The definitive text of the European Market Infrastructure Regulation (‘EMIR’) was published on 8 July 2012. As EMIR will become a European regulation, it will have direct effect in the Netherlands and there will be no need for transposition into Dutch law. The key features of EMIR are as follows. Clearing of derivatives by a central counterparty will be obligatory. Such central counterparties must be licensed and are regulated. EMIR also sets requirements on the provision of collateral for OTC derivatives and the transferability of positions taken. All parties entering into derivatives must also report their derivative transactions to a transaction register.

EMIR’s main objectives are to increase transparency in derivative transactions entered into outside regulated markets (also referred to as ‘over-the-counter’ or ‘OTC’) and to reduce counterparty risk and related operational risks. The requirement to hedge credit risks by providing collateral and derivative clearing are intended to control mutual counterparty risks so as to avoid credit risks run by one market party spreading to other markets and counterparties through the OTC market.

EMIR offers exceptions to and exemptions from the new obligations for certain derivatives and institutions. The central clearing obligation does not apply to specific non-financial institutions that use OTC derivatives to limit risks ensuing from their core business, such as the hedging of exchange rate and interest rate fluctuations. Pension funds and other pension administrators are exempt from the obligation to centrally clear OTC derivatives for a period of 3 years to the extent that these OTC derivatives pertain to their solvency. However, OTC derivative transactions that are of a speculative or trading nature and exceed a certain threshold value must be centrally cleared.

EMIR will have major consequences. The new risk control and reporting obligations will substantially raise costs for derivative use. In many cases, a review and possible adjustment of derivative contracts (such as ISDA agreements) are prerequisites for satisfying EMIR requirements.

The exemption threshold for offers of securities to fewer than 100 persons was raised to 150 persons as from 1 July. A requirement has been added that the exemption of offers having a cash equivalent of less than EUR 100,000 is to be calculated by adding the cash equivalents of all offers made in the European Economic Area (EEA).

The employee exemption has also been broadened as from 1 July. Until this date, the class of securities that an employer (or a group company of the employer) offered to employees was required to be listed in the EEA. Although this requirement has been cancelled as from 1 July, the employer (or the relevant group company) that offers the securities must still have its registered office or head office in the EEA. Another obligation that continues to have effect is that employees must be provided with a document containing information about the number of securities offered, the characteristics of the securities, the reasons for the offer and the specifics.

Within the context of the implementation of the revised Directive, the “50,000 euros exemption” was already raised to 100,000 euros as from 1 January 2012. This applies to both the offering of securities with a nominal value of at least EUR 100,00 and the “block exemption” (securities that can only be acquired in blocks of no less than EUR 100,000). As from 1 January, the law also includes an obligation to add a warning to documents and advertising materials when use is made of certain exemptions from publishing a prospectus (offers to fewer than 150 persons and the EUR 100,000 exemptions). The warning must say that no prospectus, or no approved prospectus, is available and that the relevant offer is not regulated by the Netherlands Authority for the Financial Markets (AFM). The warning must satisfy requirements set by the AFM. The mandatory warnings (texts and symbols) are available on the AFM website.

Briefly put, the Bill introduces the following changes:

1. A new 3% threshold will be added to the current thresholds (5, 10, 15, 20, 25, 30, 40, 50, 60, 75 and 95%) applicable for reporting an equity interest and/or controlling rights in a listed company. This new, lower threshold will require any investor whose equity interest reaches, exceeds or falls below 3% to report his equity interest and/or controlling rights to the Netherlands Authority for the Financial Markets.
2. A notification requirement will be introduced for holders of gross short positions (such as put options). Here, the same notification thresholds apply as for reporting an equity interest and/or controlling rights in a listed company.
3. New rules will be implemented to identify shareholders in Dutch listed companies, with the purpose of proper communication with the main investors. Sixty days before a general meeting, the company may submit an identification request to Euroclear or an intermediary to obtain the names of investors holding 0.5% or more of its issued capital.
4. The threshold for the right of public-company shareholders to place items on the agenda will be raised from 1% to 3% of the share capital. This right will also be conferred on shareholders who jointly hold a 3% equity interest.

The Bill is now awaiting discussion in the Senate. The preliminary inquiry is scheduled for 25 September 2012.

• The preventative dual dismissal system is being replaced by a single dismissal system (hearing the employee involved), with an option for the court to review dismissal after the fact.
• A transition budget instead of severance pay for every employee on termination by the employer. A severance payment will only be made in cases of wrongful dismissal.
• The employer will pay the first six months of every employee’s unemployment benefits.

