New Dutch Act on Mass Damages to be implemented

The Netherlands could become one of the go-to jurisdictions for mass claims if the proposed act on Redress of Mass Damages in a Collective Action is approved by the Senate.

In January 2019, the House of Representatives approved the proposed act on Redress of Mass Damages in a Collective Action (Proposed Act). Based on the Proposed Act, organisations will be eligible to sue for compensation of damages in collective actions.

Currently, foundation(s) and association(s) (representative organisation) issuing a claim in a Dutch collective action can only seek a declaratory judgment on whether, as a general matter, the defendant is liable towards the class or classes of victims the representative organisation represents. Because of this, the collective action is currently often used as a stepping-stone towards obtaining financial compensation that is sought in separate proceedings. The Proposed Act applies to all collective actions, irrespective of whether the proceedings are amended to seek (monetary) damages or to rule liability of a party. The collective action occurs on an opt-out basis for Dutch claimants and an opt-in basis for foreign claimants.

The Proposed Act is now awaiting approval by the Senate, which is expected spring 2019.

Connection with the Netherlands

A collective action can only be brought before the court if it has a sufficiently close link to the Netherlands. This will prevent foreign claimants from settling disputes that are not connected or are only vaguely connected to the Netherlands in Dutch proceedings. A sufficiently close connection is deemed to exist under the Proposed Act if one of the following three conditions is met:

  • the representative organisation sufficiently demonstrates that the majority of the individuals on behalf of whom the collective claim is brought reside in the Netherlands
  • the defendant resides in the Netherlands, or
  • the event or events on which the claim is based, took place in the Netherlands.

The representative organisation has no standing if none of these conditions is met, irrespective of the law chosen by parties. The requirements set must not be seen in terms of international jurisdiction. In that respect, the rules of the Brussels I Regulation will often remain applicable.

District Court Rotterdam accepts jurisdiction in claim against Petrobras - an example of the manner in which Dutch courts tend to rule on the requirement of connectivity with the Netherlands

Currently, the collective actions brought before the court do not need to have a sufficiently close link to the Netherlands. Therefore, parties who can bring an action before the Dutch court, such as to seek a declaratory judgment of liability, may not be allowed to do so after the Proposed Act passed, providing they do not have a sufficiently close link to the Netherlands.

Collective action proceedings

The collective action, as proposed, will commence through the submission of a statement of claim. This includes the facts and events on which the claim is based, the class of persons whose interests the collective action seeks to protect and a description of the similarities between the facts and legal issues that concern the class members. The statement of claim may be brought before any Dutch district court.

A collective action will not proceed unless the representative organisation has made a reasonably attempt to settle the case. A period of two weeks after the defendant has received a request for consultation is deemed to be a reasonable period. The court then reviews to see if the representative organisation meets all requirements and whether the representative organisation has made it sufficiently plausible that the action is fit to be dealt with through a collective action. The requirements of the representative organisation are, amongst others:

  • it must be a non-profit entity
  • it must demonstrate it has the (financial) means and expertise to bring collective actions
  • it must have (in most cases) a supervisory board, and
  • it must prepare financial statements and director´s reports.

Within two days of the representative organisation bringing the claim before the court, the representative organisation needs to enter the claim in a central registry of collective actions. After the claim has been entered, a three-month waiting period commences during which other representative organisations can file claims that seek to address the same facts and events. During the three-month waiting period no procedural acts will be performed.

If several representative organisations bring a claim addressing the same facts and events, the claims will be consolidated. The court will, in that case, appoint the most qualified representative organisation as lead representative organisation. If appropriate, the court may appoint two or more co-lead representative organisations. The other representative organisations, if any, may remain party to the proceedings. Within a certain period after the appointment of the lead representative organisation, class members who do not want to be represented in the collective action can opt-out. During this period, foreign claimants can join the collective action by opting-in.

After the appointment of the lead representative organisation, the court will press the parties to reach a settlement agreement. If the parties reach a class settlement, then the collective action will end up in a class settlement certified by the well-known WCAM procedure. The WCAM provides the parties to a settlement agreement the possibility of jointly requesting the court to declare the settlement agreement internationally binding. The settlement agreement binds all persons covered by its terms, unless such person decided to opt-out within a specific period of time after the binding declaration. A court judgment, however, (in case no settlement is reached) will be binding to all class members, either domestic or foreign.

If the Proposed Act is approved by the Senate, Dutch law will provide for a novel and modern collective action mechanism to obtain damages in mass litigation, which is expected to further strengthen the position of the Netherlands as one of the go-to jurisdictions for mass claims.

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.