Collective or Class Actions and Claims Aggregation in the Netherlands

The Dutch legal system is well known for its progressive and increasingly popular possibility to seek redress for collective damages. The introduction of the Netherlands Commercial Court, which allows parties to litigate in English, will likely further increase the popularity of the Netherlands as a forum for collective actions. Currently, three different legal mechanisms can be used to claim collective damages: a collective settlement procedure under the Class Actions Settlement Act 2005; a collective claim brought by a foundation (stichting), association or public entity representing a common interest; [2] and the transfer of individual claims to a foundation initiating proceedings in its own name. [3] The latter is also known as assignment of claims.

All three mechanisms offer a solution for those cases in which a large number of injured parties suffer damages as a result of the same or similar behaviour of another party or parties. This allows for redress where the losses suffered by each individual party do not exceed the costs of initiating individual proceedings. In this event, the parties who suffered damages would usually not lodge a claim or initiate negotiations if it were not for the collective redress mechanisms offering them a solution to seek damages or settle their claims without having to go through lengthy and expensive individual proceedings. The collective redress mechanisms are also beneficial for defendants, as these enable them to settle various damages claims at once without having to face multiple distinct settlement negotiations or proceedings in court.

Despite the benefits of the current Dutch mechanisms to redress collective damages, there is still room for improvement. It is against this background that the Dutch Senate adopted new legislation on 19 March 2019, seeking to reform the regime for class action claims in the Netherlands. The new regime, known as the Settlement of Large-scale Losses or Damage (Class Actions) Act is expected to enter into force no later than 1 January 2020 and will apply to collective actions relating to events having occurred from 15 November 2016 onwards. The Class Actions Settlement Act will continue to apply to events occurring before that date. This chapter provides a deep dive into the three different current mechanisms, their limitations, the forthcoming reform and the potential effects of that reform.

Collective settlement procedures

The Class Actions Settlement Act provides a legal basis for a group of injured parties to conclude a settlement agreement with the party or parties causing mass damages, using the help of a representative. [4] The representative of the interests of the injured parties, usually a special-purpose foundation (stichting), can conclude a settlement agreement with the party or parties causing the damage, which can then be declared generally binding on the basis of the Class Actions Settlement Act by the Amsterdam Court of Appeal. Following that declaration of the Court, the agreement applies to the entire class of parties injured by the single event, including those who were not involved in the conclusion of the settlement agreement.

The Class Actions Settlement Act provides a way out for injured parties not wanting to be bound by the settlement agreement. This is known as the opt-out mechanism. In the event a party does not want to be part of the collective, he or she may within a certain period of time set by the court (which must be at least three months), indicate that he or she does not want to participate in the settlement agreement. A reason to opt-out could be to keep open the possibility of conducting individual negotiations or to lodge individual claims in court. It should be noted, however, that individual proceedings may be suspended at the request of the defendant until the court has declared the settlement agreement generally binding. [5]

The Class Actions Settlement Act is a potentially useful tool for parties suffering damages who do not have the means to initiate individual proceedings, as it guarantees a prospect of compensation within a foreseeable time should the court declare the settlement generally binding. The mechanism may, however, be unfavourable for those who do have the means to initiate proceedings, as they too will be bound by the settlement agreement and dependent on the representative conducting the negotiations. Those parties will have to make sure they opt-out on time, while running the risk that their individual proceedings will be stayed. The party or parties causing the damages on the other hand can benefit from such stay, while having the chance to settle multiple damages claims at once, rather than dealing with numerous individual proceedings.

Since its entry into force in July 2005, the Class Actions Settlement Act has been applied on several occasions. Nine class settlement agreements have been declared binding on the basis of the Class Actions Settlement Act since its entry into force. None of these cases concerned cartel damages claims, but rather claims from large numbers of consumers having suffered relatively low-value damages (as opposed to larger cartel damages claims from business customers). [6] The mechanism is well-known outside the Netherlands and has been used even in cases that lack a strong connection to the Netherlands. The Amsterdam Court of Appeal (having exclusive jurisdiction to declare collective settlement agreements binding) has in the past accepted jurisdiction when only few injured parties were based in the Netherlands. The Shell and Converium cases [7] are among the most well-known cases to that effect.

In 2004, it emerged that Shell had overstated its oil reserves. As soon as the lower oil and gas stocks were announced, the share price fell causing damage to investors. Shell eventually settled the case, covering damages of institutional investors in many jurisdictions in relation to securities traded on any stock exchange (but the New York Stock Exchange) between 8 April 1999 and 18 March 2004. The Amsterdam Court of Appeal declared the settlement binding on 29 May 2009, [8] being the first international application of the class settlement mechanism. The Court’s jurisdiction was based on the nationality of one of the defending Shell entities rather than the nationalities of the investors, thereby opening up the possibility for foreign aggrieved parties to seek damages in the Netherlands on the basis of the Class Actions Settlement Act.