These are the three main components included in the reform of dismissal law and the Unemployment Insurance Act as proposed by Minister Kamp of Social Affairs and Employment, and laid down in a framework memorandum dated 18 June 2012. Legislation is to follow, but only after the elections in September. We will soon be informing you of the framework memorandum in detail.

Every company or legal entity that makes staff available must register this in the Trade Register of the Chamber of Commerce. This applies not only to entrepreneurs who supply workers in the course of their business, such as temporary employment agencies, but also to parties that hire out workers on a non-commercial basis, i.e. not as part of their regular operations.

Registration by suppliers is mandatory, and recipients of labour are only permitted to do business with registered suppliers. The Labour Inspectorate monitors whether suppliers have satisfied the registration obligation and whether recipients transact business with registered suppliers. When it detects a violation, the Labour Inspectorate will impose a penalty for each employee found to have been supplied by a non-registered employment agency. The penalty amounts to EUR 12,000 per employee and increases when the offence is repeated.

This means that the penalty is imposed not only on the supplier but on the recipient as well, unless the latter is able to demonstrate the employment agency’s registration at the time the recipient concluded an agreement with the agency. As a result, recipients must verify whether the employment agency they wish to engage is registered in the Trade Register, except when doing business with a certified employment agency, as certified agencies are always registered as such in the Trade Register.

The Waadi now also provides that the Tax and Customs Administration and the Labour Inspectorate will pass information about fraudulent agencies on to the Labour Standards Foundation (Stichting Normering Arbeid; SNA), which is charged with the certification of companies active in the temporary staffing sector. The Labour Inspectorate will also provide information to the Foundation for Compliance with the Temporary Staff Collective Bargaining Agreement (Stichting Naleving Cao voor Uitzendkrachten; SNCU), facilitating SNCU’s monitoring of compliance with provisions under the Collective Bargaining Agreement.

A recent Supreme Court judgment has shown that in the event of accidents at work, self-employed persons enjoy the same legal protection as “ordinary” employees. This means that if a self-employed person has an accident when performing his work for a client and this client has taken insufficient safety measures, in principle the client is liable for any and all damage suffered by this self-employed person. The Court did note, however, that this person’s work must be part of the client’s professional practice or business operations. Employers availing themselves of the services of self-employed persons are therefore advised to contact their insurers to ascertain whether the risk ensuing from workplace accidents involving self-employed persons is adequately covered.

The NMa is imposing the maximum personal penalty on the two former directors; each must pay a fine of EUR 450,000.

The NMa may impose fines for violations of competition law as well as for breach of transport and energy laws. In imposing fines, the NMa considers on a case-by-case basis whether any of the people involved can be fined in addition to the companies themselves.

Competition fines of EUR 150,000 to EUR 350,000 were previously imposed on five Wegener staff members, and three of the managers of two Limburg construction companies received fines of EUR 10,000 to EUR 250,000. Fines were imposed earlier this year on two individual officers of the National Association of General Practitioners in the amount of EUR 50,000 and EUR 25,000.

This is the first time that the NMa has imposed such personal penalties for violations of energy laws.

A recent report issued by the Netherlands Court of Audit reveals that the business community regularly voices complaints about unfair government competition. The report shows that there is a need for such rules of conduct in actual practice, and the Act could reduce complaints about unfair competition. Under the new rules, an administrative body performing economic activities for clients must charge all costs of the product or service and it cannot favour a public-sector company in which it is involved over other businesses that compete with this company. Also, administrative bodies are not permitted to use data obtained within the context of exercising powers under public law for economic activities - excluding economic activities that serve to exercise powers under public law - unless these data may be made available to third parties as well.

The Act will be incorporated in the Competition Act, authorising the Netherlands Competition Authority to monitor compliance with the Act. If the Act is violated, the NMa may issue a cease-and-desist order, but it is not authorised to impose a penalty.

A new aspect of the CBA-H is that Independent Treatment Centres (“ITCs”) and private clinics providing 50% or more insured specialist healthcare are regarded as ‘employers’ within the meaning of the CBA-H. The Minister’s order includes these ITCs and private clinics within the scope of the CBA-H, as a result of which the CBA-H employment conditions - pertaining to salary, supplements, expense allowances and other factors - affect working relationships with employees by operation of law. These employees have been entitled to these employment conditions since 25 May 2012 as a result, and ITCs and private clinics may face increased personnel expenses. The standard nature of the CBA-H prohibits employers from departing from the collective conditions in either a positive or a negative sense, or, as explicitly follows from the CBA-H, agreeing on employment conditions that are not stipulated in the CBA-H. As part of the CBA-H, the Terms and Conditions for Medical Specialists were also declared generally binding as from 25 May. As a result, the employment conditions included in these Terms and Conditions apply directly to medical specialists. Unlike the CBA-H, these Terms and Conditions are of a minimum rather than standard nature. These may be departed from if the employees benefit. Employment conditions may also be agreed that are not included in the Terms and Conditions for Medical Specialists, and arrangements can be made in consultation with the medical staff regarding an exchange of employment conditions.

