4.01  When the Netherlands introduced a general collective actions provision in 1994, it was among the first European countries to put such a system in place. Since its introduction, the collective action mechanism has increasingly been used in a wide variety of cases. Despite its relative success, the international interest in the Dutch system of collective redress was virtually non-existent until recently. This changed with the introduction of the Dutch Act on Collective Settlements (WCAM) in 2005. The Netherlands is the only European country to date where a collective settlement of mass claims can be declared binding on an entire class of interested parties on an ‘opt-out’ basis. This legislation seems to have unintended global implications (p. 68) and a potential to turn the Netherlands from an ordinary civil law jurisdiction into a significant player in the global scene for the resolution of mass disputes. At the same time, concerns have been expressed about the Netherlands importing the United States litigation model which has a negative connotation, at least in Europe. This chapter gives an update on the Dutch developments in the field of collective redress and analyses whether the fears related to the WCAM are justified.

4.02  Section II will give a general overview of the Dutch collective action, the WCAM, and other relevant trends in the field of Dutch civil procedure. Sections III, IV, and V will focus on the WCAM cases to date that are relevant for the resolution of cross-border mass disputes: Shell and Converium. Section VI will also briefly address the interim decision of the Amsterdam District Court in the Ahold matter, which is the first ruling of a European court related to the recognition and enforcement of a US class settlement ruling. Conclusions follow in section VII.

4.03  The Dutch system of collective redress is governed by two sets of rules; one set, enshrined in Article 3:305 a–c of the Dutch Civil Code, provides for a collective right of action to be litigated in courts and another set provides for court-approved collective settlements under the WCAM.² Both sets have a general scope of application in civil and commercial matters and are not limited to a specific substantive area of law such as consumer law or securities law. Empirical studies or statistics about the use of the collective action provisions are lacking, but an estimation based on the number of cases reported to date states that since 1994, at least 100 collective actions have been initiated.

4.04  To date, six collective settlements have been approved by the Amsterdam Court of Appeal pursuant to the WCAM in the DES, Dexia, Vie d’Or, Shell, Vedior, and Converium cases.³ On 12 November, 2010, the Amsterdam Court specifically addressed the question of international jurisdiction in a provisional judgment in which it accepted to hear the request.⁴ In its final ruling of 17 January, 2012 the Court confirmed its provisional judgment.⁵

(p. 69) 4.05  Whereas the DES case involved personal injury claims, the five other settlements which have been submitted for court approval involved securities and financial services. Three collective settlements involved non-Dutch interested parties seeking a global resolution of securities claims: Shell, Vedior, and Converium.

4.06  Dutch law does not require a minimum number of injured or interested parties belonging to the group who have to benefit from the collective settlement or the collective action. The number should be sufficient to justify the settlement. In Vedior, the number of 2000 was found to be sufficient.

4.07  An association or foundation representing a group of persons having a similar interest can bring a collective action for the purpose of protecting those interests, provided that in doing so, it acts in accordance with its articles of association. Individual injured parties cannot act as a representative of the class. While the collective action is initiated in the name of the organization and not in the names of the individual persons, there is no lead plaintiff as found within the US class action suits. In practice, such Dutch collective actions are frequently initiated both by long-standing organizations having a more general purpose, such as the Consumentenbond (Dutch Consumers Association) or Vereniging voor Effectenbezitters: VEB (Dutch Association for Shareholders), and by special purpose organizations that have been set up to deal with a specific mass claim.

4.08  When the collective action was introduced in 1994, the legislator deemed it unnecessary to require that the claiming entity is an ‘adequate representative’, nor were ‘competing organizations’ anticipated. However, since the introduction of the collective action instrument, a real market for special purpose organizations has developed. The Dutch legislator has therefore suggested the introduction of an additional requirement to address concerns about potential abuse. The new proposals still do not address sufficiently the phenomenon of competing organizations, which creates confusion amongst claimants (about which organization to join) and defendants (regarding which organization they should talk to and negotiate with).

4.09  As part of the integral adjudication of the case, the court will determine whether the organization has legal standing to bring the action. Before an action can be filed, the organization is required by law to attempt to obtain the desired relief by means of a negotiated out-of-court settlement. However, this requirement does not constitute a real impediment to the initiation of legal proceedings, since it will be deemed to have been met if the organization has asked the prospective defendant(s) to voluntarily comply with its demands and two weeks have since passed without the desired result having been achieved. Except for immediate injunctive relief, a two-week period is in practice not a realistic timeframe to resolve a complex mass liability matter.

(p. 70) 4.10  The action must seek to secure the protection of similar interests of the persons in whose benefit the organization acts, that is, the members of the group or class. This requirement will be met if the interests in question can be bundled, which depends on the specific circumstances of the case. As a general rule, bundling is only possible if, in order to award the relief sought, no individual issues need be decided.

4.11  For that reason, the law expressly prohibits the awarding of monetary damages in such an action, since this would require the court to decide on individual issues such as the amount of damage (if any) suffered by each particular person, causation, and contributory negligence. As a result, in most cases the organization seeks a declaratory judgment establishing that the defendant(s) acted wrongfully against the persons in whose interest the action was brought. If awarded, such a judgment then effectively serves as a precedent, on the basis of which each injured person can subsequently bring a separate action for damages in which the abovementioned individual issues can be addressed.

4.12  Besides the restriction on collective actions for damages, practically almost all types of claims are allowed under the collective action: performance of contract, dissolution of contract by the court, claims arising from undue payment, performance of an obligation to undo, injunctive relief, and opposition against split-off of a legal entity.

4.13  Injunctive relief is also available in order to compel a party to do something or to stop doing something. Outside of collective claims (which do not allow relief in the form of monetary damages) all kinds of damages are allowed under Dutch law, except for punitive damages, and there is no limit to the amount of damages which may be awarded, provided that no damages are awarded which would exceed the loss incurred.

