Are complex, lengthy and expensive class actions an effective
way of resolving global tort claims or would it be better if we
skipped right to settlement negotiations and then asked the court
to approve the settlement agreement? In the Netherlands, the only
way to secure damages for mass claims on an opt-out basis is
through a collective settlement agreement approved by the
court. This article is the third in a series on international group
actions1 and it outlines the recent developments in
group claim resolution in the Netherlands. After a brief review of
the Dutch legal system, we discuss a case that provided much of the
impetus for recent legislative reform in this area. We then provide
an overview of the developing Dutch legislative model for large
tort claim resolution: court-approved collective settlements.
Finally, we conclude by examining a recent test case that pushed
the original Dutch legislative envelope and will assist in
reconceptualizing the way global class, claims are resolved in the
future. The legal' system in the Netherlands belongs to the
"civil law" family, with several important differences,
including: With these conspicuous absences, one wonders how American-style
class actions would ever take hold in Europe. Yet, the last few
years have seen a wave of legislative reforms in Sweden, Germany,
France, Austria, Denmark, and the Netherlands, which have been
aimed at addressing the challenges of large, complex, multinational
suits in products liability and other traditional "class"
torts. There are two sets of rules in the Netherlands that govern the
resolution of mass disputes. The first covers so-called public
interest and group interest collective actions. These rules are
contained in the Dutch Civil Code (article 3:305a-c CC), which came
into force on July 1, 1994. All causes of action and forms of
relief can be pursued in a collective action except for an award of
money damages or a declaratory judgment on liability for sustained
damages. The inability to obtain monetary relief is a striking
distinction from the Canadian and U.S. class actions model.
Moreover, when representative organizations start a collective
action, they do so in their own name and the judgment binds only
the organization and the defendant but not individual class
members. The second set of rules governing group action in the
Netherlands ts more recent, having come into force on August 1,
2005. These rules, contained in the Dutch Civil Code (Article
7:907-910 CC) and the Dutch Code of Civil Procedure (Articles
1013-1018 CCP), cover opt-out collective settlements that may be
approved by the courts. With this background in mind, we turn to
the case that lit the fire for this legislative reform. In 1986, six daughters of women who had taken a drug called
diethylstilbestrol ("DES") during pregnancy initiated a
suit against 13 of its producers. DES was
internationally-prescribed to millions of women for over 30 years
to prevent pregnancy-related health problems such as
miscarriages.2 Tragically, the drug was found not only
to be ineffective, but actually harmful. Even though the plaintiffs
were unable to establish which manufacturers were responsible for
each person's harm, the Dutch Supreme Court held that the rule
on "alternative causation"3 applied and they
were all held to be responsible tortfeasors. The decision required that DES-users register in order to
preserve future rights against the DES producers. Within six weeks
of the ruling, over 18,000 individuals registered, including
DES-mothers and their children. Yet there are some estimates
putting the total number of people harmed by DES at 440,000 and
this was before the trans-generational effects of DES were fully
explored and understood (such as the so-called "granddaughters
of DES")?4 Given the potential for indeterminate liability, the
pharmaceutical industry and its insurers took the initiative to
begin negotiating a final settlement. Seven years later, at the end
of 1999, a DES-Fund was established, consisting of 34 million
euros. This sum was contributed to by both the industry and the
insurers, in about equal parts. The only catch was this: an
effective settlement requires finality, but the opt-in model
available at the time was not going to give this to the fund
contributors. The first set of group action rules enacted in 1994 did not
permit an action for damages and therefore, there was no mechanism
for a court to approve the opt-out settlement of a mass damages
claim. Consequently, the very publicly supported DES-Fund proposal
would have died on the negotiating table but for legislative
intervention. Rather than create an ad hoc legislative
"band-aid" that would do little to address the increasing
number of mass tort cases in the Netherlands, the Dutch Legislature
boldly and swiftly enacted new legislation permitting court
approval of mass claim settlements. Proponents of the legislation argued that it enabled, people
with individual damage claims, non-recoverable under the existing
legal regime, to bring actions, thereby enhancing access to
justice, and it would help combat lax manufacturing and service
standards. The judicial reaction was reticence. Some judges felt that the
legislation placed too heavy a burden on them, jeopardizing their
impartiality.5 They claimed that the Dutch Legislature
was aptly positioned in the constitution to address an event that
adversely affected a large group of people, providing it with the
ability to craft a unique solution to a given disastrous event. The
assessment of the fairness and adequacy of a settlement was also a
source of concern. Of course, many of these civil law judges were
also unaccustomed to this new active case managing dynamic of mass
tort litigation. The defendants' bar was quite positive about the
legislation, viewing it as an effective tool for handling, delicate
situations without moving too closely toward coercive
"blackmail" settlements. The plaintiffs' bar, not surprisingly, was less
enthusiastic, preferring the traditional, out-of-court settlements
where the number of parties was known and there was one single,
