ADORISIO AND OTHERS v. THE NETHERLANDS
Inadmissible
Ján Šikuta;Johannes Silvis;Kristina Pardalos;Luis López Guerra
1. A list of the applicants is set out in the appendix. The Netherlands Government (“the Government”) were represented by their Agent, Mr R.A.A. Böcker, of the Ministry of Foreign Affairs. 2. The facts of the case, as submitted by the parties, may be summarised as follows. A. Introduction 3. Before the events complained of, the applicants variously held shares or subordinated bonds (the latter under diverse designations) issued by SNS Reaal N.V. (hereafter “SNS Reaal”), a public limited company (naamloze vennootschap, “N.V.”) incorporated under Netherlands law, or one or more of its subsidiaries. 4. SNS Bank N.V. (“SNS Bank”) was, and is, a high-street retail bank. It was a subsidiary of the holding company SNS Reaal N.V. Another subsidiary of that holding company was Reaal N.V., an insurance company. SNS Bank N.V.’s own subsidiaries included ASN Bank N.V., RegioBank N.V. and SNS Property Finance B.V., a private limited company (besloten vennootschap, “B.V.”). 5. From 2008 onwards the financial position of certain companies within the SNS Reaal group deteriorated. By 2012 the Netherlands central bank (De Nederlandsche Bank N.V., “DNB”) was concerned about the conglomerate’s financial health to the point that it decided to seize the Minister of Finance (Minister van Financiën) of the situation. 6. Reports relevant to the case were presented on 31 October 2012 by Ernst & Young, a firm of accountants, and on 14 December 2012 by Cushman & Wakefield, a real estate services firm (a supplement to the latter was presented on 20 December 2013). SNS Bank had full access to the report by Cushman & Wakefield. Copies of the two reports submitted by the applicants have parts blacked out. It would appear that these documents were not released to the applicants complete at any relevant time. B. The expropriation proceedings 1. DNB’s letter to the Minister of Finance 7. On 24 January 2013 DNB wrote to the Minister of Finance in the following terms (footnotes omitted): “1. Introduction On 18 January 2013 DNB sent the outcome of the Supervisory Review and Evaluation Process (SREP) to SNS Bank N.V. (SNS Bank) in the form of an intended SREP decision. In this intended decision ... DNB notes a capital shortage of at least 1,9 billion euros (EUR) and states its intent to impose on SNS Bank the measure of having to supplement its core capital by at least EUR 1.9 million no later than 31 January 2013 at 6 p.m., or at least to present, no later than 31 January 2013 at 6 p.m., a final solution which, in the considered view of DNB, has sufficient prospects of success and which will, in the short term, lead to the actual supplementing of the said capital shortage. If SNS Bank should prove unable sufficiently to strengthen its capital position in time, DNB, according to its statement of intent, will consider it irresponsible for SNS to continue banking and DNB will make use of its powers under the Financial Supervision Act (Wet op het financiëel toezicht). SNS Bank has until noon on 24 January 2013 to state its views; DNB will come to a final decision as soon as possible thereafter, taking these views into account. If these views should provide any new insight, then DNB will inform your ministry accordingly as soon as possible. In the event that DNB in its final SREP decision imposes on SNS Bank the measure referred to in its intended decision and SNS Bank does not comply with the measure thus imposed within the time-limit set, DNB considers it irresponsible for SNS Bank to continue banking. In addition, in the absence of a convincing and final solution it would appear impossible to publish by 14 February 2013 provisional annual accounts drawn up on the basis of continuity. In view of the expectations raised as regards an overall solution, postponing the publication of annual accounts without announcing an overall solution for SNS Reaal will mean further undermining confidence in SNS Reaal. DNB considers this irresponsible from the point of view of financial stability, also in the light of the increasing flow of publications in the media on the vulnerable position of SNS Reaal and the resulting outflow of funds. Since SNS Bank is a system-relevant institution (systeemrelevante instelling), the threat of insolvency of SNS Bank (and therefore that of the entire concern) will mean that the stability of the financial system is in serious and immediate danger. DNB therefore advises you to make preparations to enable the use of your powers under part 6 of the Financial Supervision Act immediately after the lapse of the time-limit in a final SREP-decision if and in so far as one is taken, or even sooner if the situation should so require. In view of the seriousness of the situation and the speed of the developments, DNB considers it important to send you this informative letter – based on section 6:5 of the Financial Supervision Act – already now. Paragraph 2 of this letter provides background information relating to the situation of the institution and the supervisory approach adopted by DNB. Paragraph 3 explores financial stability as the guiding point of departure in seeking a solution. Paragraph 4 provides an overview of the solutions examined and the reasons why, as it appears at present, these are not achievable. Paragraph 5 makes a few closing remarks. 