4.14  The collective action regime has been criticized by consumer protection organizations because of the ban on the awarding of monetary damages. This can be viewed as a hurdle to the imposition of pressure on unwilling defendants. However, in practice some collective actions are rather successful. Once the court has rendered a declaratory judgment that the relevant defendant(s) have indeed breached the contract or the fiduciary duty concerned, or committed a tortious act, many defendants seek to resolve the matter by means of a settlement.

4.15  Within the judicial literature, it is suggested to broaden the effect of Article 3:305a DCC, by allowing a claim for damages and thus basically allowing a US-style class action. However, there are no plans by the legislature to implement this. The domestic WCAM-settlements to date demonstrate that within the Netherlands, being a small country, effective pressure on unwilling defendants to settle a mass claim can be created in different ways, including the exertion of political pressure and pressure from the media.

4.16  The problem, however, remains in that a declaratory judgment in a collective action is only binding on the organization and the defendant(s). Without an express power of attorney, a representative organization cannot bind individual (p. 71) group members to the result obtained in court or subsequently at the negotiating table. Thus, separate court actions can still be initiated by individual group members, even if a declaratory judgment has been rendered denying the claim or any settlement reached. This problem emerged in the DES case and the urge to resolve it formed the impetus for the enactment of the WCAM.

4.17  The WCAM legislation was inspired by the US court-approved class settlement regime and tries to avoid its negative connotation. One of the main reasons why the Dutch business community supports the WCAM is probably because, unlike the US class action, the Dutch provisions on the collective right of action do not allow actions for damages. The essence of the WCAM is that an out-of-court settlement agreement entered into by one or more representative organizations acting for the interests of the injured group and one or more of the alleged responsible parties agreeing to pay compensation with the aim of settling mass damages claims at a collective level, can be approved and declared binding by the Amsterdam Court of Appeal.⁶ There is no proper action brought to court and there are no plaintiffs or defendants, merely applicants who jointly request the binding effect of a settlement for an entire group of affected persons. Such a declaration has binding effect by operation of law on all interested persons for whose benefit the settlement was concluded and who do not exercise their right to opt-out. Once the court approves the settlement and the opt-out period has expired, all interested parties who have not exercised their opt-out right are bound by the settlement as if they had individually agreed to the terms thereof.

4.18  The representative organization entering the settlement on the part of the injured parties should be an association or a foundation with full legal competence. Again, this could be a long-standing organization or a special purpose vehicle. Unlike the collective right of action which was introduced in 1994, the WCAM requires that the organization entering the settlement should be sufficiently representative of the interests of the injured persons who are to benefit from the settlement. Whether the organization meets this requirement depends on the facts and circumstances of the case at hand. For example, the settling organizations should be jointly sufficiently representative of the interests of the group of interested persons.⁷ As a consequence, the procedure is based on the idea of representative litigation involving (p. 72) representative applicants instead of lead plaintiffs. Foundations and associations representing the injured persons do not conclude the settlement agreement in order to merely bind themselves, but in order to bind the group of affected persons which they represent. Any alleged liable party may be a party in the settlement agreement. There are no exclusions for a State or semi-governmental agencies, except for foreign sovereigns pursuant to international law (that is, in matters under which a foreign sovereign acted whilst exercising sovereign tasks).

4.19  The WCAM proceedings are initiated by means of a joint request to the Amsterdam Court by the representative organizations and the alleged responsible party or parties, ie the parties distributing the settlement amount. Notice requirements apply only under the WCAM regime. The beneficiaries of the relevant settlement (the injured parties) must then be notified of the content of the agreement, the date and time of the court hearing, as well as their right to file an objection against the binding declaration and to appear at the hearing. Individual notifications in writing must be sent to known beneficiaries pursuant to applicable regulations and treaties; unknown beneficiaries must be notified by means of advertisements within newspapers in the relevant jurisdictions. The experiences to date indicate that the individual notification process which has to be applied pursuant to European regulations and international treaties in the international WCAM cases can be cost-intensive.⁸

4.20  After the settlement has been declared binding, interested parties should be notified again so they can exercise their right to opt out from the settlement agreement. In the practice to date, public advertisements have been found sufficient to meet notice requirements in this second stage. Interested parties are entitled to file objections. If the court disregards the objections, interested parties may opt out from the settlement agreement. In four out of the six collective settlements reached at this point, interested parties have filed objections and defences of various nature. The Amsterdam Court has responded to those objections differently. Some were promptly rejected at the same time as the binding declaration was issued (DES, Shell, and Converium). Some were rejected after an expert opinion was issued (Dexia).

4.21  According to the Dutch law of civil procedure interested parties are not parties who have a general or professional interest in the process, the proceedings, or their outcome, but are only parties who would be entitled to claim under the settlement agreement, or organizations acting for their interests.

4.22  Following the hearing, the court will render its decision, either granting or denying the request to declare the settlement agreement binding. Alternatively, the court can appoint experts to offer opinions on certain relevant issues. The court cannot (p. 73) alter the terms of the settlement agreement, but it can put pressure on the settling parties to do so by making clear that it will not approve the settlement unless certain terms are changed. Obviously, it is up to the settling parties to decide if they wish to do so or to risk disapproval of the settlement agreement. If the court approves the settlement by declaring it binding, the court will also determine the duration of the period during which beneficiaries of the settlement can exercise their right to opt out. This period should be at least three months. The court’s decision will be communicated to both the known and unknown beneficiaries. If the court denies the request, an appeal (cassation) of the decision is only possible for the petitioners jointly and on limited grounds. Beneficiaries of the settlement have no standing to appeal, but they can opt out.

4.23  Although the WCAM was inspired by the United States class settlement regime, at least one essential feature of that regime did not make it into the statute: the court’s statutory powers of review and approval of class counsel fees, which is one of the safeguards against the potential abuse of collective settlements. Such a requirement was not considered necessary by the Dutch legislator. The latest legislative proposals aiming to improve the WCAM are also silent on this topic.

