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Deutsche Bank disposing of Dutch mid cap market: violation duty of care

11/11/2014

On 8 October 2014, the Amsterdam District Court rejected a claim by Deutsche Bank for penalty interests in a case of early redemption of a credit facility.

Background of the case

In 2013, Deutsche Bank decided to dispose of its Dutch small- and midcap operations. This restructuring is part of Deutsche’s major strategy change, which triggered questions to minister Dijsselbloem (Finance).

Agriculture company Van der Grift had transferred its entire credit facility to Deutsche Bank in 2011. Due to its rapid expansion, Van der Grift tried to obtain an additional loan facility, late 2012. Deutsche Bank declined, arguing that it had changed its commercial strategy by not granting any more loans to existing small- and midcap clients. Eventually, Van der Grift was able to refinance the loan facility and fully repaid Deutsche Bank. Deutsche Bank claimed a penalty interest, which had been agreed upon through the bank’s terms and conditions. Van der Grift opposed.

Judgment District Court

The Court held that Deutsche Bank had made a long term commitment to the client in 2011. The Court established that, due to the strategy change, the relationship with client changed significantly, as Deutsche is expected to no longer apply a postive approach on granting future loans to the client.

The Court ruled that, although Deutsche Bank is allowed to change its commercial strategy, it has a duty of care to take into account the best interests of the client. It should have been clear to Deutsche Bank that its strategy change caused the client to a transfer its credit facility to a different bank. According to criteria of reasonableness and fairness, Deutsche Bank’s demand for full compensation is unacceptable, the Court ruled. In the given circumstances, Deutsche Bank’s claim was mitigated to 50%.

CORP. represented Van der Grift.

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