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  • Writer's pictureCaspar van der Winden

Dutch dairy farmers win lawsuit over exit clause

A close-up image of a person's hand tipping a bottle of milk, causing it to spill over

The Dutch Supreme Court has ruled that a repayment obligation of a share of the transaction sum upon leaving DOC Kaas before 2019 is too excessive. The dairy farmers who had terminated their membership before 2019 are therefore entitled to their full milk money and their share of the transaction sum that DOC Kaas received after a merger.


Background:

In 2018, DOC Kaas merged with a German dairy cooperative. After the merger, DOC Kaas received a transaction sum of €20 million that had to be distributed among its members. However, the articles of association of DOC Kaas stipulated that members who terminated their membership before 31 December 2018 had to repay their share of the transaction sum.


Dispute:

A number of dairy farmers who had terminated their membership before 2019 objected to this repayment obligation. They argued that the repayment obligation was an unlawful exit clause that was in violation of Article 2:60 BW. This article states that the articles of association of a cooperative may impose conditions on the withdrawal of members, but that these conditions may not be too onerous and must be in accordance with the purpose and objectives of the cooperative.


Court:

The court ruled in favor of the dairy farmers. The court found that the transaction sum had been promised to all members of DOC Kaas and that the repayment obligation infringed on this promise. The court also found that the repayment obligation constituted a financial obligation attached to withdrawal, which could therefore be considered an exit clause within the meaning of Article 2:60 BW. Finally, the court ruled that the repayment obligation was too onerous and was in violation of the purpose and objectives of DOC Kaas.


Supreme Court:

The Supreme Court was in line with the advise of the Attorney General and upheld the court's ruling. The Supreme Court ruled that the court had rightly judged that the repayment obligation was an unlawful exit clause. The Supreme Court also ruled that the court had rightly awarded commercial interest on the dairy farmers' claims, as the delivery of milk is a commercial transaction within the meaning of Article 6:119a BW.


Consequences:

The Supreme Court's ruling emphizes that cooperatives may not impose exit clauses that are too onerous or that violate the purpose and objectives of the cooperative. Members of cooperatives who wish to terminate their membership must be well aware of the articles of association of the cooperative in order to determine their rights and obligations and to check whether there are any unlawful exit clauses.

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