4.24  However, it must be noted that when the class counsel fees are being paid out of the settlement fund, as was the case in Converium, the Amsterdam Court will have to review and approve the class counsel fees as part of its assessment of the fairness of the settlement agreement. The Amsterdam Court has demonstrated in the Converium ruling that it considers this assessment as part of its task.⁹ Whether an assessment of the counsel fees by the Court will take place depends however on the design of the settlement agreement and therefore can be ‘manipulated’ by the settling parties. If the settling parties would agree that the counsel fees will be paid out of a separate fund, based on a separate agreement there is no requirement for the Court to approve the reasonableness of the counsel fees. Statutory provisions that class counsel fees should be presented to and approved by the Court in any event increases transparency and is therefore a safeguard against potential abuses. On a more general level the question remains whether an explicit statutory provision with regard to the oversight of funding issues in mass disputes can be omitted and whether a legal system can afford to be entirely dependent on the competence and discretionary powers of individual judges deciding on a case whether or not to pay attention to funding dynamics in mass claim disputes.¹⁰ The European Commission has acknowledged that the financing of class or group actions is a (p. 74) significant issue, but a vision, let alone concrete proposals on how access to justice should be preserved while the potential for abuse is avoided, is lacking.

4.25  Sometimes one or more individual suits serve as a rainmaker and lead to a collective settlement: this was the case in the DES settlement. But a WCAM settlement can also be concluded without any individual or collective action ever being brought to court in the Netherlands or elsewhere, as was the case in Vedior.

4.26  The collective action and the collective settlement can be used separately or in combination. However, the fact that monetary relief is not available under Article 305a–c DCC leads to a specific interaction between the two procedures. The collective action can play a significant role in the resolution of a mass dispute if it is used to provide an answer to disputed questions of law, especially without the alleged defendant running the (immediate) risk of having to pay financial compensation. A declaratory judgment in a mass damages case pronounced by a court in a collective action may assist parties in clarifying matters, facilitate negotiations towards a settlement agreement, and induce parties to settle. In other words, the possibility of obtaining judicial decisions on disputed questions of law in a mass damages case could be an incentive to settle, while allowing the alleged defendant the opportunity to avoid facing multiple individual cases. The Vie d’Or and Dexia cases are examples of collective actions that eventually resulted in a WCAM collective settlement.

4.27  As the alleged responsible party is not immediately threatened with providing financial compensation in the collective action, the risk of blackmail settlements is said to be considerably reduced as there is less pressure to settle nuisance mass claims. Conversely, one important incentive for allegedly responsible parties to settle under the WCAM is thought to be that settling under the WCAM leaves the question of responsibility in the open and does therefore not negatively affect a company’s reputation. Moreover, the Vie d’Or case illustrates that using the WCAM might even assist institutions in improving their profile: a WCAM settlement was reached after the Supreme Court decided that the defendants had not acted wrongfully.

4.28  The Dutch system on group litigation seems to place emphasis on the collective settlement for the financial compensation of interested parties by giving preclusive effect to a settlement by a court’s binding declaration on the one hand and by refusing the availability of monetary compensation under the collective action on the other.

4.29  The main Dutch consumer organization—Consumentenbond—has frequently argued that the fact that the WCAM exclusively relies on the willingness to settle, constitutes the downside of the WCAM or of the Dutch procedure on group litigation as a whole. It states that in the absence of an effective collective action with (p. 75) the possibility of monetary compensation, there is no real incentive for defendants to settle. When the alleged liable parties are not willing to settle, there is no procedure available for interested parties to obtain financial compensation collectively except by initiating individual proceedings. In mass damages cases involving small amounts of financial compensation, it is very unlikely that interested parties or consumers will en masse initiate expensive and time-consuming proceedings to obtain small amounts of compensation. However, the latter concerns the problem of access to justice inherent to even the most advanced systems of collective redress.

4.30  The interaction between the WCAM and the collective action illustrates that internationally there is a misconception about the nature of the WCAM, which has been characterized as a non-contentious alternative dispute resolution mechanism. It turns out that a more nuanced view is required.

4.31  At present two proposals with regard to the resolution of mass claim disputes are under consideration. The first aims to introduce a procedure for requesting preliminary rulings from the Dutch Supreme Court to be submitted by the lower courts faced with mass claim disputes. The idea is that this might speed up the out-of-court resolution of a mass claim dispute and might promote a collective settlement that can subsequently be submitted for approval to the Amsterdam Court of Appeal pursuant to the WCAM.¹¹

4.32  The purpose of the other amendment is twofold: on the one hand the proposed modifications involve the incorporation of provisions allowing the court to assist in pre-trial appearances to identify the main points of dispute and encourage parties to seek assistance from mediators. Supplementary measures are proposed to stimulate the parties’ willingness to negotiate and facilitate the negotiation of settlement agreements. Second, the proposed modifications include technical improvements, especially dealing with the international application of the WCAM and the issues of private international law.¹²

4.33  When introducing the WCAM, the Dutch legislator did not expect it would be used successfully within a cross-border context. Currently, the draft proposal contains only rules that aim to improve the notification of non-Dutch shareholders, for example by allowing the court to set up a minimum success rate and to postpone the oral hearing until a sufficient number of known interested parties have been adequately notified. The current proposal does not contain rules with regard to the jurisdiction of the Amsterdam Court of Appeal. Such rules could vary from ‘a hard and fast rule’ for the minimum number of parties (claimants) that have to (p. 76) be domiciled in the Netherlands, to setting a comparatively looser standard such as a sufficient link with the Netherlands, which will leave discretionary powers to the Dutch court to decide on an ad hoc basis whether it can take jurisdiction in a certain matter.

