Summary

Introduction (Chapter 1)

This study deals with the liability of directors of legal entities in the Netherlands.1 It deals with both the liability of the director towards the legal entity (the so-called ‘internal liability of directors’) and the liability of the director towards third parties (the so-called ‘external liability of directors’). The internal liability of directors is based on Book 2, Section 9 of the Dutch Civil Code (Section 2:9 “DCC”). The external liability of directors is based on Book 6, Section 162 DCC (Section 6:162 DCC, tort). The study specifically focuses on the common standard that has been developed in case law and legal literature for both forms of liability. This common standard is the so-called ‘serious blame standard’ (‘ernstigverwijtmaatstaf’).

The introduction of the serious blame standard in directors’ liability law has its roots in legal literature of 1986 relating to the case law of 1975 and 1983 of the Supreme Court (the highest civil court in the Netherlands) concerning the liability of an employer towards an employee2 and of an employee towards an employer.3 In the first case, the Supreme Court ruled that an employer is liable towards the employee for damage he or she suffered as a result of the shortcoming of the employer unless the “blame” of the employee in relation to his or her damage is ‘so serious’ that the shortcoming of the employer pales into insignificance. In the second case, the Supreme Court ruled that an employee who causes damage to the employer is only liable towards the employer if “serious blame” may be attributed to the employee. In legal literature of the period 1986-1994, it was argued by some scholars that this same standard should be applied when assessing the liability of a director towards the legal entity. Other scholars disputed this, however.

In 1997, the Supreme Court rendered its judgment in the case Staleman/Van de Ven4 in which it introduced the serious blame standard for internal liability. It ruled that liability of the director towards the legal entity could only arise if so-called ‘serious blame’ can be attributed to the director. Since then, the serious blame standard has been discussed at length in legal literature. Legal literature at first did not seem to truly understand the relation between this serious blame standard and Section 2:9 DCC. However, over the course of time, the serious blame standard was repeatedly used by the Supreme Court and despite some criticism by legal scholars, it became broadly accepted in legal literature. It is, however, only since 1 January 2013 that the legislature has codified this standard by changing section 2:9 DCC.

In 2006, nine years after Staleman van de Ven, the Supreme Court rendered its judgment in the case Ontvanger/Roelofsen5 in which it introduced the serious blame standard for external liability. In this case, it ruled that liability for tort of the director of a legal entity towards a third party while he is acting in his capacity as director could only arise if it is possible to attribute so called ‘serious blame’. In legal literature, scholars noted in a positive way that the Supreme Court had now ‘converged’ the rules for internal and external liability by using the same standard for both internal and external liability. In the period to 2015, the Supreme Court went on to repeat this serious blame standard in several other judgments. Despite some criticism, the standard became broadly accepted in legal literature.

The purpose of this study is to analyse whether the introduction, the substantiation and the use of the serious blame standard is in conformity with the system and rationale of section 2:9 DCC, section 6:162 DCC and with the general principles of civil law. For this purpose, I investigated the parliamentary history of section 2:9 DCC and 6:162 DCC and the case law of the Supreme Court that led to the introduction of the serious blame standard. I investigated how the serious blame standard was introduced in this case law and whether the substantiation and the use of the serious blame standard fits within the framework of the Dutch Civil Code.

The study resulted in the conclusion that (i) the current standard for the internal and external liability of directors needs to be clarified and (ii) we need to separate the serious blame standard from the legal framework which encompasses the internal and external liability of directors. The study aims to create a clear and sustainable standard for the internal and external liability of directors. In this regard, it should be stressed that the current serious blame standard has been very broadly accepted in case law, legal literature and (quite recently) parliamentary history. To understand why we need to let go of this standard, it is imperative to be open to the idea that from a legal theoretical perspective, the use of the serious blame standard is not justified. It leads to inconsequent and unnecessary (complex) reasoning in both case law and legal literature. The mere fact that almost thirty years have elapsed since the serious blame standard was first introduced in legal literature, twenty years since it was introduced in case law on internal liability and eleven years since it was introduced in case law on external liability, in itself justifies a thorough study of the legal theory of the serious blame standard.

Legal language, trias politica and the creation of law (Chapter 2)

For the purpose of analysing the introduction, the substantiation and the use of the serious blame standard, it is important to elaborate on some theoretical issues that relate to the creation and the application of law in the Netherlands.

First of all, one should realise that law has no meaning and no function without language. In fact, in our western civilisation, law can only exist by the virtue of language. Laws are created and expressed by language and the application of these laws is only possible through the interpretation of that language by a court. In its judgment, the court has to connect the applicable legal provision to the facts and circumstances and the court does so by expressing its judgment in language. To enforce this judgment, the bailiff will also interpret the language of the judgment, and so on.

The importance of language for the law can therefore not be underestimated. The law is sometimes a language in itself. Legal scholars, the legislature and judges use legal parlance that in many cases is not used by the general public. In some instances it may even have a specific legal meaning that differs from the meaning that such a term or word would have in common parlance. In that perspective, the language of law could be seen as a language in itself. One could call it an institutional professional language. In other words: all those who practice law or that at any certain moment in time come into contact with the law will form part of the language community that is formed by the language of law. This institutional professional language (or this language community) however does not have a goal in itself. The goal of this language is to define and give order to the reality and to society from a legal normative perspective. The law expressed by language therefore shows the system in which our society exists.

This means that the choice by a court to use a certain term in its judgment cannot be seen apart from the meaning and function that such a term has in the language community of law. What is the meaning of the term? What is its function? Is the use of the term in the judgment justified in light of the meaning and function that the term has been given in the language community of law and in the language community of Dutch society as a whole? In this regard, the legislature has the responsibility to make clear laws from a language perspective in order to avoid as much as possible the danger of an interpretation by the court that differs from the interpretation of the legislature. On the other hand, in principle, the court has the responsibility to use the same language that the legislature uses. This is logical, firstly because all law is expressed in language but also because of the so-called ‘trias politica’.

This is the second theoretical remark on law in the Netherlands. The legal system in the Netherlands, like many other continental European legal systems, is based on the so called trias politica. According to this principle, there is – amongst other things – a clear division of tasks between the legislature and the court. The legislature has the responsibility of creating the written law in legal provisions (such as Section 2:9 DCC and Section 6:162 DCC) and the court has the obligation to interpret and apply these provisions. Strictly speaking, precedent law does not exist and the legal basis of all court rulings must be found in the written law created by the legislature. In light of the importance of language for law, it is also a logical consequence of the trias politica that courts use the same language as the legislature. If the legislature for example has chosen the term ‘red’ for a certain legal situation, the court should not use the term ‘blue’ for that same legal situation. The court has to apply the law and, in principle, it does not have the liberty to deviate from the law or from the language in which the law is expressed. All this ensures the rule of law according to which, amongst other things, all legal entities and natural persons in the Netherlands are provided with certainty about their rights and obligations towards each other.

In light of the foregoing, although in legal literature there is some discussion on this topic, especially with regard to the position of the Supreme Court, it is generally accepted that, in all circumstances, the court (including the Supreme Court) will have to withhold itself from creating law (‘rechtsvorming’). That is a prerogative of the legislature which is a consequence of the trias politica. The court may, however, so to speak find the law (‘rechtsvinding’) by interpreting and applying the written provisions of the legislature. Of course, one could say that by finding the law, law is also created. However, strictly speaking, that is not the case if the court still bases itself on written law. One could in this regard speak of creating law by finding law (‘rechtsvormende rechtsvinding’).

The third remark relates to the trias politica. This remark is that the process whereby a court finds law in the legal provisions codified by the legislature must meet the standards of legal-theoretical reason. In other words, it must comply with the principles of legality, rationality and logic. Moreover, it must be legitimate. By doing so, a judgment should give insight into the motivation and the arguments used by the court when connecting the facts and circumstances presented to it to the legal system and its legal provisions. In this way, the judgment can be studied objectively not only by the parties for which the judgment has binding consequences in society but also by public opinion, politics, legal scholars and judges in appeal. A judgment which does not meet these requirements can be criticised and that criticism forms a control mechanism for the proper functioning of the legal system. When complying with the aforementioned principles, the court can make use of several methods of interpretation and methods of rational reasoning.

Methods of interpretation relate to the question of how a court explains the legal provision relevant to the case in question. In this regard, it should be noted that, of course, it is not always possible for the legislature to create a specific provision for all the specific facts and circumstances that could arise in our society. The legislature often makes use of general expressions in legal provisions that are open to interpretation by the court. The court will have to interpret these expressions and then apply these expressions to the facts and circumstances of the case in front of it. To do so, the court could use several methods of interpretation that are generally accepted in legal literature. These methods can be based on (i) the grammatical meaning of a provision, (ii) the parliamentary history of a provision or legal-historical research (iii) the context of the provision in the system of law created by the legislature (a certain provision may be included in Book 2 of the Dutch Civil Code but this Book forms part of the Dutch Civil Code as a whole, which contains 8 Books), (iv) the development of law over the course of time and in light of international law, (v) the anticipation of the court of new law that is in the process of being developed by the legislature and (vi) the rationale of a provision.6 In light of the trias politica and the importance of language in law, the methods described above under (i) and (ii) should in principle be applied in preference to the other methods. There is, however, no hard and fast rule.