damage-causing event. However, even this segment of the bar viewed
the legislation as meaningful for "long-term" mass torts
(also called "mass exposure cases"), e.g., pharmaceutical
drugs, asbestos, etc., where the number of victims and the full
impact of the disputed activity are unknown. With the new legislation, a typical case might proceed in the
following way: How has this new system worked since its introduction in
mid-2005? The DES Settlement lost its status as the only
court-approved settlement on January 25, 2007, when the Dexia
Settlement was approved by the Court. The Dexia Bank allegedly gave
misleading or at least inadequate information about an investment
product and its risks. At the end of the recently expired Dexia
opt-out period, completed on August 1, 2007, there were 24,700
opt-outs9 out of a list of 400,000 purchasers of this
type of investment product. The third and final collective settlement engaged by the new
legislation is the Shell Settlement; however, this decision is
still pending. In January 2004, Royal Dutch/Shell announced the
re-categorization and consequent 20% reduction of its oil reserves.
This resulted in the resignation of three executives at Shell,
including its Chair. The media tumult following the announcement
ultimately led to the expansion, of the use of the Dutch collective
settlement legislation into the securities regime. One of the first of its kind, Shell is attempting a "global
resolution option" by achieving worldwide settlement
(excluding U.S. claimants) of claims related to the reduction in
its reserves. There are 29 European shareholder organizations in
the settlement from 9 different European countries. In the
agreement that is still pending approval of the Amsterdam Court of
Appeal, Shell has agreed to pay US$352.6 million, plus
administrative costs, to non-U.S, investors who suffered damages
because of alleged non-compliance with securities regulations
without Shell admitting to any wrongdoing. The Shell Reserves
Compensation Foundation will supervise the distribution of the
funds. Expert reports were submitted by Shell in order to assist the
Court in determining whether the compensation is reasonable in the
circumstances, The Dutch rules dealing with collective settlement
permits the Dutch Court of Appeal to appoint one or more experts to
assist and advise the. Court on issues raised by the application of
the Act. It is unknown how the opt-out results will affect the settlement
and, more importantly for Shell, what effect this will have on U.S.
class action proceedings.10 However, considering the
Shell Collective Settlement has a majority of institutional
investors (eg., pension funds) that have already signed on, the
opt-out rate is expected to be low. As part of the collective
settlement agreement, Shell agreed to request that the United
States Securities and Exchange Commission ("SEC")
distribute to shareholders the US$120 million paid by Shell in 2004
under a consent agreement resolving the SEC's investigation
into Shell's reserves re-categorization. Is the Dutch Act of Collective Settlements the wedge
that will open the Dutch legal system to alternative mechanisms for
resolving mass tort claims and greater use of U.S.- style class
action regimes? Perhaps the Netherlands will next consider a class
proceeding initiated by the defendant, should the collective
settlement procedure prove ineffective in cases where the liability
and the harmed class are not as easily determined as it was in the
Shell matter. One form of this type of proceeding in Canada permits
a defendant to bring a certification motion to request that the
court appoint a representative plaintiff?11 The other form of this type of proceeding is the creation of a
defendant's class, as permitted by the Ontario
legislation:12 Any party to a proceeding against two or more defendants may, at
any stage of the proceeding, make a motion to a judge of the court
for an order certifying the proceeding as a class proceeding and
appointing a representative defendant.13 There is only one case that has considered this mechanism in
Ontario, with the goal of consolidating multiple claims and
minimizing legal costs for defendants.14 In
Chippewas of Sarnia Band v. Canada (Attorney
General),15 the Ontario Superior Court of Justice
granted the certification of a defendant class proceeding in a land
dispute matter, which has not been finally adjudicated on the
merits.16 Not surprisingly, however, very few defendant
organizations are willing to take up the position as
"representative defendant" in such class proceedings. In evaluating the Dutch Act of Collective Settlements,
it is also possible that the Netherlands will decide that the true
beneficiaries of the new legislation are multinational corporations
who will only enter into a settlement of this nature if it is to
their advantage by providing finality and minimal (reasonable)
compensation. Moreover, while large pension fund managers,
cumulatively, may have been able to exert some negotiating pressure
with Shell, it is less likely that individual plaintiffs would have
the same clout in another case absent the potential threat of mass
class litigation. Looking forward, will the Dutch collective settlement mechanisms
lay the groundwork for a full class action system? And will non-
European courts recognize these collective settlements approved by
the Dutch courts? It remains to be seen whether this tentative
first step by the Netherlands into class action litigation will
evolve into a more meaningful class action system, or whether the
present half-way house will adequately address societal needs. Footnotes * The author of this article owe a huge debt of gratitude
to Dr. Tzankova and her colleague D.F. Lunsingh Scheurleer at the
firm of NautaDutillh in Amsterdam, on whose research, writing, and
advice we have heavily relied. 1 James M. Newland, Brian P. Moher and Donna A. Polgar,
"'Group Litigation in the United Kingdom: a Sheep in
'Woolf's' Clothing" (2006) 5 Class Action
310; and, James M. Newland, Brian P. Moher and Rosie J. Kogan.
