Dutch law provides for a wide range of material and procedural opportunities to file collective actions. Such actions are not restricted to a specific group, but are open to all kinds of groups, such as shareholders, consumers, off takers of products or groups campaigning for a certain cause such as the environment. Collective actions in the Netherlands are usually brought on the basis of tort, but occasionally also on the basis of a breach of contract.
The Netherlands is well-known for its cross-border mass claim litigation, notably in respect of injured shareholders and cartel claims. The reasons for the forum’s popularity are mainly the expediency of proceedings, the professionalism and the relatively low process costs. On top of this, aggrieved parties have several options when it comes to claiming damages via the bundling of claims.
First, these parties can assign their debt to a claim vehicle or appoint a representative ad litem. This occurs frequently in cartel damages claims and is usually funded by litigation funders.
Secondly, a foundation or association can seek redress for a large class or large classes of damaged parties in a so-called representative action. It is not necessary for the damaged parties to "opt-in", as long as the articles of the foundation or association expressly promote the interests of those damaged parties. For now (but this is likely to change in the near future), the claiming foundation or association in a representative action can only seek a declaratory judgment as to whether as a general matter the defendant is liable towards the class or classes of aggrieved parties, and thus cannot seek damages. After such declaratory judgment, aggrieved individuals, either individually or jointly, may seek damages through settlement or by commencing additional proceedings on an individual basis. Individuals have the opportunity to "opt-out" from the representative action, even after a judgment is rendered.
Thirdly, Dutch law provides for collective settlement by the Amsterdam Court of Appeals on the basis of the Mass Claims Settlement Act (WCAM). The WCAM, is considered to be a highly innovative piece of legislation, pursuant to which out-of-court settlements may be certified by the Amsterdam Court of Appeals. The Court can declare the settlement binding upon all parties represented by the representative body, with the option for these parties to opt-out within a limited period of time. What is unique and radical about the WCAM is that it allows for a global settlement to be declared binding and Dutch courts have so far shown very little reluctance to accept jurisdiction in international settlement matters, making it of interest to foreign shareholders.
Recently, a draft bill on mass damages in collective actions was presented, which has not yet been adopted by Parliament. The bill, if adopted, will abolish the prohibition on seeking damages. This introduces the opportunity for a “classic collective action”, ie a collective action in which damages can be claimed on behalf of a class of aggrieved parties. Simultaneously, the proposal introduces more stringent admissibility requirements for representative bodies, in order to safeguard the interests of both those represented and the defendants in a collective action. These requirements mostly relate to the question of how representative the body is and whether it meets governance standards (the latter also in relation to third party litigation funding). Where multiple representative bodies wish to claim in relation to the same factual events, the Court will, under this new bill, appoint the most suitable body to represent all aggrieved individuals. After this appointment, these individuals have the option to opt-out. If they do not opt-out a judgment will be binding on them as there is only one opt-out moment. On the other hand, if too many individuals opt-out, the judge is allowed to take steps to end the proceedings, after which those who have opted out can only start individual proceedings. Furthermore, a scope rule is to be introduced to limit the possibility of seeking collective redress to situations that are closely tied to the Dutch jurisdiction, even if the Dutch courts have jurisdiction on the basis of European Union law. This admissibility rule could limit the options for parties outside the Netherlands to address Dutch courts in order to seek collective redress. However, if one of the defendants resides in the Netherlands a "close tie" with the Netherlands is assumed. Consequently, the practice of using “anchor defendants” remains untouched. Lastly, the proposal appoints the District Court of Amsterdam as the exclusive Court in the Netherlands to handle collective actions.
- General features
As is the case for most other European jurisdictions, US style class actions do not exist in the Netherlands. However, the Dutch Civil Code provides for so called "collective actions" which, when seen in combination with recent collective settlement legislation, have several features that resemble the US style class action. If the newly proposed bill will be accepted, this resemblance will become even bigger.
- Types of collective redress
Pursuant to the Dutch Civil Code, representative actions have been permitted in the Netherlands for quite some time. In principle, representative actions can be brought for breaches of any type of law, provided they meet the statutory requirements. This statutory requirement is laid down in the Dutch Civil Code and comes down to the claim having to be brought by an organisation whose corporate purpose (as defined in its articles of association) is to protect particular interests of others, and the nature of those claims allow them to be bundled. These organisations can only seek a judicial declaration as to the general liability of the defendant. They cannot yet seek damages and any decision will only be binding between the organisation bringing the action and the defendant.
However, damages actions may be brought on the back of the general finding of liability. Individuals that are affected by the defendant's behaviour may initiate their own private damages actions, in which they will have to establish causation and the quantum of damages.