Besides these methods of interpretation, there are multiple methods of rational reasoning that are generally accepted in legal literature. The most important one is the so-called syllogism. This method entails that the court establishes that the legislature has connected a specific legal consequence (for example a fine) to the infringement of a certain rule (for example speeding). If the facts and circumstances lead to the conclusion that a person has been speeding, the court connects the legal consequence of a fine to that person for speeding. Another rational method of reasoning is the so-called analogue reasoning. This method entails that a court compares a situation which is not specifically dealt with in a legal provision with a similar situation that is dealt with in specific legal provision. Another method is contrary reasoning. This method entails that a court compares a situation which is not specifically dealt with in a legal provision with an opposite situation that is dealt with in a specific legal provision.

The court can also clarify or refine rules that follow from the legal provision that the court applied (‘rechtsverfijning’). This means that it creates a rule that can be applied in future case law in matters that have similarities with the matter that the court had to rule over. As a general rule, one may assume that if a court refines a rule, the refined rule must be less abstract (more concrete) than the rule it refined. This means the court also contributes to the development of law (‘rechtsontwikkeling’). Development of law is not the same as ‘creation of law’. When refining a certain rule, the court must always base itself on an interpretation of a provision that has already been created by the legislature. This is a consequence of the trias politica. Only in very exceptional cases may the court choose to create a new rule itself. This applies in situations where the legislature had failed to provide for a legal provision or a legal framework to answer the legal issues that have been presented to the court. In such cases, however, the court should also only choose to do so in exceptional circumstances. In summary, the court must refrain from creating law.

The Supreme Court plays an important role in the process of finding, developing and – in exceptional cases – creating law. As the highest court, its tasks include supervising the unity of law. It has to ensure that legal rules and terminology are explained and refined uniformly within specific areas of law and also throughout the whole legal system.7

Sometimes it is not possible to test whether a judgment complies with the principles of legality, rationality, logic and legitimacy because certain steps of the reasoning that led to the judgment have not been explicitly mentioned in the text of the judgment. However, that in itself does not make the judgment unjust. To test whether the judgment complies with the principles of legality, rationality, logic, and legitimacy, legal scholars can make a so-called rational reconstruction of the judgment by filling in the missing gaps in the reasoning of the court. Once this is done, the judgment can be tested on its legality, rationality, logic and legitimacy. Legal theories and arguments that have been developed in doctrine can also be tested this way. In this study, I made a rational reconstruction of the case Staleman/Van de Ven.

Internal liability of directors (Chapter 3)

Introduction

The legal provision on the internal liability of directors has not changed substantially over the past ninety years. The current section 2:9 DCC only differs in some wording to legal provisions that were already codified in 1925 for the cooperative association (‘coöperatieve vereniging’) and in 1929 for (public and private) limited liability companies. In 1976, Section 2:8 DCC was introduced which led to a convergence of the rules for internal liability for all legal entities in one legal provision. In 1992, Section 2:8 DCC was renumbered as Section 2:9 DCC. It then stated (freely translated):

On 1 January 2013, the serious blame standard that was introduced in case law and further developed in legal literature was codified in section 2:9 DCC. Since then, it states (freely translated):

The system of Section 2:9 DCC (old) and of the current Section 2:9 DCC is such that the burden of proof that there was an improper performance of duties initially lies with the legal entity. Once it has proven that there was an improper performance of duties, the burden of proof shifts towards the individual director. To exculpate himself from liability, the individual director will have to prove that:

A logical consequence of this system is that if the legal entity has only one director, this one director will never be able to exculpate himself from liability in case of improper performance of duties unless in the event of force majeure (such as serious illness).

According to the parliamentary history, the legislature only codified the serious blame standard in 2013 because of the fact that this was the language used in case law and legal literature. Parliamentary history does not show that the legislature had itself contemplated the meaning and the function of the serious blame standard in relation to the wording and the rationale of Section 2:9 DCC. On 8 June 2016, the Minister of Justice filed a proposal for a bill containing a new Section 2:9 DCC and some other new legal provisions in which the serious blame standard was again included. According to this proposal, Section 2:9 DCC will consist of seven subsections of which the first three will state:

Section 2:9a DCC will consist of six subsections of which the first one will state:

Section 2:9b DCC concerns the liability of the directors. Subsection 1 states:

Section 2:9c DCC contains provisions relating to the joint and several liability of managing directors for ‘apparent’ improper performance of duties in case of bankruptcy, which is now still dealt with by Section 2:138/248 DCC.9 By codifying these provisions in a new Section 2:9c DCC, the provisions will be applicable to a broader range of legal entities. Subsection 1, 2 and 3 state:

At the time of writing this thesis it was not yet clear when the bill was going to be further discussed in Parliament.

To investigate if the serious blame standard actually fits within the framework of Section 2:9 DCC, I have first investigated the meaning of Section 2:9 DCC.

The assessment of when improper performance of duties occurs.

How is ‘improper management’ or (im)proper performance of duties as referred to in Section 2:9 DCC established? From the analysis of the parliamentary history of section 2:9 DCC and Section 2:138/248 DCC and the legal literature relating thereto, it follows that the question of whether there is proper or improper management/performance of duties11 must be answered by taking into account the following rules:

To fully understand the meaning of these rules, it is imperative to explain the principle of collegial management and the collective responsibility and liability related thereto.

Collegial management, collective responsibility and liability, division of tasks and exculpation

Reference is made to the parliamentary history of 1983/1984 of Section 2:138/248 DCC. This Section was finally introduced on 1 January 1987 and is applicable to directors of (public and private) limited liability companies. It was based on the former Section 49a of the Code of Commerce (‘Wetboek van Koophandel’) introduced in 1929. This Section stated – in short – that a director of a public limited liability company can be liable for damage in case of bankruptcy in case of ‘gross guilt’ or ‘gross negligence’ on the part of the director. In the parliamentary history of Section 2:138/248 DCC, the legislature explained the departure from the terms ‘gross guilt’ or ‘gross negligence’. It did so because it wanted to make clear that liability can also arise without ‘gross guilt’ or ‘gross negligence’. In this regard, it stated that the legal framework for liability must not be too strict and that liability does not only arise in exceptional cases. It considered that Section 2:8 DCC (now Section 2:9 DCC) and Section 2:138/248 DCC are in fact in line with each other and run parallel. It therefore chose the term ‘(apparent) improper performance of duties’ which shows that liability can occur sooner than in the cases of ‘gross guilt’ or ‘gross negligence’.16 The parliamentary history of Section 2:138/248 DCC is therefore relevant to understanding the meaning of the words ‘proper performance of duties’ and ‘improper management’ in Section 2:9 DCC.

This parliamentary history also stated that although Section 2:8 DCC (now Section 2:9 DCC) speaks of the duty of each individual director to perform his tasks properly, in theory, the board as a whole has a collective responsibility to properly perform its tasks. This is a consequence of the principle of collegial management. A division of tasks does not release an individual director from that collective responsibility. In theory, the principle of collective responsibility and liability is accepted as a “fundamental and valued principle of corporate law”.17

In the past thirty years, the principles of collegial management and collective responsibility have been repeatedly reiterated in case law, legal literature and parliamentary history. At first, the principle was specifically mentioned in relation to the boards of (public and private) limited liability companies. In legal literature from 1986 up until now, it was stated that although Section 2:9 DCC (old) spoke of duties that could be assigned to one or more directors, all the duties of the board of directors of public and private limited liability companies also belong to all the directors individually. The consequence of the principle of collegial management according to this literature was that all directors are in principle jointly and severally liable for the improper performance of only one of the directors. The principle is also accepted in relation to the board of other legal entities such as foundations (‘stichtingen’) and associations (‘verenigingen’) provided they are subject to paying corporate income tax, so-called ‘commercial’ associations and foundations. In that regard, when introducing Section 2:138/248 DCC, the legislature also introduced Section 2:50a and 2:300 DCC which state that Section 2:138/248 DCC is equally applicable to these commercial foundations and associations.

The principles of collegial management and collective responsibility have led to the premise that the improper performance of one director automatically leads to the improper performance of the whole board of directors. The parliamentary history of the current Section 2:9 DCC therefore now also explicitly states that although Section 2:9 DCC mentions the possibility of dividing tasks between the directors, the improper performance of one director in principle leads to the joint and several liability of all directors.18 This is only different if individual directors can exculpate themselves from liability. The current Section 2:9 DCC states in this regard that exculpation is possible if serious blame cannot be attributed to the individual director in relation to the improper performance of duties and if he also has not been negligent in taking measures to avert the consequences of that improper performance of duties.

All this leads to the question of how collegial management, collective responsibility, joint and several liability, division of tasks and exculpation relate to each other. In legal literature, there has been extensive discussion of this topic. It has been said that the collective responsibility and joint and several liability still stands but that a division of tasks can play a role in the question of whether or not a director can exculpate himself. This was repeated in the parliamentary history of the current Section 2:9 DCC.19 The question of how a division of tasks can play a role in the possibility of a director exculpating himself, however, largely remained unanswered. In my perspective, this has currently still not been made clear in parliamentary history, case law and legal literature.20 Consequently, this also raises the question of what is the exact meaning of the words “to properly perform the duties” as mentioned in Section 2:9 DCC. To answer these questions, it is first important to look further into the exact meaning of the principle of collegial management.

The parliamentary history of the aforementioned Section 2:138/248 DCC stated that the management board of (public and private) limited liability companies has a joint and collective responsibility for the financial affairs of the legal entity and for the prevention of improper performance of duties by the board. That collective responsibility for the financial affairs of the company in principle leads to a joint and several liability of each director unless a director can exculpate himself.21

In case law, it was stated that the general affairs, the financial affairs and the administration of the legal entity belong to the tasks of the whole board. An (informal) division of tasks does not automatically lead to the possibility of a director to exculpate himself. The reason for this is that a director is expected to acquire knowledge of important facts and circumstances that relate to the legal entity. In this regard, he is also expected to investigate the information obtained by co-directors, to make an assessment himself of this information, to obtain external financial advice in relation to this information and to obtainin-depth knowledge regarding the basic economic principles relevant to the legal entity.22 This is especially the case in the event of envisaged transactions that could have major consequences for the financial and general affairs of the legal entity or that could endanger the continuity of the legal entity.