2. Background ... After a broad survey of possible avenues for a solution by a joint working group, there have been intensive discussions with the Ministry of Finance and market parties about a plurality of (variants of) solutions. In its role as supervisor and co-responsible party for the stability of the financial system, DNB has played an initiating and active role in this process of negotiation. With the help of external advisors, a solution has been sought which comes as close as possible to meeting the following basic criteria: The private sector should be involved as much as possible to limit the financial consequences for the State as much as possible; Wherever possible, losses should be borne by SNS Reaal’s current risk-bearing financiers (burden sharing). This point of departure not merely limits the financial consequences for the State, but also serves the stability of the financial system in the long term; The intention to forestall an emergency situation; It is self-evident that any solution – involving State support – should in addition be assured of the approval of the European Commission (EC), be structural in character, and be proportionate. 3. Financial stability In DNB’s considered view it is not only SNS Bank’s continuity which is of importance for the financial system, but also that of the holding SNS Reaal. SNS Bank’s insolvency will have serious consequences for the stability of the financial system because of (i) the costs involved in the implementation of the deposit guarantee scheme, (ii) loss of confidence in other Netherlands financial institutions and (iii) the consequences for account holders and the attending unrest. DNB has described these factors in its letter of 2 October 2012, in which it is explained that DNB considers the estimated eventual cost flowing from the implementation of the deposit guarantee scheme irresponsibly high, seen also in the light of the general scarcity of capital and the desire of the markets for the anticipated application of Basle III [a voluntary regulatory standard on bank capital requirements, now due to enter into force in 2018] (argument i). In order to supplement these arguments, communicated to your Ministry earlier, DNB points to the following factors: The uncertainty as to the possibility for banks to recover against the estate of SBS bank if the deposit guarantee system is implemented. Since EUR 35 billion of the deposits guaranteed by that scheme are held by SNS Bank, claims would be in the order of greatness of EUR 10 billion per major Netherlands bank. A situation in which other Netherlands banks have major claims against the estate of SNS Bank and in which it is uncertain to what extent these will be met in itself undermines the health of, and therefore confidence in, these banks. Further splitting up SNS Bank into separate parts is not a realistic option. This is caused, in particular, by the interrelation of subsidiaries RegioBank and ASN Bank with their parent SNS Bank as regards operations and IT; these subsidiaries use the same infrastructure with their own labels. There is also considerable financial interrelation between ASN Bank and SNS Bank: savings from ASN Bank are used to finance credit (mortgages) provided by SNS Bank. Because of these interrelations any insolvency of the parent bank will in practice include that of the subsidiaries and vice versa. Any insolvency of SNS Bank will in addition probably lead to loss of confidence in its subsidiaries as well. SNS Bank, ASN Bank and RegioBank hold approximately one million current accounts and one and a half million savings accounts, with a total credit balance of approximately EUR 36.4 billion. At least EUR 500 per month is paid into approximately two thirds of the current accounts, which is an indication that these accounts play an important role in the financial transactions of individuals. Consequently all sorts of practical problems [sic] resulting from any insolvency of SNS Bank, such as cashpoints breaking down or standing orders being stopped, will have enormous social effects [sic]. ... 