Another interesting case illustrating that the Dutch Court of Appeal is willing to accept jurisdiction in cases that have a limited nexus to the Netherlands is the Converium case. [9] The Converium decision was prompted by a dispute concerning a decline in share value following the IPO of the Swiss Converium Holding AG, having its shares registered on the Swiss stock exchange and derivatives on the American stock exchange. The alleged wrongdoing and harm occurred outside the Netherlands. In addition, none of the potentially liable entities and very few of the interested parties were domiciled in the Netherlands. Yet, the Dutch Court of Appeal accepted jurisdiction, implying that even without any interested party having domicile in the Netherlands, the Amsterdam Court of Appeal could potentially have jurisdiction as long as a Dutch foundation would represent the interested parties in the Dutch proceedings.

Collective claims and public interest claims

The Dutch Civil Code provides a legal basis for organisations (or public entities) having legal capacity, to act for the common interests of parties who have suffered mass damages (a collective), provided that the organisation has the statutory aim of promoting the collective’s interests. [10] An important limitation to such proceedings is that it cannot be used to claim monetary compensation. Most claims initiated by representative organisations are accordingly requests for declarations of law establishing liability for unlawful behaviour, whereas in cartel damages cases, the unlawfulness of the behaviour (not the liability for damages) is typically already established by the cartel decision of national or EU competition authorities. So far, there is accordingly no substantive case law on collective claims and public interest claims relating to cartel damages. [11]

The representative organisation bringing a collective claim need not be Dutch, as long as its statutory purpose covers the interests at stake, which may be both idealistic (for example, the protection of the environment) or material (for example, the protection of investment losses). The representative organisation should also have actually developed certain activities to protect said statutory interests and it should have attempted to resolve the dispute out of court. [12] To meet the latter requirement, it suffices that two weeks have passed after a mere attempt to enter into discussions.

Proceedings may be initiated in any district court in the Netherlands, but the case may be referred to another court if another collective claim concerning the same facts is already pending at a different court. Some courts have in the past also assessed whether the representative adheres to the principles of the claim code (soft law) before deciding whether to admit the collective claim. [13]

A collective claims proceeding initiated by a representative organisation does not involve the injured parties or entities whose interests it promotes. The injured parties are not a party to the proceedings and can equally not prevent a representative organisation from filing a claim. [14] The collective claim neither affects the possibility of the injured parties being represented from claiming damages in court. Should injured parties wish to receive financial compensation for their losses, they would have to file their own claim in any event, since representative organisations cannot lodge a claim for monetary compensation. This, however, does not render the procedure meaningless. The most common claims initiated by representative organisations are declarations of law establishing liability of the party causing the damages. Such declaration can be used by injured parties to initiate their individual compensation claims in court, despite the declaratory judgment being binding upon the representative organisation and the defendant only (since the injured parties were not a party to the proceedings). The declaratory judgment can then serve as proof of liability, following which the individual damages proceedings will generally be faster, cheaper and less extensive. The mechanism is thus particularly attractive for claimants whose individual damages are limited in scope.

A downside of the mechanism is, however, that an exoneration of the defendant may potentially also have a (negative) effect on the injured parties who were not a party in the representative proceedings and who seek to lodge their own compensation claims in court. The alleged defendant could then attempt to rely on the exonerating judgement as a defence in the separate individual proceedings. To resolve this downside of the mechanism, the Dutch Civil Code provides an easy opt-out of the effects of any such judgment for injured parties by simply contesting the effects of the judgement. There are no formal requirements to the opt-out, so that a declaration stating that one does not want to be bound by the effects of a representative judgement would suffice.

Assignment of claims

The Dutch Civil Code also entails a mechanism on the basis of which claims can be transferred to another party (also known as assignment of claims). [15] The assignment of a claim entails the transfer of a claim in a property-law sense. This means that the original claimant loses its ownership over the claim and accordingly its right to pursue the transferred claim in court or to invoke it against a third party. This property-law transfer of the claim is distinct from the contractual question of whether the party to whom the claim is transferred actually ‘buys and pays’ for the claim already upon transfer or only in the event the subsequent damage proceedings are successful.

The mechanism enabling assignment of claims was not specifically developed for mass claims. An assignment can also be used to transfer a single claim against a third party from one individual to another, for example, to off-set a particular debt corresponding to the value of the claim transferred. Despite the mechanism not being designed to redress mass damages, it is widely used for said purpose through the bundling of claims in a special purpose vehicle, usually a foundation (stichting).