In legal literature, it is stated that, despite any division of tasks between the directors in the board, all directors remain responsible for the general affairs, the financial affairs and important issues relating to the legal entity. In addition, despite a possible division of duties and tasks within the board of directors, all the directors have the responsibility to take decisions jointly on important (financial) issues concerning the company and to supervise the performance of each other’s duties. Directors are obliged to consult with each other, to request information from each other and to take over the duties of other directors if they sense the risk of improper management by the said other directors. Each director has his own responsibility to ensure that he is properly informed by his co-directors. If he senses that he is being misinformed or that he is unable to properly perform his own duties because of the performance of his co-directors, he should take action. In a worst case scenario that could even mean starting preliminary proceedings to force his co-directors to inform him properly or to perform their tasks properly. As an ultimate remedy, the director could resign if he is of the opinion that the other directors are preventing him from properly performing his duties, for example because they do not freely provide him with the necessary and timely information to allow him to perform his duties.23

In short, my conclusion is that the principle of collegial management entails that, besides the specific tasks assigned to him, each director has an individual duty to cooperate with his co-directors, to supervise his co-directors and to take action when he foresees or should foresee possible improper performance of duties by his co-directors. I call this ‘collegial duties’. In light of the foregoing, the words “to perform the duties properly” as mentioned in Section 2:9 DCC have a twofold meaning that has not been explicitly mentioned as such in the parliamentary history, case law or legal literature but that I herewith introduce as the obligations of each director to:

It should be noted that, when performing his specific and his collegial duties, a director may in principle rely on the information provided to him by his co-directors24 if an average reasonable and capable director would also have relied on such information. Directors need to be able to trust each other. That means that a director can in principle exculpate himself in a case in which he understandably relied on the information he had been provided with. The same applies when there was no apparent reason to further investigate certain actions of his co-directors. A director can also exculpate himself if co-directors deliberately left him out of the decision-making process. I have herewith also answered the question of how collegial management, collective responsibility, joint and several liability, division of tasks and exculpation relate to each other: the division of tasks in fact only plays a role for a director in proving that he is not to blame for ‘specific improper performance of duties’. This however does not yet clear him. To exculpate himself, he also still needs to prove that (i) he is not to blame for ‘collegial improper performance of duties’ and (ii) he has not been negligent in taking measures to avert the consequences of the improper performance of duties. These are obligations that have been imposed on the director by law. A director is to blame (in the linguistic meaning of the word) for such failure which makes him liable unless there is a situation of force majeure comparable to force majeure as referred to in Section 6:75 DCC. I do note that one could argue that these consequences of the principle of collegial management are not desirable for all sorts of legal entities especially because the principle of collegial management finds its roots in the parliamentary history and legal literature relating to public and private limited liability companies and commercial foundations and associations. For other legal entities such as for example certain leisure-, sport-, cultural- or musical associations/foundations, one could argue that these consequences stretch too far. This is, however, a normative stance that should be determined by the legislature (until now, the legislature has not provided clarity on this) but that could also be approached in specific cases by the court by defining the meaning of the obligation to properly perform the collegial duties that rest on a director in the specific case at hand.

The introduction and analysis of the serious blame standard in the legal framework of internal liability of directors in legal literature and case law (Chapter 4 to 7)

Introduction

As explained in the introduction to this summary, the serious blame standard was introduced by the Supreme Court in 1997 in the case of Staleman/Van de Ven. It did so after some scholars stated in 1986-1994 that the standard used for the liability of directors should not differ from the standard used for the liability of employees. The Supreme Court ruled that the liability of directors only occurs if they can be ‘seriously blamed’ which, according to the Supreme Court, must be assessed by taking into account all the relevant circumstances. These circumstances include, according to the Supreme Court:

However, the Supreme Court did not explain why it ruled that directors could not be liable unless the director could be ‘seriously blamed’. In order to find out what rational-legal motives justify the decision of the Supreme Court, I made a rational reconstruction of the judgment.

A first rational reconstruction leads to the conclusion that the judgment of the Supreme Court is merely based on the choice of words used by the Court of Appeal. The Court of Appeal ruled that ‘serious blame is to be attributed to the directors for improper performance of their duties’. It seems that the Court of Appeal only used the words ‘serious blame’ to express the gravity of the improper performance of the duties. Without any further explanation by the Supreme Court, it is fair to assume that the Supreme Court only chose this terminology because it assumed that the Court of Appeal had determined that liability based on Section 2:9 DCC requires that serious blame must be attributed to directors. However, from the face of the judgment of the Court of Appeal, it does not appear that the Court of Appeal attached any deliberate judicial meaning to the words ‘serious blame’. The Court of Appeal might as well have ruled that ‘the directors have improperly performed their duties’.

Another rational reconstruction leads to the conclusion that the Supreme Court based itself on (i) the idea developed in legal literature in the period from 1986 to 1994 that the liability of a director should be assessed analogously to the liability of an employee and (ii) the idea that a director needs to have a certain room to manoeuvre. This second idea was later confirmed by the Willemsen/ NOM-judgment of the Supreme Court in 2008.25 That judgment concerned the liability of the director towards a shareholder. The Supreme Court ruled that in light of the deliberate involvement of a shareholder with the legal entity, the serious blame standard of Section 2:9 DCC26 is justified as a high threshold for directors’ liability that is in the interest of the company because it ensures that directors, when performing their duties, are not undesirably led by defensive motives which is also in the interest of the shareholder.

The aforementioned rational reconstructions allow a rational-legal analysis of the Staleman/Van de Ven judgment by applying the methods of interpretation and methods of rational reasoning as described in chapter 2. My study assumes that the approach of both rational reconstructions could have formed the basis of the decision of the Supreme Court in Staleman/Van de Ven. However, if we assume that the approach of the first rational reconstruction formed the basis of the judgment of the Supreme Court in Staleman/Van de Ven, then a rational-legal test would conclude that the judgment lacks rational-legal reasoning because the use of the words by the Supreme Court seems incidental and merely based on a more or less undeliberate choice of words by the Court of Appeal. My study therefore focuses on the second rational reconstruction and analyses this rational reconstruction. Because of the fact that the serious blame standard has been extensively discussed and substantiated in legal literature, my analysis includes this legal literature. With my analysis, I also tried to answer whether the serious blame standard has clarified or refined Section 2:9 DCC (old).27

Grammatical interpretation method: the history of the term

The first method of interpretation is the grammatical one. Is the introduction and the use of the term ‘serious blame’ justified from a grammatical perspective in light of the institutional language of the legal society? In this regard, I first refer to the fact that according to the parliamentary history to Section 2:9 DCC, the words ‘improper’ imply that the director is to blamed for the improper performance. From that perspective, the use of the term ‘serious blame’ next to the term ‘improper performance’ seems wrong and seems a pleonasm. Also, the parliamentary history didn’t use the word “serious” when attributing blame in the context of improper performance. The standard therefore seems more onerous than the standard set by the legislature. This seems contrary to the trias politica. Secondly, I refer to the parliamentary history of legal provisions concerning:

As mentioned here above, the parliamentary history of Section 2:138/248 DCC shows that the legislature explained the departure from the terms ‘gross guilt’ or ‘gross negligence’. It chose the term ‘(apparent) improper performance of duties’ which shows that liability can occur sooner than in the cases of ‘gross guilt or gross negligence’. Section 7:658 DCC was based on the former Section 7A:1638x DCC (old) that stated that an employer is only not liable towards the employee for damage he suffered as a result of the shortcoming of the employer if there is ‘gross guilt’ attributable to the employee. As stated in the introduction to this summary, in 1975, the Supreme Court in this regard used the term ‘serious blame’ with respect to the employee. At that time there was no legal provision concerning the liability of the employee towards the employer for damage suffered by the employer. However, in 1983, the Supreme Court ruled in the Debrot judgment that this kind of liability also requires that ‘serious blame’ may be attributed to the employee. In 1992, Section 7A:1639da DCC (now 7:661 DCC) was introduced. This codified a legal provision relating to the liability of the employee towards the employer for damage suffered by the employer. It stated that the employee is only liable in case of ‘intent or deliberate recklessness’ (‘opzet of bewuste roekeloosheid’). Section 6:170 DCC was also codified in 1992. This Section states that the employer is jointly and severally liable with the employee towards third parties in case of tort by an employee and that the employer can only find recourse to the employee in instances of ‘intent or deliberate recklessness’. In 1997, Section 7A:1638x DCC (now Section 7:658 DCC) was altered. Since then it also used the term ‘intent or deliberate recklessness’ instead of ‘gross guilt’.

In light of the new term ‘intent or deliberate recklessness’ introduced in these Sections and the term ‘serious blame’ used in case law, the parliamentary history sought to avoid any doubt and therefore explicitly stated that there is no difference between the terms ‘gross guilt’, ‘serious blame’ and ‘intent or deliberate recklessness’.28 As the parliamentary history of Section 2:138/248 DCC shows, when considering the liability of the director towards the company, the legislature explained the departure from the term ‘gross guilt’ (which according to the aforementioned parliamentary history had the same meaning as ‘serious blame’), one must therefore conclude that the use of the term ‘serious blame’ by the Supreme Court in the case of Staleman/Van de Ven is not justified from a legal-grammatical and historical point of view.