"Group Actions in France and Current Initiatives for
Reform" (2006) 5 Class Action 338. 2 M.M. Brouwers et al., "Hypospadias: a
trans-generational effect of diethylstilbestrol?" (2006) 21:3
Human Reproduction 666 at 666
("Brouwers"). 3 The Dutch rule on alternative causation holds that in
the case of multiple activities, where each one of them alone would
have been sufficient to cause the damage, but it remains uncertain
as Io which one in fact caused it, each activity is regarded as a
cause. The victim is entitled to claim the whole amount of damages
from any one of the tortfeasors. 4 See Brouwers, supra note 2. 5 Note that judges in the Netherlands are appointed nol
elected. 6 It should be recognized that there are other ways of
applying pressure besides the threat of commencing a claim, such as
media pressure, which have been effective in the
Netherlands. 7 There is a limited ability for the parties to jointly
and under restricted conditions present their case to the Supreme
Court, but there is no realistic appeal opportunity. 8 As noted earlier, while there is a limited ability for
the parties to jointly and under restricted conditions present
their case to the Supreme Court, there is no realistic appeal
opportunity. 9 Interestingly, most of the opt-outs were organized by
claim management companies that operate on a cure, no fee"
basis, which, as noted earlier, is not an option for members of the
Dutch Bar. 10 In November 2007. the action for non-U.S. shareholders
was dismissed, although the decision is not yet final. 11 See Class Proceedings Act, 1992. S.O. 1992,
c. 6, s. 3; Class Proceedings Act. R.S.B.C. 1996, c. 50,
s. 3; Class Proceedings Act, S.A. 2003, c. C-16.5, s. 3;
The Class Actions Act, S.S. 2001, c. C-12.01, s. 5;
Class Proceedings Act, C.C.S.M., c. C130, s. 3; Class
Actions Act, S.N.L. 2001, c. C-18.1, s. 4; and Class
Proceedings Act, S.N.B. 2006, c. C-5.15, s. 4. 12 Michael A. Eizenga et al., Class Actions Law and
Practice (Markham: LexisNexis Butterworths, 2007) at
7.10. 13 Class Proceedings Act, 1992, S.O. 1992, c. 6,
s. 4. 14 Chippewas of Sarnia Band v. Canada (A.G.)
(1996). 29 O.R. (3d) 549 (S.C.J.). 15 Ibid. 16 Chippewas of Sarnia Band v. Canada (A.G.) (2000), 51
O.R. (3d) 641 (C.A.) (summary judgment motion varied on appeal);
motion for reconsideration for leave to appeal dismissed, (2001),
158 O.A.C. 199.
http://lernersclassactiondefence.ca/ The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
Introduction
Civil Procedure in the Netherlands
The DES Case
Dutch Act of Collective Settlements
The Shell Settlement
The Wedge
ARTICLE
1 February 2012
A Touch Of Dutch: Group Actions In The Netherlands
Are complex, lengthy and expensive class actions an effective way of resolving global tort claims or would it be better if we skipped right to settlement negotiations and then asked the court to approve the settlement agreement?