly volume of the Association of Corporate Litigation, in which I discuss some difficult questions that arise when LBO’s fail (available here, Dutch only).

[No. 44] Scylla and Charybdis

I just received a comment to post 43/11 from Alexander Schild (a real EHRM watcher), which I don't want to 'hide' in the comment section.

Lawyers often have the task, like Odysseus, to steer between Scylla and Charybdis. Opposing ideas try to lure the lawyer in their framework of rules and concepts. American pragmatism has tried to invent a strong antidote to this temptation by declaring all frameworks means to an end. It seems the Strasbourg court has taken the same approach regarding the interesting question raised in this post.

To what extent needs a violation of a right protected by the ECHR (and its protocols) first be brought before the national court(s), in order to avoid the complaint to be declared ‘inadmissible’ in Strasbourg for failure to exhaust the national remedies?

As is rightly pointed out in this post, it is difficult to address this question in abstracto. I enjoyed reading Assink’s thorough analyses of this case and would just like to add to his observations that backstage, two important ideas (the Scylla and Charybdis referred to above) seem to collide when one tries to answer the question put forward.

One of the pillars upon which the mechanism of review by the court in Strasbourg rests is the idea that before a complaint can be made in Strasbourg, the member states should have had to opportunity to solve the issue themselves. The national courts fulfill an important role in this respect. Their role is to examine first whether a right has been violated in a particular case. In order to ensure that the national courts are able to review alleged violations first, the rule has been adopted that before a complaint is admissible in Strasbourg, all national remedies should have been exhausted.

However, the ‘exhausting of national remedies’-rule can also act as a barrier for legitimate claims to reach the court in Strasbourg timely. This would be the case if, for example, the demand to exhaust the national remedies would also be applied to cases in which it is clear up front that national procedures will remain fruitless. When the jurisprudence in a member state is clear regarding a certain issue, the demand to exhaust all national remedies first is no more than a waste of everybody’s time and money. Therefore the second idea at stake here is the thought that in order to have an effective protection against violations of human rights, one has to do away with so called 'excessive formalism'.

The doctrine of 'excessive formalism' also applies to any procedural requirements which may hinder a person to have an alleged violation examined in court. That includes formal requirements applicable in a so called 'cassatieprocedure' (see recently RTBF v. Belgium, ECHR 29 March 2011)

In Akdivar and Others v. Turkey (ECHR 16 September 1996, § 69 & 70) the court noted that the doctrine of 'excessive formalism' entails that it is “incumbent on the Government claiming non-exhaustion to satisfy the Court that the remedy was an effective one available in theory and in practice at the relevant time, that is to say, that it was accessible, was one which was capable of providing redress in respect of the applicant's complaints and offered reasonable prospects of success.  However, once this burden of proof has been satisfied it falls to the applicant to establish that the remedy advanced by the Government was in fact exhausted or was for some reason inadequate and ineffective in the particular circumstances of the case or that there existed special circumstances absolving him or her from the requirement (…). “

A discussion along these lines may be expected in Strasbourg, when a complaint is made in this case. Then the question will arise whether the Hoge Raad could rightfully disregard the argument regarding the violation of art. 1 FP with the - as Assink rightly puts it - “too little, too late” consideration, in this particular case.