It could be said that the above analysis is comparing apples with oranges and that the term ‘serious blame’ in the context of directors’ liability has a different meaning than in the context of liability of employees. This is, however, not the case. First of all, as stated above, the Supreme Court has to ensure that legal rules and terminology are explained and refined in a uniform fashion within specific areas of law and also throughout the whole legal system. Although Book 2, 6 and 7 DCC, strictly speaking cover different areas of law (Book 2 DCC covers legal entities, Book 6 DCC covers obligations arising out of agreements and out of law, Book 7 DCC covers specific agreements such as the labour agreement), they all form part of the same area of law, this being civil law. Furthermore, they all form part of the Dutch Civil Code. It is therefore logical to assume that the term ‘serious blame’ and the terms upon which this term was based (such as ‘gross guilt’) had the same meaning throughout the several Books of the Dutch Civil Code. The importance of a uniform explanation of terms throughout the legal system has everything to do with the importance of language for law. As stated above, law exists through the language used to express it. This language has a certain meaning which is given to it by the (legal) society that uses the language. It therefore leads to confusion if different meanings are given to the same term. This becomes apparent from the analysis of legal literature on directors’ liability from 1997 to today. In this legal literature, there has been extensive discussion of the question of the meaning of the term ‘serious blame’ in the context of directors’ liability. Many scholars have argued – in line with the abovementioned parliamentary history – that the term has the same meaning as ‘intent or deliberate recklessness’. Although there were also scholars who realised that in light of the objective test that applies for the liability of a director, liability could also arise outside ‘intent or deliberate recklessness’ it was only until quite recently that there appeared to be consensus in legal literature that ‘serious blame’ in the context of directors’ liability cannot have the same meaning as ‘intent or deliberate recklessness’. The fact that there has been discussion on this subject for such a long time, shows that the choice of the term ‘serious blame’ by the Supreme Court in Staleman/ Van de Ven is quite unfortunate.29

Interpretation methods based on the parliamentary history, legal history and the system of law: the comparison between a director and an employee

One important argument of scholars in legal literature in the past that led to the introduction of the serious blame standard for directors’ liability was that a director should be treated the same as an employee. The rationale behind this thought was that there is a difference between responsibility (‘verantwoordelijkheid’) and liability (‘aansprakelijkheid’). If an employee does not live up to his responsibility, this does not automatically lead to his liability. The reason for this was, according to these scholars, that the obligation of the employee to perform under the labour agreement is a so-called ‘effort-obligation’ (‘inspanningsverbintenis’) and not a so-called ‘result-obligation’ (‘resultaatsverbintenis’). An effort-obligation is an obligation to perform to the best of his abilities while a result-obligation is an obligation to deliver a certain result. The afore mentioned scholars argued, in short, that not living up to the responsibility to perform to the best of his abilities does not therefore lead to liability of the employee because the employee is not responsible for delivering a certain result. They further argued that the obligation of the director is also an effort-obligation and not a result-obligation and that therefore not living up to the responsibility to perform to the best of his abilities does not necessarily lead to his liability either. As a starting point, these scholars concluded that the liability of a director towards the legal entity should be assessed by the general provisions of Book 6 DCC relating to obligations arising out of contract or out of law. All this led to the introduction of the serious blame standard in the legal framework for directors’ liability law.

The aforementioned line of reasoning, however, does not fit in with the parliamentary history nor the system of law. First of all, the system of law does not recognise a difference between responsibility and liability, nor does it specifically relate an effort-obligation to responsibility and a result-obligation to liability. The fact that certain effort-obligations do not oblige one to achieve a specific result, does not mean that failing in the (contractual or legal) respon-sibility to perform to the best of one’s abilities does not lead to liability. In fact, as a general rule one could state that all (contractual or legal) effort-obligations lead to liability in case of failing in the responsibility to perform to the best of one’s abilities.

Secondly, the fact that an employee does not simply become liable if he fails in his responsibility is merely because the legislature has explicitly stated that the employee is only liable in case of ‘intent or deliberate recklessness’ (and in the past: ‘gross guilt’). That has nothing to do with a difference between effort-obligation and result-obligation or with a difference between responsibility and liability. It is just a direct result of a high threshold for liability of employees that has an explicit legal basis in Sections 6:170 subsection 3 and 7:661 DCC. For directors of legal entities, no such legal basis exists.

Thirdly, as stated here above, the parliamentary history to Section 2:9 DCC shows that the test for liability of a director towards the legal entity is an objective test. The fact that the director is not personally capable of properly performing his duties based on Section 2:9 DCC because he lacks certain skills or knowledge cannot exculpate him from liability. It is his responsibility to be fit for the job. If he is not fit for the job, he should not have accepted the appointment as a director of the legal entity. His liability is not a consequence of not performing under an effort-obligation. His liability is a consequence of failing to ‘properly perform his duties’ as referred to in Section 2:9 DCC. This Section forms a separate and standalone legal basis for the liability of directors. Book 6 and Book 7 DCC are not relevant even if the director is also an employee of the legal entity. His responsibilities as a director go further than his responsibilities as an employee. The test that is to be applied according to the parliamentary history to Section 2:9 DCC is completely different from the test that is applied to the liability of an employee towards his employer. That latter test is a subjective test. The fact that the employee is not personally capable of performing his tasks under the labour agreement because he lacks certain skills or knowledge can exculpate him from liability because his liability requires ‘intent or deliberate recklessness’.

Fourthly, in this regard it is remarkable that the same scholars who compared the director with the employee also compared the director with professionals such as a lawyer or an accountant. They argued that these kinds of professionals also enter into effort-obligations and not into result-obligations. If the comparison with professionals was further thought through, which comparison was in my view not incorrect, then the outcome would be exactly opposite to the outcome of the said scholars: the liability of professionals like lawyers, accountants and others is also assessed by applying an objective test. According to standard case law of the Supreme Court, the standard to be applied when assessing the liability of the professional under the assignment agreement referred to in Section 7:401 DCC is whether or not the professional ‘has acted as a reasonably competent and reasonably acting colleague would have acted’. This question needs to be answered taking into account all the circumstances of the case.30 This test has great similarities with the objective test that is to be applied according to the parliamentary history to Section 2:9 DCC to assess the liability of directors. There is also no serious blame standard that protects professionals from liability.

All the above leads to the conclusion that the statement proffered in legal literature in the past that the test for liability must be the same for a director as the test for liability of an employee was not justified. For that same reason, it was not justified to use the term ‘serious blame’, that originates from case law concerning the liability of an employee towards the employer.

Interpretation methods based on the parliamentary history, legal history and the system of law: ‘the room to manoeuvre’

Another argument in legal literature for using the serious blame standard was that a director needs room to manoeuvre. This argument was confirmed by the Supreme Court in the aforementioned Willemsen/NOM-judgment in which it was explicitly stated that the serious blame standard of Section 2:9 DCC is justified as a so-called ‘high threshold for directors’ liability’ that is in the interest of the company because it ensures that directors, when performing their duties, are not undesirably led by defensive motives. This argument however ignores the fact that the parliamentary history to Section 2:9 DCC already stated that when assessing whether or not there was an improper performance of duties, the court has to take into account that a director needs room to manoeuvre. When answering the question of whether a director or the board of directors acted improperly, the court must take into account that the director and the board of directors has room to manoeuvre and that sometimes risks need to be taken. If no improper performance of duties by the board is established (the first question), the question of whether an individual director risks liability (the second question) will never come up. However, once it is established that a director/the board of directors acted improperly, there is no rational reason to again use a standard that protects individual directors against liability based on the argument that they need room to manoeuvre. That argument has already been taken into account when assessing whether or not the director/ the board of directors acted improperly. The justification of the Supreme Court further ignores the fact that Section 2:9 DCC applies to all legal entities while many legal entities do not run a company and do have an interest in ensuring that their directors allow themselves to be led by defensive motives (charity foundations, sport- and music associations, semi-public health organisations, social organisations, etc.).

Interpretation methods based on the parliamentary history, legal history and the system of law: the system of Section 2:9 DCC and the principle of collegiality

As stated above, the system of Section 2:9 DCC entails that if one director improperly performs his duties, in principle all directors are liable unless they can exculpate themselves. There are thus in fact two questions to be answered. Is there an improper performance of duties?31 And can individual directors exculpate themselves?32 In the case of Staleman/Van de Ven, the Supreme Court seems to have integrated both questions into one ‘overall assessment’ in which certain circumstances need to be taken into account and that concludes with the answer to whether or not a so-called ‘serious blame’ may be attributed to a director. By doing so, the Supreme Court has deviated from the system of Section 2:9 DCC and that is contrary to the trias politica. In order to ‘fit’ the approach of the Supreme Court into the system of Section 2:9 DCC, many scholars have adopted different theories that converge the serious blame standard with the ‘improper performance of duties’ standard that explicitly follows from Section 2:9 DCC. They stated – in short – that an improper performance of duties can only occur if serious blame can be attributed to a director. If that is the case, such serious blame should, according to these scholars, be attributed to all the other directors. However, these other directors can exculpate themselves by proving they are not to be seriously blamed. After the codification of the serious blame standard in the current Section 2:9 DCC this would allegedly still be the system that follows from Section 2:9 DCC according to these scholars. In my view, this approach is only based on the fact that these scholars thought it necessary to follow the Supreme Court in its reasoning simply because the Supreme Court has great authority in the development of law. But that doesn’t make the reasoning of the Supreme Court accurate from a legal-rational perspective. The reasoning of the Supreme Court and of these scholars also does not reconcile with the consequences of the aforementioned principle of collegiality. From that principle, it follows that each director also has the duty to perform the collegial duties for which he is responsible. Hence, he has the duty to supervise his co-directors, to consult with them and to take over their duties in instances where he foresees possible improper performance of duties by his co-directors. In relation to these duties there is no reason to give the director room to manoeuvre or to fear that a director will undesirably be led by defensive motives. On the contrary, these collegial duties entail that the behaviour of the director should always be somewhat critical towards his co-directors, that he asks questions to his co-directors and that he analyses risks relating to the decisions and actions of his co-directors. These collegial duties have the goal to ensure that the legal entity, as an abstract entity created by the law, becomes fully part of the community. Hence, with regard to these collegial duties the argument of the Supreme Court that the serious blame standard is justified as a high threshold for directors’ liability that is in the interest of the company because it ensures that directors when performing their duties are not undesirably led by defensive motives, does not add up. If a director can be ‘normally blamed’ for improper performance of these collegial duties, he should in principle face liability according to the system of Section 2:9 DCC. If one should assume that a director is only liable for a shortcoming in these collegial duties when he can be ‘seriously blamed’ than that would undermine the principle of collegial management and Section 2:9 DCC.