Notable recent representative claims are a consumer claim against the Dutch Railways in relation to “overcrowded trains”, a claim (rejected at first instance) by aggrieved shareholders against BP in relation to the Deepwater Horizon oil spill and the “Urgenda climate case” in which the Dutch government was ordered to reduce CO2 emissions. The latter is currently pending appeal.
Alternatively, and very commonly in practice, injured parties can assign their claims to the relevant representative organisation (usually a claim vehicle), which can bring the actions and claim damages on their behalf. Where this happens the relevant organisation will have to establish causation and quantum of damages in respect of each assigned claim. Usually claim vehicles that have debts assigned to them are installed in cartel cases, for example in the air cargo an elevator cartels.
Collective Settlement of Mass Claims legislation
The "Collective Settlement of Mass Claims" legislation enables a representative organisation which acts in the interests of those who have suffered damage to enter into a settlement agreement with the defendant(s) responsible for the damage.
An application can then be made to the Amsterdam Court of Appeal for certification of the settlement, making it binding on all present and future individual claimants, unless an individual claimant expressly (and within a specified time limit) opts out. It is this element of the Dutch system, enabling a representative body to reconcile the rights of a class of potential claimants, that most closely resembles the US system of class actions and it is probably the most far-reaching model in Europe. The legislation is usually used where the court has given a declaratory judgment in a representative action holding the defendant generally liable. Some notable settlements that have been declared binding are Vie d’Or, Shell, Converium and Dexia.
- Funding and costs
There are no specific rules in the Netherlands with regard to the funding of collective actions. One form of funding is that each individual claimant contributes a relatively small sum to the legal entity undertaking the collective action. Contingency fees are prohibited. However, success fee arrangements are in principle allowed.
Recoverable costs are not related to the actual costs incurred by a party. Cost awards are based on fixed amounts for certain activities which amounts vary depending on the amount of the claim. Court fees due are also dependent on the amount of the claim brought, but are capped and limited.
- Recent developments, trends and predictions
The Bill on mass damages in collective actions is expected to be adopted in the near future (see our article here on its approval by the House of Representatives). With this bill the options for seeking collective redress in the Netherlands will increase even further. In outline, the bill aims to achieve (1) the introduction of a procedure that resembles a true class action, (2) an improvement in the quality of governance of claim organisations and (3) limiting the jurisdictional scope of the class actions by imposing a close connection requirement.
In essence, the proposed instrument offers an efficient and effective method for collective redress and intends to find a balance between the interests of injured parties to realise their rights, and the interests of alleged perpetrators to be protected against unfounded and frivolous claims. If adopted, the proposal will make it easier for aggrieved individuals to collectively sue for damages. The most often cited of the less desirable side effects of the proposal so far seems to be that as there is only one opportunity to opt out, an injured party may find itself bound to a decision of a Dutch court it does not agree with if the notification procedure in place turns out to be insufficient.
On 10 February 2017, an act implementing the EU Damages Directive into Dutch law came into effect. This act amends the Civil Code and the Code of Civil Procedure. The Implementation Act only applies to damages actions in relation to infringements of EU competition law, and infringements of Dutch competition law when applied in parallel with EU competition law. Therefore, damages actions that relate to infringements of Dutch competition law only are currently excluded from the scope. However, the Dutch legislator has indicated it will put forward a separate act for purely national competition law infringements. This act will declare the rules of the Implementation Act binding on infringements of Dutch competition law only.
Many large follow-on claims have been lodged (or announced) in recent years, generally driven by professional litigation funders. These claims often relate to cartel damages (for example in relation to the air cargo cartel, the elevator cartel and the truck cartel). In 2016, the Dutch Supreme Court accepted the passing-on defence in a landmark ruling. In 2017 and 2018, more important decisions are expected in cartel damages cases, for example on subjects as prescription and applicable law. Aside from cartel damages claims, other scandals have led to collective redress being initiated in the Netherlands.
The popularity of the Netherlands as a forum for class actions is ever increasing, and new actions keep being announced. For example, a Dutch foundation was recently established which is aimed at reaching a global settlement for investors in Volkswagen shares to recoup their losses following the Volkswagen diesel emissions scandal. The Foundation’s stated aim is to open a dialogue with Volkswagen and to try to find a reasonable and fair solution. Once a settlement has been reached between the Foundation and Volkswagen the WCAM legislation provides the opportunity for the settlement to receive Court approval and make it globally binding. Other foundations were established with regard to the Petrobras affair and the case of the Consumers Association against Philips.
The Netherlands remains a key player when it comes to damages claims in connection with consumer contracts. The Dutch Disputes Committee (Geschillencommissie, hereinafter: the Committee) is a Europe-wide example when it comes to consumer alternative dispute resolution (CDR). The Committee is known for its (cost)-efficient and expedient resolution of identical or similar consumer complaints.
This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.