With the expiry of the term of protection of a specific Glaxo Group patent in the offing, Pharmachemie applied for marketing authorisation for the generic medicine Ondansetron. After having obtained the marketing authorisation, Pharmachemie had the medicine entered in the G-Standaard, a database containing information on all remedies - medicines, medical devices, homoeopathic medicines - that are or may become available at pharmacies. It was subsequently published before Glaxo Group’s patent had expired. Then, at Pharmachemie’s request, the database owner (Z-Index) sent all G-Standaard users a letter stating that the patent had not yet expired and that Ondansetron would not be traded before the patent’s expiry.

At first instance, The Hague District Court found that the mere publication of the medicine in the G-Standaard did not constitute patent infringement. The Court did not regard the inclusion in the G-Standaard as “offering for some purpose”, but rather as a preparatory act for supplying Ondansetron. Pharmachemie furthermore did not use the G-Standaard as a means for offering generic Ondansetron, but needed to use it in order to make trading the medicine possible immediately from the expiration date, according to the District Court.

On appeal, however, The Hague Court of Appeal held that “offering for some purpose” was most certainly at issue here. The Court of Appeal found it plausible that when prescribing or ordering medicines, as the case may be, users would be guided in part by the knowledge that a generic version of a medicine with the same active substance would soon be available on the market. That it is generally known that generic medicines are significantly less expensive than proprietary products was also considered relevant. Given the above, the Court of Appeal judged that the publication influenced market behaviour. The circumstance that the actual trading will only occur after the expiration of the term of the patent - the disclaimer - does not change this. On that basis, the Court of Appeal held that Pharmachemie had offered Ondansetron “for some purpose” and had infringed Glaxo Group’s patent.

Referring to legislative history, the Supreme Court has now upheld the Court of Appeal’s judgment and clarified that “offering for some purpose” should be broadly interpreted.

The increase of scale allows courts to improve the organisation of their tasks. Hearings may be held earlier and the assignment of cases can be improved. Also, there will be a sufficient influx of new cases, allowing courts to develop and maintain knowledge and experience and to develop specialisms. Obviously, staff changes and absenteeism can also be better absorbed by larger courts.

Another benefit offered by the new Act is improved accessibility of the legal system for citizens. Currently, many locations provide only limited jurisdiction. As from 1 January 2013, citizens may appeal to courts in 32 hearing locations for a wide range of matters.

A bank had a right of pledge on a membership right in a cooperative association of apartment owners. The deed of pledge stipulated that the bank’s written permission was required if the pledgor wished to let the residential premises. Despite this prohibition, the pledgor let the premises without the bank’s permission. As an appraisal report stated a forced sale value with vacant possession that was substantially higher than the forced sale value in let condition, in view of the forced sale the bank planned to vacate the property with analogous application of the lease clause pursuant to Article 3:264 of the Dutch Civil Code.

The Preliminary Relief Judge dismissed the bank’s request to invoke the lease clause, as only a mortgagee is permitted to do so. The statutory regulations on rights of pledge do not include a comparable provision on lease clauses.

On appeal, the bank argued that the District Court should have applied Article 3:264 of the Dutch Civil Code. The Court of Appeal, however, found that there was no room for this analogous application because the bank could only exercise such a far-reaching power - as the lease clause is an exception to the principle that tenancy agreements are not terminated by sale - based on explicit statutory grounds and supported by legal conditions and safeguards.

This Court decision may lead banks to exercise more caution in providing loans for membership rights. Given the rationale for the lease clause and the fact that the interests involved are put on a par with the interests involved with the lease clause when a membership right is leased without permission, it is desirable for the legislature to again critically review the statutory regulations on rights of pledge.

Until then, unlawful act (leasing a membership right without the bank’s permission) can be invoked in such cases to obtain an order to vacate the residential property against the tenants, provided that the forced sale value with vacant possession exceeds the forced sale value in let condition.

An appeal in cassation has been filed against the Court of Appeal’s decision.

One of the questions dividing the parties was whether the indexation entitlement had correctly been changed from an unconditional right to a conditional right for active participants. The Pensioners’ Association believed it had not, as Delta Lloyd had never communicated the change to participants and retirees, making the change was unenforceable. The Court, however, held that communication is not a requirement for a change in pension scheme rules to be legally valid.