Interpretation methods based on the parliamentary history, legal history andthe system of law: the serious blame standard is not applied in Section 2:138/248 DCC

The parliamentary history of Section 2:138/248 DCC explained that Section 2:8 DCC (now Section 2:9 DCC) and Section 2:138/248 DCC are in fact in line with each other and run parallel. In legal literature, with which I agree, it is argued that the term ‘improper management’ in Section 2:9 DCC does not differ from the term ‘apparent improper performance of duties’ in Section 2:138/ 248 DCC. Despite this, the case law relating to liability based on Section 2:138/ 248 DCC and the case law relating to liability based on Section 2:9 DCC use different standards. While in case law relating to Section 2:9 DCC the serious blame standard is used, the case law on Section 2:138/248 DCC applies the test of whether the director has acted as no other reasonable thinking director would have acted under the same circumstances. I think that the test applied with Section 2:138/248 DCC is correct and the test applied with Section 2:9 DCC (the serious blame standard) is incorrect. The mere fact that case law deals differently with both Sections while both Sections of Book 2 DCC concern the liability of the director for improper performance of duties shows that the use of the serious blame standard when applying Section 2:9 DCC is not justified from a legal-systematic point of view.

The serious blame standard in case law on internal liability of directors afterStaleman/Van de Ven

In my research into the large amount of case law on the internal liability of directors, I have not come across many cases in which I feel that the outcome was unjust or contrary to a feeling of what is right. It confirms that, in my opinion, our judges exhibit good sense when defining the boundaries of liability. In this regard, I do point out that, in my research, I mainly looked at the legal theoretical substantiation of this case law relating to Section 2:9 DCC and not the merits of the case law. However, I did establish that in some cases, the legal theory on Section 2:9 DCC, as explained in case law and in legal literature (hence: in which the serious blame standard plays a pivotal role), led to unnecessarily complicated case law that does not follow the rationale and system of Section 2:9 DCC.33 This is contrary to the idea that case law must be based on legal provisions codified by the legislature. In this summary, I shall not go into detail on this specific area of case law. In short, I established that in some cases the court ruled that one or more directors of a legal entity could be blamed for personally improperly performing their duties and that they could not exculpate themselves but that they were still not liable because the court ruled that there was no persuasive evidence of ‘serious blame’. From a legal theoretical perspective, that is not possible. If the court actually considered that in the current circumstances the directors were not to be held liable then it should have ruled that there was no improper performance of duties at all or that a specific director could exculpate himself.

Conclusion

From a legal-theoretical and rational point of view, there does not seem to be any justification for the introduction and use of the serious blame standard in the legal framework of the internal liability of directors. The introduction seems to be based on the analogy between the director and the employee, while the director and the employee are not to be compared. This is now broadly accepted in legal literature. Despite the fact that it is now quite clear that the liability of a director is dealt with differently than the liability of an employee, case law and legal literature still make use of a term that originates specifically from the legal framework for employees’ liability. This has led to much unnecessary discussion and unnecessary theories in legal literature and case law. The Supreme Court and legal literature have in fact influenced each other and both have strengthened the idea of the serious blame standard. This has even gone so far that the legislature decided to codify the serious blame standard on 1 January 2013 although the legislature itself had apparently not given it much thought. The serious blame standard does not do justice to the objective test for liability and to the principle of collegial management which are both broadly accepted. There is no reason to hold on to the serious blame standard. It does not refine Section 2:9 DCC and it leads to inconsequent reasoning and case law. I realise that the serious blame standard is now broadly accepted in case law, legal literature and even by the legislature. This, however, does not change the fact that the serious blame standard is not justified and that sometimes it is necessary to depart from existing paradigms. In this regard, one should note that the law and case law need to be clear in the language it uses. This is an important condition for the rule of law. Legal entities and their directors need to have full clarity on the standards that apply for directors’ liability. In legal literature, it is stated that corporate law has sometimes become so complex that it becomes difficult for the ordinary natural person or legal entity to grasp. I therefore plead for simplifying the law on internal liability of directors by clarifying the legal theory. In chapter 8, I therefore suggest an amendment to the proposal that the Minister of Justice filed on 8 June 2016.

The codification of the serious blame standard on 1 January 2013 and aproposal for a new Section 2:9 DCC (Chapter 8)

When the legislature codified the serious blame standard on 1 January 201334, it based itself merely on the judgment in Staleman/Van de Ven and said that it wished to codify the terminology that has been broadly used in case law and legal literature. The legislature had no further normative or political reason for itself. When it codified the serious blame standard, the findings in my thesis were not yet public. In light of these findings, the codification of the serious blame standard can only result in less clarity. This already becomes apparent when we look at how the serious blame standard was codified. While in legal literature after Staleman/Van de Ven it was assumed that the serious blame standard was important in the context of assessing whether or not there is improper management, the legislature codified the serious blame standard in Section 2:9 DCC after the sentence that starts with the word “unless”. This led to a lengthy and fierce discussion in legal literature in which different scholars discussed the question of whether or not improper management still can only occur in the event that ‘serious blame’ may be attributed to a director. However, from the parliamentary history it follows that the legislature did not have the objective of changing the standards according to which directors’ liability should be assessed. In my view, therefore, the discussion is merely important to establish that the legislature has the responsibility to make clear laws. In this regard, it seems that the legislature itself did not have a clear understanding of what it meant. This naturally leads to a lack of clarity, not only in the current Section 2:9 DCC but also in the proposal filed on 8 June 2016.35 I therefore propose to amend this proposal as follows (marked with the emphasis added and the strikethrough).

Section 2:9 DCC

I propose to delete subsection 2. Subsection 3 will then become subsection 2. I propose the following amendments:

This means that the principle of collegial management is explicitly mentioned in Section 2:9 DCC. This makes it unnecessary to mention the possibility of dividing tasks. It is also not necessary to mention that the general conduct of affairs is the responsibility of all the directors. In all circumstances, a director can exculpate himself in accordance with Section 2:9b subsection 1 DCC.

I propose to include a new subsection 3:

There is no reason not to codify the objective test to be applied and the fact that this test needs to be applied from the time of the actions of the director. In this way, the risk of the benefit of hindsight is explicitly made clear. This is generally accepted and should therefore be codified.

Section 2:9b BW

I propose to amend subsection 1 as follows:

For clarity sake, I suggest only using the term ‘improper performance of duties’ and depart from the term ‘improper management’ since both terms have the same meaning. The importance of language for law demands uniformity in the use of language. Moreover, the principle of collegial management is reflected in the proposed amendment. The words “in full” are deleted because the first sentence of my proposal only relates to the damages caused by the director’s own improper performance of duties. The term ‘serious blame’ is removed since it does not fit the objective test for the assessment of liability. The task designated to other directors is further not relevant in light of the principle of collegial management and joint and several liability. This joint and several liability is explicitly mentioned in the second sentence which is important in order to make clear that directors can seek recourse to one another. The third sentence makes clear that, to avoid liability, the director must at least also have fulfilled his duties of collegial management. When determining if a director has fulfilled his duties of collegial management, the court can take into account the position of the director in the board as an executive or non-executive director. The non-executive director will be more dependent on the information provided to him by executive directors. When determining if a director has fulfilled his duties of collegial management, the court can further take into account the nature of the legal entity of which the director has been held liable.

Section 2:9c BW

I propose to amend subsections 1, 2 and 3 as follows:

Since there is no real difference between ‘apparent improper performance of duties’ and ‘improper performance of duties’, I suggest to depart from the term ‘apparent’ in Section 2:9c DCC. I further suggest including the same wording in subsection 3 as in Section 2:9b subsection 1 DCC.

In chapter 8 I also put forward an alternative proposal to merely alter Section 2:9 DCC in the event that the legislature at this time does not desire to change Section 2:9 DCC as drastically as proposed by the Minister of Justice in his bill of 8 June 2016.

To conclude, the current Section 2:9 DCC and the proposal by the Minister of Justice are based on legal provisions that go back to the beginning of the twentieth century (Section 31 of the former Act on the cooperative association was introduced in 1925 and Section 47c of the former Code of Commerce was introduced in 1929). Sometimes it is good to start from scratch. I believe that the above amendments provide for a sustainable and clear legal framework for the internal liability of directors in the future.

