How should privileged information be handled in the inquiry procedure?

A recent ruling of the Supreme Court concerned the question of whether a legal person is obliged to provide all documents requested by investigators or whether he/she can refuse to provide certain information because he/she has entrusted this information to a lawyer or notary. In this blog, Corporate Law lawyer Onno Hennis explains how this case clearly highlights the tension between revealing the truth and the importance of confidential communication with a lawyer/notary.

SNS investigation

The ruling is one of many decisions in the long-running inquiry procedure that aims to clarify the policies and state of affairs prior to the nationalization of SNS REAAL and SNS BANK after real estate subsidiary Propertize suffered major losses. The inquiry request submitted by the VEB, among others, was granted and investigators were appointed in 2018.

The obligation of SNS and its officers to provide information

The investigators can consult all information of the legal person while conducting their investigation. In addition, directors and supervisory directors are required to provide all information necessary for the investigation upon request. If the officer in question is unwilling to provide the requested information, the examining magistrate of the Enterprise Division may issue an instruction or a court order.

Derived privilege

The investigators had requested a long list of documents at the start of their investigation. SNS responded to this request by stating that part of the information in those documents had been entrusted to its lawyer and/or notary and was therefore confidential. SNS claimed that the investigators were not entitled to use this information for their investigation.

Overriding interest in investigation

The investigators disagreed with this statement. They therefore asked the examining magistrate to order all requested information to be made available. In support of their request, the investigators argued that an important objective of the right of inquiry is to achieve transparency. There is an overriding public interest in revealing the truth regarding matters that occurred prior to the nationalization of SNS REAAL.

Decision of the examining magistrate

The examining magistrate made a practical decision: he obliged SNS to make all documents available and to indicate which passages in the documents they considered “privileged” and why. Those passages may not be used by the investigators, unless the examining magistrate has first ruled, if necessary, that those passages do not fall under the derived privilege.

Appeal

The investigators appealed against this decision. They stated, among other things, that only the lawyer and notary can invoke this privilege (and they had not done so) and that SNS is not entitled to invoke it. Furthermore, the investigators claimed that the legal person does not have a “derived” privilege comparable to, for example, the privilege of secretaries at a law firm. The investigators also stated that the information that SNS did not want to provide was included in minutes and decisions of the Executive Board and the Supervisory Board. This information could therefore no longer be considered “privileged”. After all, it was not correspondence between the client and the lawyer/notary. The Supreme Court rejected these objections and dismissed the appeal.

Supreme Court reasoning

In support of its decision, the Supreme Court reasoned that the functional privilege rests on a basic principle of law applicable in the Netherlands that determines that the public interest in revealing the truth in a legal proceeding must be superseded by the public interest in ensuring that everyone should be able to seek assistance and advice freely and without fear of disclosure of what has been discussed. According to the Supreme Court, this basic principle is also applicable in the inquiry procedure.

Derived privilege?

The Supreme Court also reasoned that although SNS did not have a derived privilege, SNS may have a valid reason for not sharing certain information with the investigators that it has shared with a lawyer or notary. However, it must be possible to externally determine if such information exists. Since the examining magistrate had determined that he was ultimately responsible for deciding whether SNS could and should omit certain passages, the Supreme Court ruled that such an assessment option existed. All of the above also applies regardless of whether the information is included in minutes or decisions, and whether the lawyer or notary in question invokes privilege.

AMS Advocaten: specialists in the field of Corporate Law

Are you involved in an inquiry procedure? Or do you have a dispute with a (co-)shareholder? AMS Advocaten employs various lawyers who have extensive experience in conducting proceedings in the Enterprise Division. Please feel free to contact us!