Whether a bank may validly close an account of a client, even on the basis of a contractually agreed termination provision, is often not straightforward and depends on the type of client (a consumer or a company), the availability of alternatives for the client (e.g. an account with another bank) and the reason for termination (e.g. fraudulent activity). Recent Dutch Caribbean case law illustrates the factors taken into account by the courts when assessing whether a bank may close an account. A bank enjoys a certain position of power and for that reason it is assumed that a bank should carefully handle the interests of its clients who depend entirely on the bank for doing business. Nowadays it is very difficult to participate in society without a bank account and access to the financial system. On the other hand, the interest of the bank is also weighed, in particular the importance of the integrity of the bank itself and of the financial system as a whole.
One of the leading judgements on this subject is a ruling of the Supreme Court in 2014, which confirmed that a bank may terminate a relationship with a client, unless this would be unacceptable according to the standards of reasonableness and fairness, an important legal principle in Dutch Caribbean law. The Supreme Court ruling did not state which circumstances are relevant when determining the validity of a termination. Consequently, a broad range of circumstances could be taken into account by a court when assessing whether a termination is unacceptable according to the standards of reasonableness and fairness, including whether the bank observes a reasonable notice period which enables the client to find alternatives.
Typically, a termination may take place where there has been a breakdown of trust in the banking relationship, e.g. where the bank suspects fraudulent activity, such as money laundering. In fact, banks are not only wise to terminate the relationship in these circumstances but are often required to do so pursuant to anti-money laundering regulation. However, the grounds upon which a bank may wish to end a relationship are occasionally less clear and clients, not always thrilled to learn that their bank accounts have been terminated, will often take issue with the right of the bank to do so.
Grounds for termination may vary from the more compelling (e.g. fraudulent activity of the client) to the less compelling (e.g. a change in the bank’s risk appetite). The more compelling grounds are less likely to be considered unacceptable according to the standards of reasonableness and fairness, such as recent case law in Curaçao illustrates (a case concerning natural and legal persons convicted of criminal activities). However, less compelling grounds may result in the court weighing up the interests of the bank and the client and concluding that a termination is unacceptable according to the standards of reasonableness and fairness and is thus invalid, such as recent case law in Aruba and Sint Maarten illustrates (cases concerning clients who are active in a specific industry, such as the casino business).