Ever since the entry into force of the 2014 EU cartel damages directive and its implementation in Dutch law in 2017, [16] multiple claims vehicles have been established for the purpose of pursuing cartel damage claims in Dutch courts. Claim vehicles seek to bundle claims of purchasers of products allegedly affected by a cartel and lodge cartel damages claims in their own name. They hire their own lawyers and experts, write their own submissions and carry the costs of the proceedings either themselves or through third-party funding. Individual claimants having assigned their claims to a claim vehicle are in principle not involved in the procedure. The assignment of the claim to the claim vehicle, however, doesn’t relieve the claim vehicle of having to prove and substantiate each individual claim, as well as the legal transfer of each claim. [17]

Limitations of the current regimes

Despite its successes, a significant drawback of the Class Actions Settlement Act is that it assumes that the parties involved can reach a settlement, where in practice this may be difficult should the parties have fundamentally different views on the question of liability.

In that case, the representative attempting the settlement could instead lodge a collective claim requesting the court to establish liability of the party or parties causing the alleged damages. If the court does so, the judgement may subsequently be used in individual proceedings lodged by the injured parties seeking financial damages. Said mechanism accordingly assumes a two-step approach to obtain compensation for damages: a collective action seeking a declaratory judgment as the basis for liability and an individual procedure to seek financial redress. This is both cumbersome and time-consuming. The only alternative currently available is for the injured parties to assign their claims to a special purpose vehicle. In this case, the individual claimant loses its right to the claim and receiving damages will become dependent on a contractual agreement concluded with the claim vehicle.

Some criticism has also been made as regards the opt-out mechanism in the current settlement system. Aggrieved parties must already decide whether to opt-out at the beginning of the settlement procedure when they do not yet know what the results of the settlement procedure would be. Another implication of the opt-out has to do with trying to get a better understanding of the scope of the case. The current opt-out system does not allow defendants to distinguish between parties who have proactively chosen not to opt-out because they want to participate in the proceedings and parties who fail to opt-out because they are simply not interested in or aware of the case. This could affect the negotiations between the representative and the alleged defendant, as the defendant will, as a result, not know how many parties are likely to execute and seek payment under the settlement agreement.

Forthcoming reform

On 19 March 2019, the Dutch Senate adopted the Settlement of Large-scale Losses or Damage Act, which is yet to enter into force. The Act amends the provisions relating to collective claims (Article 3:305a of the Dutch Civil Code) and introduces specific rules for collective actions in Articles 1018b – 1018m of the Dutch Code of Civil Procedure. [18]

As a result of the reform, representative organisations will be able to seek financial damages in collective claims proceedings, thereby opening the possibility for monetary compensation claims. To streamline different class actions, representative organisations are required to register their writ in a central register. [19] Should multiple representative organisations register writs relating to the same event and involving similar factual and legal issues, they will be referred to the same court, [20] provided the representative is admissible. [21] The different proceedings will then be consolidated and the court will appoint one exclusive representative that it believes is most suitable to litigate on behalf of all the representative organisations. The court, in doing so, takes into account the size of the collective whose interests are being represented, the financial interests of the represented parties, the other activities of the representative and the previous activities of the representative. [22]

The admissibility criteria for representatives initiating proceedings will be stricter following the reform, especially since the reform has the purpose of having one exclusive representative acting on behalf of all parties in the proceedings. The court will review whether these factual requirements for admissibility have been fulfilled. The representatives should not only have a supervisory body, they should also have an accessible internet page with information on the representative and its experience and skills in relation to initiating collective proceedings. [23] Board members of the representative may not pursue a profit via the representative. [24] Similarly, the control over the claim and procedure should rest with the representative to a sufficient degree and not with the third-party funding litigation, [25] as that could negatively affect the interests of the injured parties.

Should the court decide that the claim is admissible and the representative has standing, national injured parties get the chance to opt-out (similar to the mechanism currently applicable in the event of collective settlement procedures). Said parties will then not be bound by the judgement rendered in the proceedings between the defendant and the exclusive representative appointed by the court. Foreign injured parties will in principle not be bound by the judgement, unless they opt-in after the appointment of the exclusive representative. [26]

