What does the judgment of the Court of Justice of the European Union (CJEU) of 12 May 2021 in VEB v BP mean for the jurisdiction of the Dutch courts in respect of (class action) claims for purely financial loss?
Class actions in the Netherlands
For many years, the Netherlands has presented itself as the European jurisdiction for collective redress. Since the 1990s, claim organizations have had the option of starting class actions before the Dutch courts to obtain a declaratory relief. Since 2005, the Amsterdam Court of Appeal can declare a collective settlement universally binding. With the entry into force of the Settlement of Mass Damage in Collective Actions Act (Dutch acronym WAMCA) on 1 January 2020, it is now also possible to bring a collective action for damages.
Foreign defendants regularly challenge the jurisdiction of the Dutch courts to hear this type of class action. The CJEU now clarifies in its judgment that damage that has occurred in an investment account held in the Netherlands does not, in itself, provide sufficient grounds for the jurisdiction of the Dutch courts on the basis of Article 7(2) Brussels I-bis. This judgment potentially has significant consequences for collective redress through the Dutch courts.
Background: Deepwater Horizon
On 20 April 2010, an explosion occurred in the Gulf of Mexico on the BP-loaded Deepwater Horizon oil rig. Following this oil spill, BP stocks showed a significant price drop.
In 2015, the Dutch Association of Stockholders (Vereniging van Effectenbezitters, VEB) summoned BP - with its registered office in London - to appear before the District Court of Amsterdam and brought a collective action on behalf of investors who had bought, held or sold 'BP ordinary shares' through an investment account held in the Netherlands between 16 January 2007 and 25 June 2010. In brief, the VEB took the position that BP had acted unlawfully vis-à-vis these investors by providing incorrect, incomplete and misleading information about (the scope and role of BP in) the oil disaster, as a result of which investors suffered losses due to the a fall in BP's share price.
Prejudicial questions from the Dutch Supreme Court
The central question in these proceedings is whether the Dutch courts have jurisdiction to hear VEB's claims on the basis of the Erfolgsort (Article 7(2) Brussels I-bis: 'the court of the place where the damage occurred shall have jurisdiction').
The Dutch Supreme Court submitted preliminary questions to the CJEU on 20 September 2019 ( ECLI:NL:2019:1400). The gist of these questions was whether the damages claimed by the VEB as a result of investment decisions taken under the influence of widely disseminated, but incorrect, incomplete and misleading information of an international listed company, provides for a sufficient connection factor for international jurisdiction of the Dutch courts under the Erfolgsort. If not, what additional circumstances are required that (do) justify the jurisdiction of the Dutch courts?
The CJEU reiterates the main rule: the courts of the Member State where the defendant is domiciled have jurisdiction.
By way of exception, the defendant may be sued in another Member State's court under Article 7 Brussels I-bis. The CJEU emphasizes that Article 7 Brussels I-bis must be interpreted restrictively and that it must be foreseeable for a defendant where it may be sued. The investment account in which the shares are administered does not provide a sufficient connection factor to justify such exception, according to the CJEU.
The CJEU considers it possible that the courts of the Member States in which a listed company complies with its statutory reporting obligations may assume jurisdiction by virtue of the occurrence of the damage. Only in those Member States is it reasonably foreseeable for a listed company that an investment market exists and that it can be held liable.
What does this mean for collective redress?
The decision of the CJEU not only has consequences for the VEB class action against BP, but also for other class actions that have been (or will be) instituted in the Netherlands. After all, the Dutch courts will not automatically be competent to hear class actions for purely financial loss that has occurred on investment accounts in the Netherlands. Going forward, additional connecting factors will be required.
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