Commercial Court rules on abuse of economic dependence by bank

On 16 March 2021, the President of the Brussels Commercial Court ruled a refusal to supply to infringe the new Belgian prohibition to abuse a position of economic dependence. With its ruling, the President seems to continue an emerging line of case-law that applies the prohibition to abuse economic dependence relatively lightly (more information on this new prohibition can be found on our website).

For some years now, diamond traders (especially SMEs) in Belgium have had difficulties opening bank accounts as a result of the important money laundering risks associated to the sector. This is no different for the plaintiff in this case, a diamond trader that - along with 320 other diamond traders - had temporarily lost the proper use of its bank account as a result of an immediate and unilateral decision of the bank, effectively preventing it from doing business. As a result, the diamond trader asked the President of the Brussels Commercial Court to order the bank to cease and desist its temporary refusal on account of it being an abuse of a position of economic dependence.

In its decision, the President assessed whether the three constitutive elements of such abuse - ie a position of economic dependence, an abuse of that position and an effect in Belgium or a substantial part thereof - were present.

First, the President ruled that the diamond trader was in a position of economic dependence vis-à-vis the bank, noting that:

(i). before contracting with the Bank, the Plaintiff had been refused by two other banks, illustrating a lack of reasonable equivalent alternative available for the diamond dealer in question (at least until entry into force of the Law of 8 November 2020 regarding basic banking services to undertakings, expected in July);  

(ii). the bank actively promoted itself to SME diamond traders as a solution of last resort which allowed it to acquire significant market power. The President indicated in this respect that the bank "controlled the market of SME diamond dealers".

 (iii). during the suspension of the accounts, for half a year, the bank accepted payments to come in but refused to execute payments to go out, which the President viewed as evidence of the bank being able to act in conditions that are not normal market conditions.  

Second, the President ruled that the unilateral decision to suspend its services towards the diamond dealer constituted an abusive practice by the bank. The President ruled in this respect that the bank was well aware of the particularly difficult situation of SME diamond dealers (since such companies are targeted as part of the bank's business strategy).

Finally, the President analysed the effects of such refusal to supply on the Belgian market or a substantial part thereof. It did not assess whether the suspension of services in question had actual or potential effects in Belgium or a substantial part thereof, but reasoned that there would be such effect if the bank in question would be allowed to unilaterally decide which SME diamond dealer would be able to participate on the market by randomly suspending or terminating its services.

The President's decision seems to confirm the relatively light-touch interpretation by Belgiancease and desist jurisdictions of the prohibition to abuse a position of economic dependence, in particular as regards the effects analysis. Indeed, while the President did proceed to analyse the effects on the Belgian market or a substantial part thereof (contrary to the President of the Ghent Commercial Court last October), it did not limit the scope of analysis to the refusal in question but broadened its analysis to take into account the effects of all the bank's actual and potential refusals to supply.

Absent any decisional practice or case-law on the substance regarding the prohibition to abuse a position of economic dependence, the emerging cease and desist case-law appears to be heading to a very light application of the new prohibition. Given the speed of cease and desist procedures, courts are likely to continue to rely heavily on the existing case-law as well as on arguments provided to them by the involved parties. It is in this context worth noting that just like in the first case brought before the President of the Ghent Commercial Court, in this case the defendant bank was apparently relying solely on arguments relating to contract law and the freedom of commerce. Companies are therefore well advised to familiarise themselves with the conditions of the new prohibition.

Should you need assistance, have any further questions regarding this client alert or competition law generally, please do not hesitate to contact any of the individuals listed or your usual contact at Simmons & Simmons.