National injured parties will accordingly have to determine whether they want to participate in the collective procedure or whether they believe they may have better chances initiating individual proceedings or assigning their claims, in which event they should opt-out. For foreign parties, the original legislative proposal entailed a different mechanism prescribing that the claim had to have a sufficiently close connection to the Netherlands, which is the case if the majority of parties whose interests are protected are domiciled in the Netherlands, or the defendant is domiciled in the Netherlands, or the event causing the damages took place in the Netherlands. Despite the proposal’s purpose of preventing that too many cases would be initiated in the Netherlands without having a (sufficient) connection to the Netherlands, there was a fear that this rule would introduce too wide a scope for foreign claims. The legislative proposal was accordingly amended by introducing an opt-in mechanism for foreign injured parties wanting to participate in the collective proceedings. [27] As a result, foreign interested parties would not be involved in any proceedings whatsoever unless they opt-in. This is in line with the European Commission’s advice for an opt-in mechanism (rather than an opt-out) mechanism for collective damages claims. [28]

After the opt-out and opt-in, the court will, under the new procedure, order the parties to try to settle the case. [29] The rationale of the measure is to incentivise defendants more strongly to enter into settlements (in comparison to the current regime pursuant to which claimants have no chance of seeking monetary compensation in a class action when settlement negotiations fail to succeed). The new mechanism accordingly introduces a threat for the defendant of the court awarding monetary compensation should settlement negotiations fail, which is likely to increase the chances of a successful settlement.

If settlement negotiations turn out successful, the parties must submit the settlement to the court for approval. If not, the court may settle the collective claim. In doing so, the court has the discretion to first ask the exclusive representative and defendant to submit collective claims settlement proposals. When settling the collective claim, the court will take into account such proposals (provided these have been submitted) while determining the compensation in categories, so that the amount of compensation is reasonable for each subgroup of injured parties. [30] As the court will accordingly decide on the damages awarded to each subgroup, this can also be seen as a ‘forced settlement’. As such a forced settlement could have far-reaching consequences, another opt-out possibility was eventually included in the legislative proposal. If the proceedings end with a court decision in which the court establishes a collective settlement that (certain) injured parties do not perceive beneficial, those injured parties will thus have a second chance to opt-out of the collective settlement. [31] This could be to the detriment of defendants seeking to settle as many claims a possible while going through the settlement procedure.

The new Settlement of Large-scale Losses or Damage (Class Actions) Act described above is expected to enter into force no later than 1 January 2020 and will apply to collective actions relating to events having occurred from 15 November 2016 onwards. The Class Actions Settlement Act will continue to apply to events occurring before said date.

Potential effects of the reform

The new regime will enable individuals and entities that incurred damages following the same events to collectively claim monetary compensation in court. The two-staged approach (a collective proceeding to obtain a declaratory judgment on liability and the individual proceeding to seek monetary compensation on the basis of said declaration) will no longer have to be followed to obtain damages, as judges can now decide on the question of liability and the quantum of damages in a single procedure. Though this brings many benefits, there are also some nuances that deserve attention.

Despite there being a lot of potential in the new mechanism, it remains to be seen how widely used it will become. One could, for instance, wonder whether the more stringent admissibility criteria will prevent the Settlement of Large-scale Losses or Damage (Class Actions) Act from becoming a success. It is not very likely that the mechanism will replace the assignment of claims (in mostly cartel damages), as the claim vehicles initiating said proceedings usually have a profit motive following which they would be inadmissible under the Settlement of Large-scale Losses or Damage (Class Actions) Act. Should these claim vehicles nevertheless be admitted, they still face the risk that they will not get a (for them) sufficient amount of damages rewarded, as the court will award reasonable amounts of compensation to different categories of injured parties.

One could conclude that the Settlement of Large-scale Losses or Damage (Class Actions) Act and the assignment of claims mechanism will accordingly continue to exist next to one another, but that does not mean that cases litigated on the basis of claims assignment will not experience hindrance from the Settlement of Large-scale Losses or Damage (Class Actions) Act: the claim vehicles could be bound by other proceedings under the Settlement of Large-scale Losses or Damage (Class Actions) Act until they opt-out. When subsequently installing their individual claims, their cases are most likely to be suspended until the court has decided on the collective claim. [32] Despite the claim vehicle having the possibility to request termination of the suspension, they will first have to wait one year before they can do so. [33] The already lengthy cartel damages proceedings initiated by claim vehicles may accordingly become even lengthier as a consequence of the new reform.


Notes

1 C E Schillemans is a partner, E M M Besselink is a senior associate and E M R H Vancraybex is an associate at Allen & Overy LLP. Special thanks to H Vanderveen for her valuable contribution to this chapter.

2 Articles 3:305a-3:305d of the Dutch Civil Code.

3 Article 3:94 of the Dutch Civil Code.

4 The collective settlement procedure on the basis of the Class Actions Settlement Act is laid down in Articles 7:907-910 Dutch Civil Code and Articles 7:1013-1018a of the Dutch Code of Civil Procedure.

