Article by Brian P.F. Moher*


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.

Civil Procedure in the Netherlands

The legal' system in the Netherlands belongs to the "civil law" family, with several important differences, including:

  • no juries;
  • no contingency fees (or "no cure, no pay" fee arrangements);
  • no punitive damages; and
  • no English-style discovery.

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.

The DES Case

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.

Dutch Act of Collective Settlements

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:

  • Defendants and representative organizations try to reach a settlement out of court, notwithstanding the organization's inability to apply pressure associated with (the threat of) commencing a claim for damages, as in Canada.6
  • If the parties succeed in reaching an out-of-court settlement, they can jointly petition the approval of the Amsterdam Court of Appeal, which has exclusive jurisdiction over collective settlement cases.7
  • If court approval is not granted, the representative organization may proceed with a (non-damages) action or individuals may bring individual suits.
  • If successful in obtaining court approval, damages would be allocated on the basis of the characteristics of the class/group of which the individual claimants are members and not on the basis of personal characteristics.
  • The collective settlement must be published in a newspaper so that those included in one of the categories of the settlement can opt-out within a certain period of time (not less than three months).
  • The defendant may choose not to continue with the settlement based on the number of opt-outs, if it stipulates such an option in the publication. The defendant has six months after the class members' opt-out deadline to decide against proceeding.
  • In deciding whether to approve the settlement, the court takes into account the nature, cause and amount of the loss; the simplicity and expediency of the payment method; the defendant's asset base; the nature of the legal relationship between the defendant and the class members; and, the availability of insurance. As well, the compensation amount must not be unreasonable; the defendant's performance must be sufficiently guaranteed; the representative organization must sufficiently represent the class; and, the number of class members must be sufficient to warrant certification (numerosity).
  • Since there is no right of appeal,8 the matter is concluded when the settlement is registered with the court and copies of the settlement materials are sent to all known injured parties, in addition to another newspaper publication advertising the results. In this way, the defendant achieves final settlement as any future claims would be barred by the principles of issue estoppel or res judicata.

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.

The Shell Settlement

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.

The Wedge

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.


* 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.

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