4.34  Another noteworthy initiative concerns a study commissioned by the Dutch Ministry of Economic Affairs on the incidence of scattered damages (strooischade): the so-called individually non-recoverable claims. Although the conclusion of the Minister is that the phenomenon has a significant impact on the functioning of a legal society and therefore should be adequately addressed, she concludes that private law enforcement is not a proper route and that the involvement of public enforcers should be considered.¹³ There are some recent self-regulation initiatives which aim to improve the accountability and transparency of special purpose organizations: a Claim Code was introduced in July 2011.¹⁴ It remains to be seen whether and how this will improve the functioning of the WCAM. In any event, the issue of competing special purpose organizations has not been addressed to date by the Claim Code nor by the legislator.

4.35  There seems to be a general trend in the Netherlands to facilitate the enforcement of latent claims. For instance, although discovery and fishing expeditions are not allowed in the Netherlands, the alternatives for fact-finding are improving. In securities litigation, the so-called ‘enquiry proceedings’¹⁵ (enquete procedure) are of increasing significance to gather evidence to be used against corporations and its directors and officers. In commercial cases, it is relatively easy to preliminarily hear witnesses. Furthermore, the hearings are public and there is a trend among lawyers to cross-examine witnesses, which used to be unusual for the Netherlands. Those preliminary hearings not only serve fact-finding purposes, but can also create a nuisance value in high-profile cases. Moreover, there were some proposals to introduce a limited discovery (exhibitieplicht) but without improving the safeguards against abuse.

4.36  Third-party litigation funders have discovered Europe and the Netherlands. The first Dutch international cartel claim case was initiated before the Amsterdam (p. 77) District Court in September 2010.¹⁶ The increased availability of third-party litigation funding will clearly make it easier to fund mass claims in the future. The government has raised the financial interest threshold for which a representation by an attorney, member of the Dutch Bar, is mandatory, to €25,000 and in certain consumer-related matters to €40,000. This amendment is aimed to make it cheaper and easier for litigants to bring claims without hiring a qualified lawyer. There is a slow but undeniable establishment of a Plaintiff Bar that increasingly cooperates with US plaintiff lawyers. However, contingency fees remain prohibited for members of the Dutch Bar.

4.37  Originally, the WCAM was not designed for transnational mass damages cases. And although foreign interested parties were involved in the Dexia, Vie d’Or, and Vedior settlements,¹⁷ the Shell settlement, declared binding on 29 May, 2009,¹⁸ and the Converium settlement, declared binding on 17 January, 2012,¹⁹ have by far the most significant cross-border implications.²⁰ Since the Shell and Converium settlements, the WCAM is undeniably ‘going global’, especially since it is used as a complementary collective redress mechanism to US class actions or class settlements, in which non-US interested parties are excluded.

4.38  The representative organizations that concluded the settlement agreement with Shell Petroleum NV and the Shell Transport and Trading Company Ltd²¹ as the alleged responsible parties, represented numerous shareholders residing worldwide who suffered financial losses allegedly caused by misleading statements concerning Shell’s oil and gas reserves, which led to a considerable fall in the price of Shell’s (p. 78) shares. In the United States, several securities class actions were filed, including two securities actions filed by European-based institutional investors. These securities actions were consolidated before the Federal District Court for the District of New Jersey and a Consolidated Amended Class Action Complaint was filed on 13 September, 2004.

4.39  Meanwhile, in the Netherlands, a joint request was filed on 11 April, 2007 for a binding declaration of a US$352.6 million settlement concluded for the benefit of non-US shareholders who both resided and purchased the shares outside the United States between April 1999 and March 2004. The Shell Group negotiated and concluded the settlement with the organizations representing the ‘non-US class’: the Shell Reserves Compensation Foundation—a Dutch special purpose organization specially set up to represent the interests of non-US shareholders—the Dutch Investors’ Association (VEB), and two Dutch pension funds.

4.40  In light of the proceedings in the United States, the Amsterdam Court of Appeal was requested—by the petitioners—to stay its proceedings on the binding declaration of the settlement until the New Jersey court ruled on its jurisdiction over non-US shareholders. The Amsterdam Court accepted to hold its decision partly because the Shell settlement prescribed that in the event US courts would assert jurisdiction over non-US shareholders, the settlement shall be null and void in order for the non-US shareholders to join the US class action. Nonetheless, the New Jersey court refused jurisdiction over the non-US plaintiffs on 13 November, 2007, and denied their claims on 5 December, 2007, on the grounds that Shell did not engage sufficient conduct in the United States for the District Court to have subject matter jurisdiction over foreign plaintiffs.²²

4.41  The Dutch WCAM Shell settlement was declared binding by the Amsterdam Court of Appeal on 29 May, 2009. The non-US shareholders represented by the representative organizations are thus bound by the terms of the settlement agreement and have the obligation to release all claims against Shell in relation to the reserves’ re-categorization.²³ The WCAM settlement also prescribes that if the US class action settles on more favourable terms than the WCAM settlement for the non-US shareholders, the latter will be amended to include those more favourable terms. As indicated, this case involved significant private international law issues, especially relating to international jurisdiction.

4.42  The Converium settlement involves Converium Holding AG, a Swiss-based reinsurance company currently known as SCOR Holding AG. Converium shares were (p. 79) sold by ZFS and listed on the SWX Swiss Exchange (SWX) in Switzerland and as American Depositary Shares (ADSs) on the New York Stock Exchange (NYSE). Converium allegedly made false statements and omitted material facts regarding its financial position and as a consequence thereof, the value of its shares substantially declined and investors suffered financial losses. Several securities class actions were filed in the United States and were consolidated before the United States District Court for the Southern District of New York.

4.43  On 6 March, 2008, the District Court ruled that it lacked subject-matter jurisdiction over claims of foreign class members who purchased Converium shares on the SWX. The court excluded the foreign members from the class and any future US settlement.²⁴ The US class action was eventually settled, but the two US settlements only benefited shareholders which purchased (i) ‘ADSs’ on the NYSE or (ii) Converium shares on the SWX but were United States residents. Non-US shareholders who had purchased their Converium shares on SWX or on any other non-US stock exchange were excluded from the relief provided under those US settlements.