5 Article 1015 Dutch Code of Civil Procedure.

6 Amsterdam Court of Appeal 1 June 2006, LJN AX6440, NJ 2006/461 (DES); Amsterdam Court of Appeal 25 January 2007, LJN AZ7033, NJ 2007/427 (Dexia); Amsterdam Court of Appeal 29 April 2009, LJN BI2717, JOR 2009/196 (Vie d’Or); Amsterdam Court of Appeal 29 May 2009, LJN BI5744, JOR 2009/197 (Shell); Amsterdam Court of Appeal 15 July 2009, LJN BJ2691, JOR 2009/325 (Vedior); Amsterdam Court of Appeal 17 January 2012, LJN BV1026 (Converium); Amsterdam Court of Appeal 4 November 2014, JOR 2015/10 (DSB); Amsterdam Court of Appeal 24 June 2014, ECLI:NL:GHAMS:2014:2371 (DES II); and Amsterdam Court of Appeal 13 July 2018, ECLI:NL:GHAMS:2018:2422 (Ageas).

7 Amsterdam Court of Appeal 29 May 2009, LJN BI5744, JOR 2009/197 (Shell); Amsterdam Court of Appeal 15 July 2009, LJN BJ2691, JOR 2009/325 (Vedior); Amsterdam Court of Appeal 17 January 2012, LJN BV1026 (Converium).

8 Gerechtshof Amsterdam, 29-05-2009, ECLI:NL:GHAMS:2009:BI5744 (Shell).

9 Gerechtshof Amsterdam, 17-01-2012, ECLI:NL:GHAMS:2012:BV1026 (Converium).

10 Articles 3:305a-3:305d Dutch Civil Code.

11 We note that such case law may follow, as the Consumers’ Association initiated a collective claim against Phillips a.o. in relation to the CPT/CDT cartel (Amsterdam Court, 29-03-2018, ECLI:NL:RBAMS:2018:1682) and Stichting Elco Foundation against Rabobank a.o. in relation to the Libor scandal (Amsterdam Court, 14-08-2019, ECLI:NL:RBAMS:2019:5827). In both cases, a decision on the merits is yet to follow.

12 Article 3:305b Dutch Civil Code.

13 Amsterdam District Court 30 November 2016, ECLI:NL:RBAMS:2016:7841 (Trafigura).

14 Dutch Supreme Court 26 February 2010, NJ 2011/473, ECLI:NL:HR:2010:BK5756 (Clara Wichmann/Staat).

15 Article 3:94 Dutch Civil Code.

16 Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union; amendment of national substantive and procedural rules in the Dutch Civil Code and the Dutch Code of Civil Procedure on 10 February 2017.

17 See, for example, Rotterdam District Court, 29 May 2019, Case C/10/439791/HAZA13-1278 and Amsterdam District Court, 15 May 2019, Case C/13/639718/HAZA17-1255 and others.

18 Amendment of the Dutch Civil Code and the Dutch Code of Civil Procedure (Settlement of Large-scale Losses or Damage (Class Actions) Act), submitted on 15 November 2016, Dutch Senate: www.eerstekamer.nl/wetsvoorstel/34608_wet_afwikkeling_massaschade.

19 Proposed Article 1018c(2) Dutch Code of Civil Procedure.

20 Proposed Article 1018c(6) Dutch Code of Civil Procedure.

21 Proposed Article 3:305a(2)(3) Dutch Civil Code entails the admissibility criteria, which will be more stringent in comparison to the current regime.

22 Proposed Article 1018e Dutch Code of Civil Procedure.

23 Proposed Article 3:305a(2) Dutch Civil Code.

24 Proposed Article 3:305a(3) Dutch Civil Code.

25 Proposed Article 3:305a(2)c Dutch Civil Code.

26 Proposed Article 1018f Dutch Code of Civil Procedure.

27 The court may decide that in some cases the opt-out mechanism also applies to foreign injured parties, see Proposed Article 1018f(5) Dutch Code of Civil Procedure.

28 Commission recommendation of 11 June 2013 on common principles for injunctive and compensatory collective redress mechanisms in the Member States concerning violations of rights granted under Union Law, 2013/396/EU, Recommendation 21.

29 Proposed Article 1018g Dutch Code of Civil Procedure.

30 Proposed Article 1018i Dutch Code of Civil Procedure.

31 Proposed Article 1018h(5) jo. 1018f(1)–(4) Dutch Code of Civil Procedure.

32 Proposed Article 1018m(1) Dutch Code of Civil Procedure.

33 Proposed Article 1018m(2) Dutch Code of Civil Procedure.

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