ABN Amro: New York internal affairs

Last month, District Judge Cote (SDNY) dismissed the derivative action brought against ABN Amro Holdings NV (Euronext, NYSE: ABN) of the Netherlands and members of its Managing and Supervisory Boards, which was brought by an American holder of its American Depository Receipts. The Court applied the New York internal affairs doctrine and concluded that the plaintiff lacked standing to bring such a suit on behalf of the bank. (opinion and order)

Plaintiff’s Counsel: Weiss & Lurie; Defendants’ Counsel: Milbank Tweed Hadley & McCloy LLP and NautaDutilh NV

Under New York law, the law of the state of incorporation adjudicates “a corporation’s internal affairs, including questions as to the relationship between the corporation’s shareholders and its directors.” “[O]nly one State should have the authority to regulate a corporation’s internal affairs.” (citing Galef v Alexander and Edgar v MITE Corp, respectively, p.15) And so, as agreed by the parties, Dutch law would apply to this action.

Dutch law however (see pp.8-11), “affords shareholders no right to bring a claim on behalf of a corporation against members of its Managing or Supervisory Boards for breach of duties owed to shareholders since, under Dutch law, members of these boards do not owe fiduciary duties directly to shareholders,” according to an expert declaration submitted by the defendants and plaintiff concedes so.

The Court, in holding that “Dutch law provides different avenues for shareholders to address malfeasance by members of corporate Managing and Supervisory Boards than does New York law,” (original emphasis, p.19) it rejects that in casu the public policy exception to the doctrine should apply and grants the motion to dismiss.

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