4.44  On 8 July, 2010, the Converium settlement was concluded under the Dutch WCAM for the benefit of non-US residents who purchased Converium shares on the SWX Swiss Exchange or any other stock exchange and for ­shareholders—even if they purchased their shares on the NYSE—who were residing outside the United States during the relevant period of time. The two representative associations were established in The Hague and incorporated under Dutch law: the special purpose organization Stichting Converium Securities Compensation Foundation (the Converium Foundation)—representing the interests of the ­non-US shareholders and the VEB representing the interests of Dutch Shareholders.²⁵ Pursuant to its articles of association, this Converium Foundation represented the interests of non-US residents who purchased the shares outside the United States and allegedly suffered financial loss. Only 3 per cent of them are established in the Netherlands. The Converium settlements were concluded for the benefit of approximately 12,000 interested parties.²⁶ An estimated 8500 of them are established in Switzerland and about 1500 in the United Kingdom. The names and addresses of over 3000 interested persons are known to the settling parties; of these, only 204 are domiciled in the Netherlands. When approving the Converium settlement the Amsterdam Court considered that the Foundation and the VEB were sufficiently representative with respect to the interests of the (p. 80) non-US exchange to declare the settlement binding.²⁷ The court considered that the Foundation’s representativeness of the interests of non-US shareholders was demonstrated by the fact that it had sought and obtained support from 29 foreign organizations representing non-US shareholders including European representative organizations and various representative organizations from countries where most of these known interested persons are domiciled, such as Switzerland and the United Kingdom.

4.45  As indicated earlier,²⁸ the Amsterdam Court accepted jurisdiction to hear the case in a preliminary judgment on 12 November, 2010.²⁹ On 22 August, 2011, a statement of defence was filed against the joint petition for the binding declaration of the two settlements by 10 institutional investors mainly registered in Germany and Switzerland. These foreign respondents representing less than 1 per cent of the total alleged damages of the group of non-US shareholders principally contested the reasonableness of the settlement as to the amount awarded. On 17 January, 2012, the Amsterdam Court declared the Converium settlements binding, at the same time reaffirming its provisional ruling on jurisdiction.³⁰

4.46  In its findings on the reasonableness of the settlement with respect to the amount of compensation awarded, which was proportionally considerably lower than the settlement payment for the smaller group of US shareholders, the Court heavily relied on the fact that the non-US shareholders had being excluded from the US class, and that it is not plausible that they would therefore have effective remedies in or outside the United States absent the settlement agreements. In other words, the difference between the US settlement and the WCAM Converium settlement was not unacceptable, as the legal position of the two groups of shareholders was essentially different and could accordingly be treated differently in terms of settlement outcomes.³¹

4.47  The court also assessed the reasonableness of the Principal Counsel’s fees that represented 20 per cent of the settlement payment and was perceived by the objecting parties as excessive and incompatible with Dutch public order.³² The Amsterdam Court of Appeal dismissed this objection, finding that in the context of determining the fairness of a collective settlement also under Dutch law the court may take into account customary US fee practices, when US law firms are involved and the legal services provided by them took place predominantly in the US. Furthermore, the Amsterdam Court of Appeal pointed out that the US lawyers’ fees have also been heavily scrutinized by the US court approving the US settlements and that (p. 81) a fee calculated on the basis of the lodestar method (hourly fees) would lead to a similar remuneration.

4.48  Shell and Converium demonstrate that the WCAM played a complementary role in order to obtain relief for mainly European shareholders who were excluded from the US class actions. Although the need for a competent forum to obtain relief—or forum necessitatis—does not play a role in the allocation of jurisdiction under the Brussels I Regulation³³ and the Lugano Convention,³⁴ the necessity to provide relief for the excluded group of non-US class members was emphasized by the Amsterdam Court of Appeal when it accepted jurisdiction and declared the settlement binding.³⁵ It was repeatedly stressed that there was no other forum available to the interested parties where they could be compensated for their damages in such an efficient manner.³⁶ This ‘European group’ of interested parties would likely be left without any form of relief if the Amsterdam Court would not declare the WCAM settlements concluded for the benefit of the ‘excluded groups’ binding.

4.49  It must be emphasized that the court’s willingness to facilitate the global resolution of mass disputes probably stems from the fact that the collective settlements that are submitted for approval before the court are viewed by the court as amicable settlements and as an exponent of the freedom of contract. By submitting these settlements to the court, parties demonstrate a perceived need for a global solution and resolution, for which the court, as public servant, is obviously responsive. Parties requesting the binding declaration expected and wanted the Amsterdam Court to assert jurisdiction over foreign interested parties and its jurisdiction was never challenged.³⁷ In Converium, the foundation of the Amsterdam Court’s international jurisdiction as established in its preliminary decision was not contested. Subsequently, the court did not see any reason to ex officio retract its provisional ruling hereby simply confirming its reasoning on the jurisdictional aspect of the (p. 82) case.³⁸ The specific feature of a joint request for a binding declaration creates the impression that it is in the interest of all parties concluding the settlement that it is declared binding by the court. It is equally thought to be in the interest of the beneficiaries.

4.50  The fact that the Netherlands is the only Member State with the possibility of providing relief by way of a collective settlement which would be complementary to United States settlements was one of the principal reasons to settle under the WCAM. The WCAM is therefore considered by some to be the new export product of the Netherlands to provide relief for European and other non-US interested parties or victims in mass damages cases.³⁹ This phenomenon of transnational collective redress is likely to intensify in the aftermath of the US Supreme Court’s landmark decision in Morrison v National Australia Bank,⁴⁰ which has the principal implication that the extraterritorial reach of the anti-fraud provisions of the US Securities Laws will considerably be reduced.⁴¹ The immediate effect would be that foreign class members are even more likely to be excluded in global securities class actions.

