The Netherlands to Introduce Possibility for Damages Claims Under Class Action System
As explained in my latest contribution in Business Law International (“Fortis’s Settlement: A comparative case-study of (securities) class action mechanisms in Europe and in the United States“), the Netherlands presently offer one of the most friendly regimes in Europe for collective actions. Unlike the U.S. class action system, however, the Netherlands does not offer the possibility to obtain monetary damages under the current class action rules.
Nevertheless, a new bill (the Bill) recently put before the Dutch legislature suggests that this significant limitation could be on the way out. I therefore wanted to take this opportunity to briefly introduce you to the future changes that might be brought to the class action regime in the Netherlands.
The current class action system in the Netherlands
At the moment, the Dutch class action system uses two specific vehicles.
On the one hand, there are rules on the initiation and litigation of collective actions. Those rules, which are provided for in Article 3:305 of the Dutch Civil Code, enable a court to either deliver a declaratory judgment establishing the liability of the defendant or to grant injunctive relief. Such a declaratory judgment can then serve as a stepping stone for claimants to claim damages in individual proceedings or to collectively seek a settlement.
On the other hand, the Dutch Collective Settlement of Mass Claims Act (“Wet collectieve awkikkeling massaschade” – WCAM) provides for a class or collective settlement mechanism. Unlike class action procedures in the United States, however, neither Article 3:305 of the Dutch Civil Code nor the WCAM provide a legal basis for bringing or maintaining class actions seeking monetary damages. They merely provide procedures to settle claims. Indeed, the WCAM simply allows plaintiffs to petition a Dutch court to declare a mass settlement binding on a class or classes of persons whose members have suffered similar injury.
Importantly, under the current regime, only a foundation or a special interest organisation (a so-called “stichting“) can take a role in the litigation and settlement negotiations with the defendant (thereby excluding individual plaintiffs from taking any role in the negotiation process).
The proposed changes – the possibility to obtain reparation for collective damage claims
In November 2016, the Bill was submitted to the Dutch Parliament. The purpose of the Bill is to repeal the current restriction on collective action for monetary damages and to find a balance between the interests of the injured person and the rights of defence of the defendant.
In order to reach those objectives, the Bill provides for strict requirements with which the representative organisation should comply:
- The organisation should have a supervisory body;
- The organisation should have appropriate mechanisms insuring the involvement of the injured persons;
- The organisation must have sufficient funds to bear the cost of the legal proceedings;
- The organisation should have a website that is generally accessible (containing specific information); and
- The organisation should have sufficient experience and expertise.
Importantly, the class action must have sufficient ties with the Netherlands in order to be admissible. This condition will be fulfilled if, for example: (i) a majority of the injured victims represented by the class reside in the Netherlands; (ii) the defendant is domiciled in the Netherlands; or (iii) the event on which the claim is based occurred in the Netherlands.
The Bill also provides for a central register for collective actions in which each representative organisation must register its collective actions. If more than one class action is filed for the same event, the competent court will then appoint a lead plaintiff based on various criteria, including the number of injured persons that the organisation represents or their financial interest. The role of the lead plaintiff will be to represent the entire class and to file briefs on their behalf.
Importantly, members of the class can also choose to opt-out at the beginning of the proceedings. If they do not opt-out then they will be bound by the judgment rendered by the court.
This significant legislative development should carefully be monitored by those practitioners (in particular lawyers in the field of private enforcement of competition rules) active in cross-border litigation.
I will of course keep you posted of any significant legal development.