External liability of directors and the introduction of the serious blame standard (Chapter 9)

Introduction

The basis for external directors’ liability is Section 6:162 DCC. Section 6:162 DCC states (free translation):

In the period between 1927 and 1997, case law on the external liability of directors was based on the simple application of this Section 6:162 DCC. In this period, the Supreme Court rendered some landmark cases that refined Section 6:162 DCC in the context of the external liability of directors. In the period between 1997 and 2005, the Supreme Court rendered a few cases in which it used the words ‘serious’, ‘personal’ and ‘blame’ in different constellations. The words did not, however, seem to have a specific legal meaning in themselves. In 2006, the Supreme Court rendered the landmark Ontvanger/Roelofsen36 case in which it introduced the serious blame standard into the legal framework for the external liability of directors. It appears that the Supreme Court, while doing so in 2006, based itself on case law in the period 1997-2005 in which the terms ‘serious’, ‘personal’ and ‘blame’ were used in different ways. The Supreme Court in 2006 did not explain why it used the serious blame standard. Although there was some discussion in legal literature concerning the question of whether the Supreme Court was correct in introducing the serious blame standard, many scholars noted in a positive way that the Supreme Court had now ‘converged’ the rules for internal and external liability by using the same standard for both internal and external liability. After that, the serious blame standard came into common use in the legal framework for external liability. In the period between 2006 and 2014, the Supreme Court rendered a few cases in which it further substantiated the use of the serious blame standard.

Case law 1927-1997

In 1927, the Supreme Court rendered the Kretzschmar/Mendes de Leon case.37 It ruled that directors can be personally liable on the basis of tort if they give third parties a wrong representation of the state of the company while knowing better.

In 1958, the Supreme Court rendered the Van Dullemen/Sala case.38 It ruled that the refusal of a director on behalf of a legal entity to comply with the obligations of that legal entity, could under certain circumstances be tortious based on what according to unwritten law has to be regarded as proper social conduct.

In later case law there are several similar rules developed in relation to frustrating the performance by the legal entity by for example creating insolvency or liquidity problems while prejudicing the rights of creditors.39 In my thesis I summarise these as the ‘frustration rule’).

In 1989, the Supreme Court rendered the Beklamel case.40 It again ruled that directors can be personally liable on the basis of tort if they give third parties a wrong representation of the state of the company while knowing better. More specifically, it now ruled that a director is liable for tort if he enters into an agreement on behalf of the legal entity while he knew or ought to have known that the legal entity will not be able to perform under the agreement nor give sufficient recourse for the damages resulting from that non-performance (the ‘Beklamel-rule’).

Case law 1997-2006

In 1997, the Supreme Court rendered the Henkel/JMG case.41It ruled that the breach of contract of the legal entity could under circumstance lead to a tortious act by the director if the director is “personally” to “blame” in relation to that breach. The Supreme Court then explained what circumstances it meant, by repeating the Beklamel-rule.

In 2000, the Supreme Court rendered the New Holland Belgium/Oosterhof case.42 In this case, it repeated the Beklamel-rule and the frustration-rule and added to this that:

In 2002, the Supreme Court rendered the Textile Company APS/Steins case.43It ruled that, in light of the circumstances of the case, the director is “personally to blame” and that the director therefore has committed a “personally attributable tort” towards third parties. The judgment followed the conclusion of the Attorney-General of the Supreme Court (A-G Spier) that ruled that the personal liability of the director towards a third party “does not require the serious blame” of the director.

In 2004, the Supreme Court rendered the Ponteceen/Van Straten case.44It then ruled that the director was “sole shareholder and director of the legal entity and closely involved in the transaction with the third party”. In the judgment of the District Court45 which was acknowledged by the Supreme Court, the District Court ruled that the shortcoming of the legal entity may under certain circumstances lead to the personal liability of the director if the director “can be personally blamed” for something.

In 2005, the Supreme Court rendered the Ontvanger/S case.46It then ruled that the “correct standard” to assess if the director is “personally to blame”, is whether he has acted in violation with what according to unwritten law has to be regarded as proper social conduct (see Section 6:162par. 2 DCC).

Case law 2006-2014

In 2006, the Supreme Court rendered the Ontvanger/Roelofsen case.47 In this case, the Supreme Court stated that when a creditor of a legal entity is prejudiced because of the fact that his claim against the legal entity remains unpaid without the possibility of recourse to the legal entity, beside the legal entity, a director can also be held liable depending on the circumstances of the case if (i) the director has acted on behalf of the legal entity or (ii) the director has frustrated the legal or contractual obligations of the legal entity or allowed these obligations to be frustrated. The Supreme Court then stated that, in both forms, one may only assume that the director acted in a tortious manner if in light of Section 2:9 DCC ‘serious blame’ can be attributed to him. The Supreme Court ruled so by referring to the aforementioned New Holland Belgium/Oosterhof case as if, in that case, this conclusion of ‘serious blame’ had already been reached. With regard to form (i) it then repeated the Beklamel-rule and with regard to form (ii) it repeated the frustration-rule, to explain the circumstances under which such “serious blame” exists. Since then, the serious blame standard has been used in case law and legal literature as the standard for the external liability of directors.

In 2012, the Supreme Court rendered the Spaanse Villa case.48 In this case, the Supreme Court did not apply the serious blame standard while a director was held liable for a tortious act towards a third party. The Supreme Court substantiated this approach by stating that the “normal rules of tort apply” if the director infringes a rule of diligence that rests personally on the director himself. This led to much commotion in legal literature. Scholars were worried that the Supreme Court apparently did not use the high threshold for external liability of directors that follows from the serious blame standard when considering a case concerning such external liability of directors.

In 2014, the Supreme Court rendered the cases of Hezemans Air49 and RCI/Kastrop.50 In these cases, it explained that, in its view, the Spaanse Villa case did not concern the external liability of directors but concerned the infringement of a rule of diligence that personally rests on the director himself. The Supreme Court then reaffirmed the serious blame standard for cases of the external liability of directors and gave further substantiation for this serious blame standard by stating the following (freely translated):

The analysis of the introduction, use and substantiation of the serious blame standard in the legal framework of external liability of directors (Chapter 10)

Introduction

In this chapter, I conclude that the case law on external liability of directors has in fact not substantially evolved since the landmark Beklamel case in 1989. In the cases between 1997 and 2006, the Supreme Court has in fact only repeated the rules that were already developed in previous case law and added some remarks that had little or no additional judicial meaning. This is for example the case with regard to the use of the words ‘serious’, ‘personal’ and ‘blame’. It is a fact that no one can be held liable for tort himself if he has not personally committed the tort (in other words: if he is not personally to blame for the tort). The statement by the Supreme Court in Henkel/JMG and New Holland Belgium/Oosterhof that liability depends on the circumstances of the case also speaks for itself. These circumstances have been defined in the Beklamel-rule and the frustration-rule. Also the fact that someone is not liable if his actions are justified as stated in New Holland Belgium/Oosterhof is completely logical since that is explicitly stated in Section 6:162 DCC. In this chapter, I shall further investigate the legal theory of the substantiation of the serious blame standard in relation to liability towards third parties.

Interpretation methods based on the grammatical meaning, the parliamentary history, legal history, the system of law and teleology

I investigated whether the introduction of the serious blame standard in the case of Ontvanger/Roelofsen can be justified from a grammatical point of view. I concluded that this is not the case. The introduction of the serious blame standard in Ontvanger/Roelofsen seems to be based on a linguistic misunderstanding that was caused by the use of the words ‘serious’, ‘personal’ and ‘blame’ in case law between 1997 and 2005. The use of these words in case law between 1997 and 2005 did not have a deliberately intended judicial meaning. In Ontvanger/Roelofsen, the Supreme Court referred to New Holland Belgium/Oosterhof as if it was already made out in that case that the serious blame standard introduced in Staleman/Van de Ven in 1997 in relation to Section 2:9 DCC was also to be used in relation to the external liability of directors. New Holland Belgium/Oosterhof, however, does not refer to Section 2:9 DCC nor does it imply that a serious blame standard should be applied with regard to the external liability of directors. The three cases of the Supreme Court rendered between 2002 and 2005, Textile Company APS/Steins, Ponteceen/Van Straten and Ontvanger/S, also do not show that such a serious blame standard had been set in New Holland Belgium/Oosterhof. From a rational legal grammatical point of view, the meaning of this serious blame standard, that was (unjustly) used in relation to Section 2:9 DCC, was completely different from the meaning of the words ‘serious’ and ‘blame’ in the context of the case law between 1997 and 2005. Legal scholars therefore justly asked themselves if the reference to this serious blame standard and to Section 2:9 DCC was appropriate.

