Dutch Court Upholds SNS Bond Seizure, Allows Future Claims

The Netherlands’ top administrative court upheld the government’s seizure of SNS Reaal NV’s shares and subordinated loans after real-estate losses brought the bank to the brink of collapse.

Without Dutch Finance Minister Jeroen Dijsselbloem’s intervention, SNS would probably have gone bankrupt, the Council of State in The Hague said in a statement on its website today. While the court didn’t return investors’ securities, it refused to block their right to seek compensation for losses in the future.

The minister was entitled to conclude that the stability of the financial system faced a “serious and immediate threat,” a condition for intervening under legislation adopted last year, the Council of State said.

The nationalization included issued shares, subordinated bonds and loans. About 700 parties, from countries ranging from the Netherlands to Indonesia, appealed the decision, according to the Council of State.

Dijsselbloem on Feb. 1 also blocked future claims against SNS Reaal, saying he considered it unacceptable for investors to seek compensation for losses caused by wrongful conduct by SNS Reaal or its managers. The Council of State wiped out this part of his decree, possibly allowing the case to drag on for years through various European courts.

Seek Damages

“We have our right back to seek damages from those responsible, which is of immense importance,” said Jan Maarten Slagter, chairman of Dutch investor group VEB. “This gave us something to fight for again.”

The VEB represented about 6,000 SNS investors, he said. The group will study whether there are grounds to fight the expropriations at the European Court of Human Rights.

Following today’s ruling, which makes the nationalization irrevocable, Dijsselbloem will make an offer for compensation within seven days. He has already said he sees that value at zero. The Enterprise Chamber of the Amsterdam Court of Appeal will rule on whether his offer is adequate.

“I see absolutely no reason at this stage to assume that the Enterprise Chamber will revise the compensation upwards,” the finance minister said in a Feb. 1 letter to Parliament. “In the event of a bankruptcy, the expropriated parties would also have lost their investment.”

After the financial crisis led to the nationalization of the Dutch parts of Fortis and ABN Amro Holding NV in 2008 and the bankruptcy of DSB Bank NV, the Netherlands adopted legislation allowing the state to take control of banks’ assets, liabilities or stock. Dijsselbloem, sworn in on Nov. 5, became the first to test the powers.

The government says the bailout of SNS Reaal will cost taxpayers 3.7 billion euros ($4.9 billion) in write-offs and capital injections, and the state is also providing another 6.1 billion euros in loans and guarantees. The expropriation of subordinated creditors reduced the rescue costs for the state by about 1 billion euros, Dijsselbloem has said.

The case is: Council of State, case no. 201301173/1.

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