5. Conclusion ... [It would appear], at this moment, that nationalisation of the conglomerate as a whole is the only remaining solution for SNS Reaal. For a decision to expropriate to be taken, there has to be a situation of ‘serious and immediate danger to the stability of the financial system’. As has been observed in the introduction to this letter, DNB considers it irresponsible for SNS Bank to continue banking in the event that DNB in its final SREP-decision imposes on SNS Bank the measure referred to in its intended decision and SNS Bank does not comply with the measure thus imposed within the time-limit set. In the considered view of DNB the above-mentioned legal criterion for nationalisation will then have been met. Should you decide not to proceed with nationalisation, DNB, as the responsible supervisor, would be compelled to seek an emergency arrangement, which would mean implementing the deposit guarantee system. An emergency situation is therefore imminent. In the introduction to this letter attention has been drawn to the danger of loss of confidence as a result of any postponement of publication of the annual accounts without announcing an overall solution for SNS Reaal. There is already a loss of confidence, which has manifested itself in an outflow of funds in an amount of approximately EUR 1.4 million since the reports of 16 January 2013 about the position taken by the EC in this case; actually, if it had not been for public confidence in the safety net provided by the State the outflow would probably have been considerably greater. In addition to publication of the annual accounts without announcing an overall solution DNB notes other events that could be the beginning of an emergency situation. In the first place, DNB cannot allow Reaal and/or SNS Bank to increase lending to the holding SNS Reaal with which to repay external financing that will end in March. Absent any other funding possibilities this is expected to cause the holding to be unable to make further payments. In addition, if no solution is found, then SNS Bank, owing to its very weak capitalisation and the negative developments in this respect, would run the risk of no longer having access to the European Central Bank’s facilities. This, combined with the outflow of funds that has already occurred, could cause SNS immediate liquidity problems. On the above grounds, DNB advises you to make preparations to enable the use of your powers under part 6 of the Financial Supervision Act immediately after the expiry of the time-limit in a final SREP decision if and in so far as one is taken, or even sooner if the situation should so require.” This letter was at the time classified confidential. It has since been made available to the public. 2. The SREP decision 8. On 27 January 2013 DNB, after SNS Bank had stated its views, gave a decision (the “SREP decision”) which, as relevant to the case before the Court, was in the following terms: “6. Decision SNS Bank shall supplement its core capital by no less than EUR 1.84 billion no later than 31 January 2013 at 6 p.m., or in any case SNS Bank shall, no later than 31 January 2013 at 6 p.m., present a final solution which, in the considered view of DNB, offers sufficient prospects of success, it being required, at least, that all the parties involved shall demonstrably have committed themselves to the solution presented, and which solution shall lead to the actual supplementing of the said capital shortage in short order. 7. Final remarks Only if the decision set out in paragraph 6 has been fulfilled will it be possible for DNB to conclude that SNS Bank’s established capital (toetsingsvermogen) guarantees controlled and durable cover of its risks. If SNS Bank should prove unable to strengthen its capital position sufficiently and in time, DNB considers that it is irresponsible for SNS Bank to continue banking and DNB will make use of its powers under the Financial Supervision Act. ...” 3. The expropriation decree 9. On 1 February 2013 the Minister of Finance issued the following decree (Official Gazette (Staatscourant) 1 February 2013, no. 3018, translation published by the Government): “The Minister of Finance, acting in agreement with the Prime Minister, Minister of General Affairs; Having regard to Sections 6:1(1), 6:2(1), (4) and (5), and 6:4(1) and (2) of the Financial Supervision Act; Having consulted [DNB]; DECREES as follows: Article 1 1. The following securities, issued by or with the cooperation of the public limited company (naamloze vennootschap) SNS REAAL N.V. or, respectively, the public limited company SNS Bank N.V., both having registered offices at Utrecht, shall be expropriated for the benefit of the State of the Netherlands: a. all two hundred and eighty-seven million six hundred and nineteen thousand eight hundred and sixty-seven (287,619,867) issued shares of the class Ordinary shares in the share capital of SNS REAAL N.V., ISIN code NL0000390706; b. all six (6) issued shares of the class Shares B in the share capital of SNS REAAL N.V.; c. all other issued shares in the share capital of SNS REAAL N.V.; d. all issued shares in the share capital of SNS Bank N.V. held by others than SNS REAAL N.V. or its group companies; e. all four million three hundred and fifty thousand (4,350,000) Stichting Beheer SNS REAAL Core Tier 1 capital securities issued by SNS REAAL N.V.; f. all subordinated bonds issued by SNS REAAL N.V. that belong to the following series: 1o. EUR 350 million 6.258% Fixed/Floating Rate Hybrid Capital Securities issued under SNS REAAL N.V.’s EUR 2,000,000,000 Debt Issuance Programme of 13 July 2007, ISIN code XS0310904155; 2o. EUR 100 million 8.45% Fixed/Floating Rate Hybrid Capital