I also investigated whether the introduction of the serious blame standard in the case of Ontvanger/Roelofsen can be justified from the perspective of the parliamentary history, legal history and the system of law. I concluded that this is not the case. In this regard, I assumed that if the introduction of the serious blame standard in Ontvanger/Roelofsen is not based on a grammatical misunderstanding, it must be based on legal literature at that time, that stated that not all the faults of a director should lead to his personal liability towards third parties. This legal literature stated that, for this sort of liability, one needs to be able to attribute serious blame to the director and therefore it is necessary that the director can be blamed for ‘intent or deliberate recklessness’. This stance seems to be based on the statement in legal literature that Section 6:170 subsection 3 DCC equally applies between the director and the legal entity. Section 6:170 subsection 3 DCC states in short that if the employer is jointly and severally held liable by a third party for the tort of an employee, such an employer can only find recourse with the employee if the employee can be blamed for acting ‘intentionally or with deliberate recklessness’. If it is this analogy that led to the idea that the director is not liable towards the third party unless he is seriously to blame, one must conclude that this line of reasoning is not justified by the parliamentary history and the system of law. In this regard, it is important to note that the parliamentary history to Section 6:170 DCC explicitly stated that the existence of an employer-employee relationship and the protection that is provided by Section 6:170 subsection 3 DCC, does not change the fact that the employee himself remains fully liable towards the third party for his own acts despite there being no ‘intent or deliberate recklessness’.51 Section 6:170 DCC therefore explicitly states that the employer and the employee are jointly and severally liable. This is specifically important in cases of corporate insolvency in which case the employee, who has paid the damages of the third party, will not be able to find recourse with the employer on the basis of Section 6:170 subsection 3 DDC in conjunction with the general recourse provision of Section 6:10 subsection 2 DCC. He is still personally liable. That is a logical consequence of the system codified by the legislature.52 If one would want to compare the director with the employee, which in the context of external liability of directors could well be argued, then it would also be logical to adhere to the same rules that apply to employees. Not doing so would be contrary to the system of the law and it would also not be understandable from the perspective of the employee. Why would the director be afforded greater protection than the employee? In light of the fact that for employees there is no higher threshold for liability towards third parties, there is no justification to apply a higher threshold for directors. Society would also not understand such justification. On the contrary. As directors of legal entities have the responsibility to be capable of performing the duties assigned to them, one may assume that a director will more easily become liable towards a third party for misrepresentation than an employee: If the employee has no real knowledge of the misrepresentation, he will not be liable on the basis of tort because he did not violate that which, according to unwritten law, has to be regarded as proper social conduct. However, the fact that the director had no real knowledge of the misrepresentation does not clear him from liability towards the third party yet. If he ought to have known of the misrepresentation, he can still face liability for it (the Beklamel-rule).

Besides all mentioned above, there is no legal theoretical justification for using the same standard for internal liability of directors based on Section 2:9 DCC and external liability of directors based on Section 6:162 DCC. Both provisions protect different interested parties (Section 2:9 DCC protects the legal entity and Section 6:162 DCC protects third parties) and both provisions provide for their own rules in the context of the interests they intend to protect. There is no conjuncture of legal rules. This would only be the case if a director of the legal entity is held liable by the legal entity based on Section 6:162 DCC and Section 2:9 DCC. In that case, the director may shield himself by stating that his liability is not to be assessed on the basis of Section 6:162 DCC because it should be assessed on the basis of Section 2:9 DCC. With regard to liability towards third parties, that is, however, not the case because Section 2:9 DCC does not govern the relationship between the director and a third party. Therefore, there is no reason to converge the rules for internal and external liability of directors. However, the obligations that rest on the director based on Section 2:9 DCC can still be relevant when determining liability based on Section 6:162 DCC because of the trustee function of the director (reference is made to the paragraph in this summary dealing with this trustee function).

Refining the law and the model for testing external liability of directors

One could argue that the Supreme Court has refined the law with its judgment in Ontvanger/Roelofsen and with the introduction of the serious blame standard in the sense that it has made specific rules for external liability of directors based on Section 6:162 DCC. In my view, this is clearly the case with regard to the Beklamel-rule and the frustration-rule. This is, however, not the case with regard to Ontvanger/Roelofsen and the serious blame standard that was introduced in that case. On the contrary. First of all, the words ‘serious blame’ are more abstract than the words in Section 6:162 DCC. The use of the term therefore leads to unnecessarily complicated reasoning in case law.53 Secondly, in Ontvanger/Roelofsen the Supreme Court has introduced a model, according to which the external liability of directors needs to be tested, that cannot be seen as a refinement. The first step in this model is to establish that a creditor of a legal entity is prejudiced because of the fact that his claim against the legal entity remains unpaid without the possibility of recourse to the legal entity. The next step is to establish whether the director played a role in this. The Supreme Court narrows down this role by stating that there are two ways to conclude liability, these being violation of the Beklamel-rule and violation of the frustration-rule. A possible consequence of this is that facts and circumstances that do not fit into this model of the Supreme Court will not be deemed tortious, while they would very well have been deemed tortious if the general rule of Section 6:162 DCC was applied.54

There is no difference between normal tort and external liability of directors

In the cases of Spaanse Villa, Hezemans Air and RCI/Kastrop the Supreme Court suggested that there is a difference between normal tort and the external liability of directors. This reasoning does not fit into the system of the law. External liability of directors is based on the rules of ‘normal tort’. Every time a director is externally held liable, it would have to be established whether this director has personally acted in violation of a rule of diligence towards the third party. If so, he acted in a tortious manner.

The legal entity as primary liable party and the director as secondary liable party

In Hezemans Air and RCI/Kastrop the Supreme Court justified the serious blame standard by stating that “such a high threshold is justified by the fact that it is primarily the company that has acted”. This justification implies that the actions of the director must be attributed to the legal entity. To correctly understand the argument, one must therefore first understand the doctrine of attribution of acts. In this regard, it is important to realise that a legal entity is an abstract entity created by the law. Section 2:5 DCC states that with respect to the possibility of obtaining rights and obligations, this legal entity is equal to a natural person. To bind the legal entity in any form, there must, however, always be a legal act (‘rechtshandeling’) or factual act (‘feitelijke handeling’) by a natural person because the legal entity itself cannot act without the intervention of natural persons.

With regard to binding the legal entity to an agreement through attribution, the legislature has developed the legal framework of representation as set out in Title 3 of Book 3 DCC (Section 3:60 DCC and further) that applies to all forms of representation. These Sections form a legal basis for the attribution of legal acts by the representative to the represented. According to Section 3:78 DCC and 3:79 DCC, Title 3 of Book 3 DCC is for a large part also applicable to the representation of a director of a legal entity. According to Sections 2:45 (the association) 2:130/2:140 (the private and public limited liability company) and 2:292 DCC (the foundation) (the board of) director(s) is authorised to represent the legal entity. Legal acts performed by the directors in their capacity as director of the legal entity are therefore attributed to the legal entity. They do not bind the director himself but only the legal entity. This is explicitly made clear in Section 3:66 DCC.

However, the legislature chose not to codify any rules according to which factual acts by the natural person such as tort can be attributed to the legal entity. The legislature chose to leave that to the discretion of the court.55 The doctrine of attribution of acts is therefore developed in case law. For a long time, it was the common opinion that only acts by (the board of) directors could be attributed to the legal entity. This changed with the judgment of the Supreme Court in the case of Kleuterschool Babbel.56 In this case, the Supreme Court ruled that for the answer to the question of whether or not a legal entity can be held liable for tort in relation to acts performed by a natural person, it is decisive whether such an act in the community is perceived to be an act performed by the legal entity.

If so, the act should be attributed to that legal entity. This standard is also used to attribute knowledge to the legal entity. The doctrine of attribution of acts is essential to ensure that legal entities are fully part of the community.

Although case law and legal literature speaks of attributing a tort to the legal entity, case law shows that strictly speaking it is not necessarily the tort that is attributed to the legal entity but it is the factual act itself that is attributed to the legal entity, as a consequence of which the legal entity can be held liable for tort. It is possible that the natural person who acted did not himself commit tort, while the legal entity to which the act is attributed did commit tort.57 This also becomes clear if, for example, two natural persons (independently or not) perform an act with certain knowledge while acting for the account of the legal entity. It is possible that each act in itself in light of the knowledge of each individual natural person does not constitute tort towards a third party. However, when considered together, both acts and the knowledge of both natural persons do constitute tort. The acts and the knowledge become ‘merged’, so to speak, within the legal entity and therefore only the legal entity shall be deemed to have committed tort.

The purpose of the doctrine of attribution of acts is to protect the third party prejudiced by the acts of natural persons who acted for the account of the legal entity. The doctrine gives a solution to the ‘problem’ (i) that on the one hand, we have accepted the legal abstract construction of a legal entity as an entity that can fully form part of the community and therefore can exercise rights but can also have obligations and (ii) on the other hand, this legal entity cannot act without the intervention of natural persons.

In legal literature, the doctrine of attribution of acts has led to the idea that when natural persons act for the account of the legal entity, the legal entity is always ‘primarily’ liable and the natural person is only ‘secondarily’ liable. Legal literature stated that this ‘secondary’ liability must therefore not be accepted easily. This idea was apparently followed up by the Supreme Court in the aforementioned cases of Hezemans Air and RCI/Kastrop. I believe that this idea is, however, contrary to the system of law. The reason for this is that the doctrine of attribution of (legal) acts has been developed to assess the liability of the legal entity. It has not been developed to assess whether or not the natural person himself is liable (as well) nor to provide for protection for the natural person against liability. In this regard, it is important to realise that Section 1:1 DCC states that all natural persons have legal rights. This Section, which is the first Section of the first title of the first book of our Civil Code (which suggests its importance) entails that all natural persons can obtain rights and obligations. The natural person is a legal entity itself, so to speak. The fact that we have also created abstract legal entities does not change the fact that each natural person remains responsible for his own actions. Simultaneously, it is a general rule, as recognised by the Supreme Court,58 that no natural person can be held liable for the acts of other natural persons or legal entities except if this is explicitly provided for by the law. The natural person and the legal entity for which account the natural person has acted are two separate legal entities. The natural person can therefore never be ‘secondarily’ liable for acts that are ‘primarily’ acts of the legal entity. He is not ‘derivatively’ liable. The terms primary and secondary liability only explain that when a natural person acts for the account of the legal entity, he in principle does not bind himself or become liable himself. But that does not mean that he cannot still commit a tort himself for which he remains liable. The mere fact that this tort may also be attributed to the legal entity does not change this. This also becomes apparent in Sections 6:170-172 DCC. According to those Sections, a legal entity is jointly and severally liable for the tort committed by an employee or a representative. The parliamentary history to these Sections made it explicitly clear that the employee and the representative also remain liable themselves. All this means that the argument in Hezemans Air and RCI/Kastrop that “a high threshold is justified by the fact that it is primarily the company that has acted” is unjust.