4.51  Whereas United States courts have the power to exclude certain class members during the certification stage, as was the case in the United States litigation in Shell and Converium, the Amsterdam Court has to declare the settlement binding for all interested persons for whom it was concluded or refuse the binding declaration as a whole. As explained previously, the court cannot alter the terms of the settlement agreement, and is therefore not entitled to exclude (groups of) persons for whose benefit the settlement agreement was reached. If the settlement is concluded for the benefit of (among others) foreign parties, the court has to assert extraterritorial jurisdiction over the whole group including these foreign interested parties. Nonetheless, the court can suggest to parties to exclude (or include) certain beneficiaries in order for the court to declare it binding.

4.52  The Shell and Converium settlements excluded US shareholders due to the class action proceedings instituted in the United States. In the Dexia settlement, a group (p. 83) of Belgian interested parties was excluded from the settlement in order to avoid problems related to a more favourable applicable consumer law. Nonetheless, when the number of beneficiaries to the settlement is reduced, it obviously becomes less attractive to the alleged defendant to settle, as achieving finality becomes problematic.

4.53  In the Converium case, none of the alleged defendants and only a limited number of the interested parties were domiciled in the Netherlands.⁴² This raises at least three significant questions. The first one relates to the jurisdictional reach of the Amsterdam Court of Appeal to declare the settlement binding for the remaining 97 per cent of shareholders located outside the Netherlands. The second concerns the question of whether the representative foundations fulfil the representation requirement with respect to these foreign interested parties. The third one relates to the question whether they are bound by the binding declaration outside the Netherlands. Similar questions were raised in Shell. In other words, the international application of the WCAM highlighted complex issues of private international law relating to the jurisdictional reach of the Amsterdam Court, the notification requirements and adequate representation of foreign interested parties, the cross-border recognition of the binding declaration, and issues regarding the applicable law.

4.54  The question of the jurisdictional reach of the Amsterdam Court to bind foreign interested parties to the WCAM settlements and the jurisdictional grounds used by the Court has been perceived by many as controversial, especially in the Converium case, owing to the lack of nexus with the Netherlands.⁴³ The application of existing European jurisdictional rules appears problematic and the suitability of the Brussels I Regulation to the WCAM procedure was questioned.

4.55  The jurisdictional question was firstly addressed in the Shell settlement and was the main issue of the Court’s provisional judgment of 12 November, 2010 in the Converium case.⁴⁴ In both cases, the Court established jurisdiction by applying the Brussels I Regulation and the Lugano Convention over interested persons domiciled in the EU and EFTA States on the one hand and by applying Article 3 DCCP to interested persons not domiciled in any of those countries on the other.

(p. 84) 4.56  The application of the jurisdiction rules under the Brussels I Regulation is based on a creative interpretation of the concepts therein and requires further clarification in relation to collective settlements under the WCAM.⁴⁵ The Court has primarily focused on the settlement agreement itself and has not considered the underlying obligation of the settlement when it applied the provisions of the Brussels I Regulation. As a consequence, the concepts used in the WCAM such as ‘interested parties’ and ‘petitioners’ do not seamlessly fit within the terminology of the Brussels I Regulation, which is based on the traditional concepts of ‘defendants’ and ‘claimants’. This leads to a by some perceived as problematic application of the territorial scope of the Brussels I Regulation and the jurisdictional rules under Articles 2 and 6(1) Brussels I Regulation.

4.57  In Shell and Converium, the Court applied the Brussels I Regulation by considering the ‘interested parties’ as the persons ‘to be sued’ under Article 2. The Court accepted jurisdiction on the basis of the Articles 2 and 6(1) Brussels I Regulation by considering the place of domicile of the interested parties. For the interested parties domiciled in the Netherlands, the court accepted jurisdiction in accordance with Article 2 and considered all other foreign interested parties domiciled outside the Netherlands, but within the boundaries of a European Union Member State or EFTA State—as ‘one of a number of co-defendants’ to be sued for the purpose of Article 6(1) Brussels I Regulation. In the Converium case, this resulted in the court establishing jurisdiction over around 12,000 foreign interested parties pursuant to Article 6(1) Brussels I Regulation and Lugano Convention on the mere fact that 204 (known) interested parties who were domiciled in the Netherlands could be sued under Article 2.

4.58  This controversial application of Article 6(1) in conjunction with Article 2 would lead to the far-reaching consequence that the Amsterdam Court will have jurisdiction even when only one of the interested parties for whose benefit the settlement agreement was concluded is domiciled in the Netherlands.⁴⁶

4.59  In the Converium case, the Court applied an additional jurisdiction rule. The court applied Article 5(1) by stating that the place of performance of the obligation to pay compensation is in the Netherlands. Several question marks have been put as to the way Article 5(1) was applied by the Court: Should one not look at the underlying claim instead of at the settlement agreement itself? If one does look at the settlement agreement, should the latter be considered as a ‘contractual matter’ in the sense of Article 5(1) when it only comes into effect if declared binding?⁴⁷ And (p. 85) should the settlement be regarded as a ‘contractual’ obligation under Article 5(1) with respect to interested parties?⁴⁸ Finally, does a proper application of Article 5(1) not impose the determination of the ‘obligation in question’ according to established case law of the European Court of Justice?⁴⁹

4.60  The unanticipated problems which arose when dealing with the jurisdictional question under the Brussels I Regulation can be easily solved by a practical solution, which is the incorporation of a choice of forum clause in favour of the Amsterdam Court of Appeal in the settlement agreement to declare it binding on the interested parties for whose benefit it was concluded. For the application of the Brussels I Regulation, Article 23 (choice of forum clause) merely requires that one of the parties, either claimant or defendant, is domiciled in the Netherlands.