Securities issued under SNS REAAL N.V.’s EUR 2,000,000,000 Debt Issuance Programme of 18 August 2008, ISIN code XS0382843802; g. all subordinated bonds issued by SNS Bank N.V. that belong to the following series: 1o. EUR 320 million 11.25% Resettable Tier 1 Notes issued on 27 November 2009 under the Debt Issuance Programme of SNS Bank N.V. / SNS REAAL N.V., ISIN code XS0468954523; 2o. EUR 200 million 5.75% Subordinated Fixed changing to Floating Rate Notes issued on 22 July 2003 under the EUR 20,000,000,000 Debt Issuance Programme, ISIN code XS0172565482; 3o. EUR 500 million 6.25% Subordinated Notes issued on 26 October 2010 under the Debt Issuance Programme of SNS Bank N.V. and SNS REAAL N.V., ISIN code XS0552743048; 4o. EUR 200 million 6.625% Subordinated Fixed Rate Notes due 14 May 2018, issued on 14 May 2008 under SNS Bank N.V.’s EUR 25,000,000,000 Debt Issuance Programme, ISIN code XS0363514893; h. all non-listed subordinated bonds issued by SNS Bank N.V. under the name of ‘SNS Participatie Certificaten 3’ with a nominal value of EUR 100 each, at an interest rate of (currently) 5.16%, issued for an indefinite period and described in the prospectus of 1 May 2003; i. all debt instruments, issued by or with the cooperation of SNS REAAL N.V. or SNS Bank N.V., which include subordination clauses that are similar to the subordination clauses included in the aforementioned series of bonds, or that otherwise prevent the claims of holders of such instruments from being met until after senior creditors of the issuer have been satisfied. 2. The following capital components of SNS REAAL N.V. and SNS Bank N.V., respectively, shall be expropriated for the benefit of Stichting Afwikkeling Onderhandse Schulden SNS REAAL [“Foundation for settling the private debts of SNS REAAL”], with registered office at Utrecht: a. the payment obligations of SNS REAAL N.V. and SNS Bank N.V. under the following loans: 1o. the EUR 20 million, 7.13% loan of SNS REAAL N.V. dated 9 October 2000 maturing on 23 June 2020 extended by Van Doorn Securities B.V.; 2o. the EUR 10 million, 7.10% loan of SNS REAAL N.V. dated 9 October 2000 maturing on 23 June 2020 extended by Van Doorn Securities B.V.; 3o. the NLG 400 million loan of SNS REAAL N.V. dated 20 May 1997 and maturing on 24 February 2014 extended by Stichting tot beheer van FNV aandelen Reaal Groep N.V.; 4o. the NLG 1 million loan of SNS Bank N.V. received on 23 February 1999 and maturing on 23 February 2019, extended by Stichting Pensioenfonds Poseidon; 5o. the NLG 25 million loan of SNS Bank N.V. received on 27 December 1999 and maturing on 27 December 2024, extended by Stichting Bewaarder OHRA Obligatie Fonds; b. all obligations and liabilities of SNS REAAL N.V. or SNS Bank N.V. to parties expropriated under the first subsection or to former holders of securities expropriated under that subsection, to the extent that those obligations or liabilities relate to the (former) holdership of the said securities; such that all rights and obligations arising from those capital components with respect to SNS REAAL N.V. or SNS Bank N.V. shall transfer to Stichting Afwikkeling Onderhandse Schulden SNS REAAL effective as of the time of expropriation. 3. Any party that loses the right to claim against SNS REAAL N.V. or SNS Bank N.V. as a result of the expropriation of the capital components referred to in subsection (2) shall be deemed to be ‘titleholders’ within the meaning of Section 6:8(1) of the Financial Supervision Act (...), for the purposes of Chapter 6.3 of that Act. Article 2 The public limited company SNS REAAL N.V. shall be appointed as director of Stichting Afwikkeling Onderhandse Schulden SNS REAAL. Article 3 1. Notwithstanding any provision in Part 6 of Volume 2 of the Dutch Civil Code or the relevant provisions in the Articles of Association: a. the members of the Board of Management (raad van bestuur) of SNS REAAL N.V., as well as the chairman and vice-chairman of that Board, shall be appointed, suspended and dismissed by the general meeting of shareholders, without any recommendation. b. the members of the Supervisory Board (raad van commissarissen) of SNS REAAL N.V., as well as the chairman and any vice-chairman of that Board, shall be appointed, suspended and dismissed by the general meeting of shareholders, without any recommendation. 2. The provisions set out in subsection (1) shall be in effect for a period of six months starting on the date this Decree takes effect. Article 4 This Decree shall take effect on February 1, 2013 at 08:30 hours. This Decree shall be published by means of a press release in combination with the publication of the complete text of this Decree on the website of the Ministry of Finance. A copy of the Decree shall be sent to SNS REAAL N.V., SNS Bank N.V. and Stichting Afwikkeling Onderhandse Schulden SNS REAAL. This Decree shall also be announced in the Government Gazette [i.e. the Official Gazette] (Staatscourant).” 10. A press release was issued, in Dutch and in English. It read as follows (English-language version published by the Government):