All this does not mean that a director of a legal entity becomes liable for all torts committed by the legal entity. A director is only liable for torts he committed himself. That means that he himself must personally have acted in violation of someone else’s right and/or in violation of a duty imposed by law or in violation of what according to unwritten law has to be regarded as proper social conduct. In other words, a director must breach an independent duty of care, which he personally owes to the injured party. This must be assessed by analysing his own actions towards the third party and by analysing the knowledge he had or ought to have had. Once this is assessed, there is no reason to accept a higher threshold for his liability. This higher threshold is not accepted for other non-directors who have acted on behalf, or for the account, of a legal entity.

Piercing the corporate veil with Section 2:11 DCC (Chapter 11)

Section 2:11 DCC and exculpation

Section 2:11 Civil Code states: “The liability of a legal entity as a director of another legal entity also jointly and severally lies on each person at the time of the creation of the liability of the legal director thereof”. In the parliamentary history, it is noted that exculpation is possible if the legal provision from which the liability arises contains a ground for exculpation.59

Internal and statutory liability and form of strict liability

Legal literature and case law is unanimous about the fact that Section 2:11 DCC applies to all forms of so-called internal and statutory directors’ liability. As regards the liability of the director pursuant to Section 2:11 DCC based on provisions that have no possibility of exculpation, Section 2:11 DCC constitutes a very severe form of strict liability because exculpation is then also excluded on the basis of Section 2:11 DCC. All (legal entity-)directors of a legal entity (-director) are therefore advised, independent of their division of tasks, to closely monitor compliance with these provisions within the group. If the underlying legal provision, from which the liability of the legal entity-director arises, contains a ground for exculpation, the indirect director’s (the directors of the legal entity-director) can invoke this ground for exculpation in a similar way as they were directors in person of the underlying legal entity.

Legal personality, the trustee function of the director pursuant to Section 2:9 DCC in conjunction with Section 2:11 DCC and the doctrine of attribution

The fact that a legal entity is an abstract figure that cannot “really” act without human intervention/actual acts by an individual, raises the question of how this legal entity should fulfil its trustee function. Accepting the abstract form of the legal entity and the possibility that such a legal entity can also be a director of another legal entity, therefore necessarily and reasonably means that the legal obligations Book 2 DCC imposes on a director are fully transposed to the individual natural person-directors of that legal entity. All individual natural person-directors of one or several legal entity-directors therefore personally have the duty to perform the duties that Section 2:9 DCC imposes on the legal entity- directors. The collective responsibility of Section 2:9 DCC therefore remains a responsibility of the natural person-directors as if they were directly directors of the underlying legal entity. Questions such as whether a legal entity-director (i) has properly performed his administrative duties, (ii) may exculpate himself or (iii) has carried out an unlawful act, cannot be separated from an assessment of the actions, omissions and the knowledge of the natural persons associated with the legal entity. These actions, omissions and knowledge are then attributed to the legal entity(-director). While this approach seems rather theoretical and is not explicitly reflected in the literature or case law, the case law does implicitly show that this approach is in fact applied.60 For the above reasons, once it is established that a legal entity-director is liable on the basis of Section 2:9 DCC, the natural person-directors of such a legal entity will in principle not be able to collectively exculpate themselves, unless there is a situation of force majeure/ absence.

The applicability of Section 2:11 DCC on Section 6:162 DCC-liability (Kampschöer/Le Roux Fruit Exporters)

In the case of Kampschöer/Le Roux Fruit Exporters of February 17, 2017, the Supreme Court confirmed that Section 2:11 DCC also applies to liability of a legal entity-director under Section 6:162 DCC. In that context, the Supreme Court held that indirect directors can only exculpate themselves from joint and several liability under Section 2:11 DCC in conjunction with Section 6:162 DCC by stating and proving that they cannot be held seriously to blame.

Although this approach reflects the rationale of Section 2:11 DCC, the justification for this approach is in my opinion not Section 2:11 DCC but the fact that (i) a legal entity-director, as an abstract legal entity, cannot act itself and that therefore the legal obligations Book 2 DCC imposes on a director are fully transposed to the individual natural person-directors of that legal entity and (ii) the responsibility to manage and represent the legal entity is a responsibility of the board of directors as a whole and not of individual directors. While in a situation of directors’ liability toward the legal entity pursuant to Section 2:9 DCC in conjunction with 2:11 DCC, the legal entity or, in case of bankruptcy, the trustee in the bankruptcy mostly have the disadvantage of not knowing which director is actually to blame for the improper performance of duties of the board, the same goes for the third party that suffered damages because of tort of the legal entity-director. This third party will mostly not know which direct director of the legal entity-director has actually breached a duty of care towards this third party. It therefore seems logical that in relation to assessing the external directors’ liability of indirect directors, the same burden of proof is applied as with assessing the external directors’ liability of direct directors (reference is made to the paragraph here above dealing with the burden of proof of direct directors). If one would not accept this, the approach of the Supreme Court in the judgment of Kampschöer/Le Roux Fruit Exporters would lead to the conclusion that indirect directors would be placed in a less advantageous position than direct directors under the judgment of the Supreme Court in Ontvanger/Roelofsen. There is no logical reason for this. The reasons why the serious blame standard should not be applied in the assessment of liability under Section 6:162 DCC of direct directors naturally apply equally to the assessment of liability under Section 6:162 DCC of indirect directors.

Attribution of exculpation to a legal entity-director vs. Matryoshka-dolls

One consequence of the fact that Section 2:5 DCC states that a legal entity is to be qualified as equal to a natural person, is that a legal entity can also be a director of another legal entity. This is also illustrated by Section 2:11 DCC. Legal literature has pointed out that if the director of a jointly and severally liable legal entity-director is again a legal entity, the application of Section 2:11 DCC can be repeated. Hence the third degree legal entity-director will then also be joint and several liable. This is repeated until the joint and several liability ultimately rests on one or more natural person-directors. According to this legal literature, there would be an endless series, as Matryoshka-dolls, of liable (legal entity-) directors. However, if we accept that the legal entity-director is an independent legal subject as stated in Section 2:5 DCC, in my opinion, there is no reason to withhold the possibility of exculpation of liability for the legal entity-director under Section 2:11 DCC. It is my opinion that if the legal entity-director is part of a joint board and all (indirect) natural person-directors of this legal entity-director may exculpate themselves, then such a legal entity- director may also exculpate itself because the knowledge and behaviour of these natural person-directors should also be attributed to the legal entity-director. The endless series of Matryoshka-dolls can therefore be interrupted before it reached the natural person-directors. Because the system for establishing liability under Section 2:11 DCC in fact does not differ for determining the first degree-liability under Section 2:9 DCC, the ‘serious blame’ standard is also irrelevant when assessing liability based on Section 2:11 DCC.

A comparative study of the external liability of directors (Chapter 12)

This chapter contains a comparative study of the external liability of directors. In light of the demarcation of my study, I have chosen not to do a comparative study of the internal liability of directors. My comparative study on the external liability of directors is furthermore not extensive. It has merely the goal of showing that my thoughts on the external liability of directors are not very peculiar if we compare them to relevant legal systems abroad. I have done a comparative study of general contours with the systems of the State of Delaware of the United States, the United Kingdom and Belgium. This study shows that in all these legal systems, the legal framework for external liability of directors is based on simple (‘normal’) tort. There is no conversion of rules between internal and external liability of directors. The question of whether a director has committed tort is not bound by a higher threshold for liability. Furthermore, the fact that certain acts can be attributed to the legal entity does not form a reason to justify a higher threshold for liability.

For example the Superior Court of the State of Delaware ruled:61

Legal literature regarding Delaware law states:62

And:

The House of Lords in the United Kingdom ruled:63

It also ruled:64

The Scottish Court of Sessions in the United Kingdom ruled:65

Finally, in Belgium, there are specific legal provisions relating to the external liability of directors, these being Sections 262-264 and 527-529 of the Code of Corporations. Besides that, legal literature states explicitly that the violation of a duty of care towards the legal entity and violation of the duty of care of the director towards a third party are two separate issues. The mere fact that a natural person acted in his capacity as a director of a legal entity, does not clear him from liability for tort towards a third party. The Court of Cassation confirmed this by stating that, according to the rules of representation, the representative remains liable for tort even though his acts can be attributed to the represented. The liability of the legal entity does not exclude the liability of the natural person. Both liabilities exist next to each other.66 The Court of Appeals of Gent further ruled that if a director violates a general duty of care towards a third party when entering into an agreement with such a third party on behalf of the legal entity, he will still be personally liable on the basis of tort.67

Conclusion (chapter 13)

My study results in the following conclusions:

Internal liability of directors

External liability of directors

Internal and external liability of directors

The inconsistencies that I revealed in my study have partly and separately also already been revealed in the past by many other scholars. In my study, I have grouped all the inconsistencies together in addition to my own analysis. This meant I was able to research the serious blame standard more broadly. I believe that the outcome of this research justifies the conclusion that we need to depart from the serious blame standard and go back to the original meaning of Section 2:9 DCC and Section 6:162 DCC. This is in the interest of directors, legal entities and third parties.