4.61  The practical outcome of incorporating a choice of forum clause in the settlement agreement in favour of the Amsterdam Court is that such clause would render the WCAM available in transnational mass damages cases affecting foreign interested parties residing outside the Netherlands as long as one of the applicants or party to the settlement agreement is domiciled in the Netherlands.⁵⁰

4.62  The question is whether a choice of forum clause contracted by representative applicants in the settlement agreement would also bind the interested parties, who are not de facto parties to the agreement, and have therefore not agreed to the choice of forum incorporated in the collective settlement. In other words, can a choice of forum clause concluded for the benefit of third parties and who have not signed the clause be valid, and can these third parties avail themselves of the choice of forum clause even if they have not explicitly consented to the choice of forum? In our view, the question should be answered positively by analogously applying the Gerling case to the WCAM procedure.⁵¹ Gerling concerned an insurance contract entered into between an insurer and a policy-holder and which contained a choice of forum clause not only for the benefit of the policy-holder, but also in favour of beneficiaries—third parties—to the contract. The Court of Justice of the European Union (CJEU) ruled that the third parties could rely on the jurisdiction clause even if they had not expressly signed and thus consented to the jurisdiction clause, provided that the formal requirements with respect to writing as enshrined in Article 23 are satisfied and that the consent of the insurer has been clearly manifested. The CJEU stated that third parties may rely on the clause even when they are not parties to the (insurance) contract and even when they are different persons whose identity may even be unknown when the contract was signed. The position of the beneficiaries to a WCAM settlement should be understood as comparable to the beneficiaries (p. 86) under Gerling.⁵² The interested parties have the opportunity to opt-out of the settlement. If they do not, they are considered to have consented to the settlement as a whole, including to the choice of forum: it is a take-it or leave-it deal.

4.63  When a choice of forum clause in favour of the Amsterdam Court is lacking in the settlement agreement, a different approach from that used by the Amsterdam Court in Shell and Converium could be taken with regard to the interpretation of the concept ‘person to be sued’. The alternative approach could establish jurisdiction on the basis of the underlying legal relationship—or subject matter of the dispute—of the settlement agreement. In most cases the alleged defendant would then be the ‘person to be sued’ in the sense of the Brussels I Regulation. In the Shell case, this would have been sufficient to establish jurisdiction for the Amsterdam Court under Article 2, Brussels I Regulation and its jurisdiction would most probably have been widely accepted.⁵³ Obviously such an approach would have been insufficient to establish jurisdiction in the Converium case by the Amsterdam Court while the alleged responsible parties were both domiciled in Switzerland.⁵⁴

4.64  Lastly, it is questioned by some whether the WCAM can be viewed as contentious proceedings within the meaning of the Brussels I Regulation even if it is currently unclear whether non-adversarial proceedings fall within the material scope of the Regulation.⁵⁵ Outside the scope of the Brussels and the Lugano regimes, the application of Article 3 DCCP is straightforward and unproblematic; it establishes a general jurisdiction rule for procedures commenced by petition and confers jurisdiction to Dutch courts if the domicile or habitual residence of any petitioner or any of the interested parties is located in the Netherlands. In the Shell and the Converium settlement, not only were the representative organizations established in the Netherlands, but so were (some of) the interested parties.

4.65  Yet, the advantage of applying the Brussels and Lugano jurisdictional regimes to interested persons within the EU and EFTA States served the recognition and enforcement purposes of the settling parties. The underlying argument was that if the Amsterdam Court could exercise jurisdiction to declare the settlement binding over foreign interested parties on the basis of the Brussels jurisdictional regime, (p. 87) this would provide for a stronger guarantee that the recognition of the court’s ruling would also fall under the Brussels recognition regime, including the preclusive effect of the foreign interested persons being refrained from starting proceedings elsewhere in the EU and EFTA States, unless they opted out.

4.66  However, the scope of the recognition regime differs from the Regulation’s jurisdictional scope enshrined in Article 2, as automatic recognition of decisions is guaranteed when the issuing court is a court of a Member State.⁵⁶ The question of recognition is to a great extent separated from the jurisdictional regime and does not depend on the underlying jurisdictional basis, but on the country of origin of the judgment or settlement.

4.67  In sum, the recognition of the Amsterdam Court’s binding declaration depends on the qualification of ‘judgment’ or ‘court settlement’ under Articles 32 and 58 of the Brussels I Regulation pursuant to Article 33(1) and Article 57 Brussels I Regulation respectively.⁵⁷ This might become different if the new definition of ‘court settlement’ under the Commission’s Proposal on the Recast of Brussels I were to be accepted.⁵⁸

4.68  The Regulation’s recognition regime for ‘judgments’, established in Articles 33–56, differs from the Regulation’s recognition regime for ‘court settlements’ as defined in Article 57 in conjunction with Article 58 Brussels I Regulation. The automatic recognition of ‘judgments’ may only be refused if one of the grounds for non-recognition specified in Article 34—manifestly contrary to public policy, given in default of appearance or irreconcilability of judgments—apply or if the examination of the jurisdictional grounds preclude recognition pursuant to Article 35. For ‘court settlements’, recognition may only be refused if enforcement is manifestly contrary to public policy in the Member State addressed.⁵⁹ This distinction is likely (p. 88) to be maintained under the proposed Recast of the Brussels I Regulation.⁶⁰ The public policy ground is particularly important in WCAM proceedings. It has been argued that the opt-out character is in itself a reason to refuse recognition.⁶¹

4.69  The applicability of the ‘automatic’ recognition regime of the Brussels I Regulation and Lugano Convention for EU and EFTA judgments constitutes an important advantage to settle under the WCAM.⁶² When a decision is not issued from another EU or EFTA State, such as a US class action judgment, the recognition of the decision falls outside the scope of the Brussels I Regulation and Lugano Convention and national rules on international recognition apply. The Dutch recognition regime is based on case law and provides for recognition of foreign decisions as long as:

1. 1)  the foreign decision is issued by a court which has established jurisdiction on an internationally accepted jurisdiction ground;

2. 2)  the foreign proceedings met the requirements of a fair trial; and

3. 3)  the foreign judgment is not contrary to public policy.⁶³

4.70  According to these standards, the Amsterdam District Court recognized a United States class settlement in the Royal Ahold NV case in an interim decision of 23 June, 2010. The Netherlands appears to have the scoop of recognizing a foreign class settlement based on an opt-out procedure in Europe, as an opt-out procedure has been said to be contrary to public policy in some European countries, notably in France.⁶⁴

(p. 89) 4.71  The Dutch Royal Ahold NV announced considerable losses on 24 February, 2002 following alleged complex fraud at its United States subsidiary Foodservice. As a consequence, investors in Ahold’s shares allegedly suffered substantial damage and several class actions were filed in the United States, against Ahold, its former CFO, and its accountant Deloitte, which were eventually consolidated before the District Court of Maryland.

4.72  On 6 January, 2006, Ahold reached a collective settlement with the plaintiffs, including among others the Dutch Investors’ Association, which was finally approved by the United States court on 16 June, 2006. The settlement held that compensation of US$1.1 billion should be paid by Ahold, and that the class members were no longer entitled to start any proceedings in relation to the claim against Ahold and its former CFO unless they had opted out.

4.73  In February 2008, the Stichting Onderzoek Bedrijfsinformatie (SOBI)— an association under Dutch law claiming to represent several Dutch class members who had not opted out—sued Ahold’s former CFO and Deloitte by claiming compensation for its loss suffered on similar grounds as the US class action. The latter relied upon the approved US class settlement and asked the Amsterdam Court to recognize the final judgment of the United States District Court for the District of Maryland, in order to bar SOBI from starting proceedings in the Netherlands.

4.74  The Amsterdam District Court held that the United States’ decision approving the class settlement should be recognized and enforced in the Netherlands according to its own recognition regime and the standards mentioned earlier. It considered that:

1. 1)  the foundation of the US court’s jurisdiction is internationally acceptable, as it could be considered as (one of the) forum delicti,

2. 2)  US proceedings respected the principles within the concept of a fair trial; and

3. 3)  they were not incompatible with public policy.

With respect to the latter two standards, the Amsterdam District Court relied heavily on the fact that the US proceedings were similar to the Dutch WCAM and argued that the interests of the interested parties were adequately safeguarded, as they were properly notified and had the opportunity to opt out or to file defences within a reasonable period of time.⁶⁵

4.75  It is worth mentioning that the Dutch decision to recognize a US settlement does not fall within the scope of the Brussels I Regulation because a decision recognizing another decision is not considered as a ‘judgment’ in the sense of Article 32. The (p. 90) Ahold US class settlement will not (automatically) be recognized in other EU and EFTA countries under the Brussels/Lugano regime.

4.76  With regard to the extended use and functioning of the WCAM in cross-border mass disputes, concerns have been expressed as to whether the Netherlands is implementing exponents of the United States legal systems that ideally should be avoided. Such fears seem ungrounded. The use of the WCAM in the cases to date seems to be the result of external factors rather than a process triggered by its structure. Those cases were and would have been brought up notwithstanding the absence or availability of the WCAM. Three out of the six collective settlements that have been submitted for approval to the Amsterdam court concern spin-offs of international securities disputes (Shell, Vedior, and Converium) and aim at a global resolution of securities claims, even though none of those cases have been litigated in the Netherlands. Vedior was not litigated at all and it was the Dutch company Vedior that initiated settlement negotiations with the Dutch Association of Retail Shareholders (VEB). The non-securities claim settlements (DES, Dexia, and Vie d’Or) have domestic backgrounds. DES pre-existed the WCAM and the WCAM was drafted to facilitate its resolution. In Dexia and Vie d’Or, lengthy individual proceedings and collective actions also pre-existed the WCAM.

4.77  However, there are reasons to believe that the structure of the WCAM—more precisely the absence of statutory provisions for (judicial) control over class counsel fees and the statutory provisions that grant standing to special purpose organizations to file a WCAM petition with the court—has triggered dynamics that may lead to the compensation of claims in the future which would otherwise not have been compensated, at least not in the Netherlands. In the aftermath of Morrison, US plaintiff lawyers will seek to expand their class litigation practice beyond the US by cooperating with non-US lawyers. In doing so, it may be possible for them to use the WCAM more frequently as part of their global options and litigation strategies. US plaintiff lawyers might be attracted by the WCAM since according to its statutory provisions, there is no judicial control over their remuneration, which can be substantive in class settlements.

4.78  Until now, the Amsterdam Court has been willing to facilitate the resolution of mass claims disputes where non-Dutch defendants are involved. However, the global application of the WCAM model has raised several concerns as to the way the Amsterdam Court has constructed its jurisdictional reach over foreign interested parties. However, none of the interested parties in Shell or Converium objected to the jurisdiction of the Amsterdam Court of Appeal, although other types of objections have been filed. Only some of the questions with regard to the international scope of the WCAM can be dealt with by the Dutch legislator. There are (p. 91) also interpretation issues that stay beyond the reach of the Dutch legislator and that can be addressed only by the Court of Justice of the European Union or the European Commission and Parliament. The private international law implications of collective redress mechanisms within the EU are on the EU legislative agenda.⁶⁶ However, the expectation is that the topic is too delicate and complicated to be dealt with expeditiously.

4.79  Whether the functioning of the WCAM to date is to be valued positively depends on one’s attitude with regard to prevention, law enforcement, and compensation as the main functions of civil law and civil procedure. What seems to remain undisputed is that in the cases to date, the WCAM has provided interested parties with remedies, and corporations with the opportunity to close the books and focus on business.(p. 92)