1.8 Liability

Director 's liability also varies in each of the three countries, both from a legal and a practical point of view. In Britain there has not been much liability litigation, but wrongdoing can, indeed, lead to dismissal, disqualification or cold shouldering of a director.

In the US litigation could be said to start at the drop of a hat, but actual out-ofpocket payments by independent directors are rare because of (a) the legal standards, including the business judgment rule, (b) the strong systems of exculpation and indemnification, (c) a very good insurance system and settlement incentives, which typically lead to settlement within Director and Officer (D&O) insurance policy limits.

The volume of litigation in the Netherlands (including the inquiry proceedings before the "Ondernemingskamer", the court for company matters, hereafter "Enterprise Chamber") now exceeds that of the UK, but is less extensive than in the US. The legal standards of mismanagement, "wanbeleid", in Enterprise Chamber cases are not so clear. This is partly due to the fact that the inquiry proceedings before the Enterprise Chamber are relatively new and have not always been consistent on whether a judge may second guess directors. The Enterprise Chamber judgments only deal with declarations of mismanagement and taking of measures. District courts deal with liability, where the test is serious blame, "ernstig verwijt". Again here, the legal standards are not quite clear, because there is not so much case law up to now.