United States: Dutch Collective Actions vs. Collective Settlements

As U.S. law has become less willing to entertain certain types of lawsuits on behalf of worldwide classes of plaintiffs, litigants have looked for other forums that might allow the prosecution – or at least the resolution – of claims on a global, classwide basis, ideally through opt-out classes. The Netherlands has emerged as an option in recent years because the Dutch Act on Collective Settlement of Mass Claims (the "WCAM") authorizes the settlement, but not the prosecution, of classwide claims on an opt-out basis.

On September 28, 2016, the Amsterdam District Court dismissed a collective action by Vereniging VEB NCVB ("VEB") – the Dutch shareholders' association – seeking a declaratory judgment against BP plc on behalf of investors who had purchased, sold, or held BP shares before and shortly after the Deepwater Horizon explosion in the Gulf of Mexico. The court ruled that the fact that investors might have held securities in the Netherlands was insufficient, in and of itself, to confer jurisdiction on Dutch courts in the absence of other factors connecting the lawsuit and the underlying claims to the Netherlands.

Some commentators have wondered whether the BP decision will influence Dutch courts' continued willingness to adjudicate collective settlements under the WCAM. But the collective-action statute under which VEB sued is different from the collective-settlement statute under which the Amsterdam Court of Appeal has declared collective settlements binding on worldwide groups of allegedly injured persons, and the jurisdictional analysis under each of the two statutes is also different. Accordingly, the BP decision need not necessarily affect the Amsterdam Court of Appeal's willingness to issue binding declarations in appropriate collective settlements under the WCAM.

Dutch Collective Actions

Collective actions in the Netherlands are governed by Article 3:305a of the Dutch Civil Code. Article 3:305a allows a foundation or association – not an individual plaintiff – to seek declaratory relief on behalf of allegedly injured persons. The statute does not authorize a damages remedy (although the Dutch government is currently considering proposals to change that aspect of the statute). Allegedly injured persons who wish to recover money damages must either sue individually or wait to use any declaratory relief obtained in the Article 3:305a proceeding as a predicate for their own subsequent damages actions. (Alternatively, any declaratory relief obtained in the collective action can be used to encourage the defendant to enter into a WCAM collective settlement, as described below.)

The parties to a collective action are structured in the familiar manner. The foundation or association is the plaintiff; the party against whom it seeks relief is the defendant. The court's jurisdiction depends on whether the defendant can be sued in the chosen forum.

The European Union's Regulation (EU) No. 1215/2012 (effective January 2015) (the "Brussels Regulation"), which is part of Dutch law, prescribes the bases for jurisdiction. Article 4 provides that "persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State." Under Article 5, persons domiciled in a Member State may also be sued in courts of another Member State, but only in accordance with the provisions of the Regulation.

One such exception to domicile-based jurisdiction – the one invoked in the BP case – is for tort claims. Article 7(2) states that "[a] person domiciled in a Member State may be sued in another Member State . . . in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred or may occur." VEB argued that the harm to BP investors had occurred in the Netherlands because investors had held their securities in the Netherlands and had therefore suffered the loss of stock value in that country.

The Amsterdam District Court rejected that argument, relying in part on the European Court of Justice's (the "ECJ's") recent decision in Universal Music International Holding BV v. Schilling (Case No. C-12/15, June 16, 2016). The ECJ there held that the Brussels Regulation's reference to "the 'place where the harmful event occurred' may not be construed as being, failing any other connecting factors, the place in a Member State where the damage occurred, when that damage consists exclusively of financial damage which materialises directly in the applicant's bank account and is the direct result of an unlawful act committed in another Member State." The ECJ also noted that the concept of "'matters relating to tort, delict or quasi-delict'" under current Article 7(2) "do[es] not concern 'matters relating to a contract' within the meaning of [current Article 7(1)(a)]."

Based on the Universal Music decision, the Amsterdam District Court ruled that the harm to the BP investors on whose behalf VEB had sued had not occurred in the Netherlands. That conclusion, in the court's view, was reinforced by the unavailability of a damages remedy under the Dutch collective-action statute.

Dutch Collective Settlements (the WCAM)

Dutch collective settlements are different from Dutch collective actions. The WCAM is codified in sections 7:908-7:910 of the Dutch Civil Code and Articles 1013-1018 of the Dutch Civil Procedure Code, not under the collective-action provisions of Article 3:305a.

The WCAM may be used only to settle claims on a classwide basis, not to prosecute them. The statute allows a foundation (not a private plaintiff) representing allegedly injured persons to enter into a contract (a settlement agreement) with the party that allegedly inflicted the injury. Pursuant to that contract, the alleged wrongdoer agrees to provide compensation to the group of persons represented by the foundation, subject to court approval. The party providing compensation need not yet have been sued. The foundation and the compensating party can make a contract even without pending litigation.