What is more, in the Court’s opinion deferred participants and pensioners could not to rely on a continuation of unconditional indexation by reason of unclear communication. The Court ruled that a debate about indexation communication and financing did not arise until 2002/2003 and only then did “conditional indexation” and “unconditional indexation” become a hot topic. The Court seems to have held that the beneficiaries were unable to make this distinction in 2000.

The parties also quarrelled over the question of whether the Pension Fund was permitted to change the unconditional indexation for deferred and retired participants into conditional indexation. The board had decided to do so in 2006, but the change did not take effect until 1 January 2011.

The Court found that the Delta Lloyd Pension Fund was empowered to amend the pension scheme pursuant to its Articles of Association. The alleged terminated legal relationship cited by the Pensioners’ Association also did not preclude the change, according to the Court, which stated that “however, a pension agreement does not cease to have effect upon the end of an employment contract, but only when no more pension payments are due”. As far as we are aware, no court has ever declared this in such explicit terms. The consequence is that employers might change the content of a pension agreement even after an employee’s employment has ended.

In the Court’s opinion, the mechanism of the Pension and Savings Funds Act is no objection, either. This, too, is striking, as it has often been argued in the literature that unconditional indexation cannot be changed afterwards. It would appear impossible at any rate to do so under the Pensions Act.

The Court ultimately rejected the claims submitted by the Pensioners’ Association in a judgment that we consider quite remarkable and certain to give rise to further debate.

General terms and conditions commonly regulate major topics such as exoneration of liability, penalty clauses and other topics that are relevant for a landlord’s position. A tenant must have been given a reasonable opportunity to examine the general terms and conditions. This requirement is met if these are provided before or on the conclusion of the agreement. Late provision of the general terms and conditions allows the tenant to annul them, and this could have far-reaching consequences.

The case in this decision was as follows. A housing corporation let a home to X. The General Terms and Conditions of Tenancy were provided at a brief meeting, but only after the parties had signed the agreement. X violated the subtenancy prohibition incorporated in the General Terms and Conditions, leading the housing corporation to claim the contractual penalty, which by that time had risen to EUR 19,650. In the proceedings, the presentation of the general terms and conditions and the reasonableness of the penalty clause were addressed.

The Court of Appeal held in this case that the meeting was only brief and was specifically intended for signing the agreement. Also, the tenancy agreement clearly referred to the terms and conditions. The Court of Appeal is testing the limits by ruling that presentation during this meeting but after the agreement was signed is still timely. We believe the decision could also have been different, as an examination of the general terms and conditions after the agreement has been signed cannot have any real consequences for the tenant, for the mere fact that he has then already signed to indicate his approval. Consequently, to avoid running any risks in this respect, landlords are advised to present their general terms and conditions before signing the tenancy agreement, leaving no doubt as to the timeliness of their examination.

This case subsequently addressed the reasonableness of the penalty clause. Housing corporations often have difficulty demonstrating that they have suffered damage in the event of illegal subtenancy because they continue receive the agreed rent. In this case, a penalty had been set on violation of the subtenancy prohibition. The Court of Appeal held that the primary purpose of the penalty clause was not the compensation for damage but, rather, to avoid violation of the prohibition. The Court considered the penalty no higher than reasonably necessary and therefore found it not unreasonably onerous. The penalty clause was upheld.

Although this case ended well for the landlord, caution and due care on the part of the landlord in using the general terms and conditions are essential to avoid nullification. The penalty clause for the subtenancy prohibition is an effective means of exerting pressure and can obviate the need for lengthy claim settlement proceedings.

Background
Until 1 July 2012, policy was that no VAT was to be collected from persons who served on no more than four supervisory boards and were not liable to pay VAT on another basis. A transitional arrangement is in place to allow invocation of the old - cancelled - policy until 1 January 2013.

Supervisory board members’ VAT liability
Irrespective of the number of supervisory board memberships they hold, every supervisory board member must consider whether they are liable to pay VAT. This will generally be the case if duties are performed in exchange for payment. Any supervisory board member who is subject to VAT must (i) register as a VAT business; (ii) set up VAT accounting records; and (iii) remit VAT on the basis of a tax return. VAT on expenses related to the supervisory board membership may be deducted from the VAT charged.
Supervisory board members who pay a maximum of € 1,883 of VAT per calendar year - after deduction of the VAT charged - may seek a reduction of VAT payments and be exempted from compliance with the accounting requirements.

Point of attention
VAT-exempt businesses such as hospitals and educational institutions cannot deduct the VAT they are charged for fees paid to supervisory board members, resulting in higher costs for supervisory board members. Supervisory board members of such businesses would do well to apply the transitional arrangement.

Source: Decree issued by the State Secretary for Finance on 27 June 2012, No. BLKB/2012/477M.