The contracting parties then present the contract to the Amsterdam Court of Appeal – which has exclusive jurisdiction over WCAM proceedings – and ask the court to declare the contract binding on all of the allegedly injured persons on whose behalf the contract was made. The allegedly injured persons – whom U.S. lawyers would view as the "class" – are treated as defendants under Dutch law, because the contracting parties have effectively filed a petition against them to extinguish their potential claims in consideration for the proposed settlement relief. The contracting parties send notice of the proposed settlement to the class, and class members may object to it and appear before the court. If the Court of Appeal declares the settlement binding on the class, any class members who wish to opt out of the class and preserve their rights may do so. Those who do not opt out will be bound by the court's judgment and can share in the settlement relief if they are otherwise eligible. The contract may authorize the compensating party to terminate the settlement if too many class members opt out (a U.S.-style "blow" provision).

The WCAM was initially used several times for matters tied to the Dutch legal system, but it assumed a truly international scope in two global securities settlements: one involving Royal Dutch Shell (an Anglo-Dutch company) in 2009, and another involving the former Converium Holding AG and its parent (both Swiss companies) in 2012. (Yet another global settlement was signed in March 2016 in the Ageas litigation.) The Shell and Converium settlements involved significant numbers of non-Dutch shareholders. In fact, only about 3% of the class members in the Converium case were Dutch. But the Amsterdam Court of Appeal approved both settlements and upheld jurisdiction over the global classes.

The jurisdictional analysis in both cases turned not on the tort provision of the Brussels Regulation invoked in the BP action, but on separate jurisdictional bases.

  • For Dutch class members, jurisdiction existed under Article 4 of the current version of the Brussels Regulation, which provides that domiciliaries of a Member State can be sued in the courts of that state.
  • For domiciliaries of other European Union countries, two jurisdictional bases existed:

    • Article 8(1) says that, in multi-defendant cases, domiciliaries of a Member State can be sued in a state where at least one defendant is domiciled if "[t]he claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings." This provision applies in WCAM settlements because the class members are considered to be defendants, not absent plaintiffs. Under Article 8(1), the petitioners' claims for a binding declaration against all defendants (the class members) are closely connected because the petition seeks to limit the compensating party's liability to the entire class and depends on a single judgment that binds the whole class (other than a relatively de minimis number of potential opt-outs, if the contract provides for a "blow" provision). Thus, it is theoretically possible that, as long as at least one class member is Dutch, all non-Dutch EU class members may also be sued in the Netherlands.
    • Article 7(1)(a) says that, for matters relating to a contract, a domiciliary of a Member State may be sued in another Member State if that other state is the place where the contract will be performed. WCAM contracts can be structured to be performed in the Netherlands, as they were in the Shell and Converium cases.
  • For domiciliaries of Lugano Convention countries (Denmark, Iceland, Norway, Switzerland), the Lugano Convention has provisions similar to those of the Brussels Regulation.
  • For domiciliaries of other countries, Article 6 of the Brussels Regulation says that the Member State's law (i.e., Dutch law) applies. Article 107 of the Dutch Civil Procedure Code authorizes jurisdiction over codefendants if sufficient connectivity exists between or among the claims – so Article 107 is similar to Article 8(1) of the Brussels Regulation.

    • The Converium court also upheld jurisdiction as to non-EU/EVEX class members for two other reasons: One or more petitioners – such as the foundation that was a party to the settlement – were domiciled in the Netherlands, and the matter was sufficiently connected to the Dutch legal order.

WCAM proceeding thus can be and have been used for global settlements with relatively little connection to the Netherlands. The Converium decision expressly recognized that the Netherlands is the only national legal system in the EU that authorizes opt-out collective settlements. The Amsterdam Court of Appeal also observed that, after the U.S. Supreme Court's 2010 decision in National Australia Bank v. Morrison, which limited non-U.S. shareholders' ability to file securities claims in the United States, the international legal system needs a non-U.S. forum with jurisdiction to render a settlement binding on persons who cannot be included in U.S. class-action settlements.

Where Does the Netherlands Go From Here?

Because Dutch collective actions and Dutch collective settlements are authorized under different statutory schemes and involve different jurisdictional bases, no apparent reason exists why the two types of proceedings cannot continue along their separate tracks. The ECJ's decision in Universal Music, which proved persuasive to the Amsterdam District Court in the BP case, need not apply to WCAM settlements. The ECJ addressed tort jurisdiction based on alleged harm to the plaintiffs, not jurisdiction over contractual claims or jurisdiction over interrelated claims against a group of defendants. The ECJ made clear that it was not considering the Brussels Regulation's contract-based jurisdictional provision.

WCAM proceeding thus can be and have been used for global settlements with relatively little connection to the Netherlands. The Converium decision expressly recognized that the Netherlands is the only national legal system in the EU that authorizes opt-out collective settlements. The Amsterdam Court of Appeal also observed that, after the U.S. Supreme Court's 2010 decision in National Australia Bank v. Morrison, which limited non-U.S. shareholders' ability to file securities claims in the United States, the international legal system needs a non-U.S. forum with jurisdiction to render a settlement binding on persons who cannot be included in U.S. class-action settlements.

Dutch Collective Actions vs. Collective Settlements

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