The Netherlands: the gateway to cross border binding collective settlements
Published on 18th Sep 2014
Under the Dutch Collective Settlement of Mass Claims Act (WCAM), parties that agree a settlement can request the Dutch court to declare the settlement binding on all individuals covered by its terms. Within the opt-out period, individuals can opt-out to avoid being bound by the collective settlement. Three (out of six) major collective settlements of mass claims (with a clear transnational effect) have been declared binding in the last couple of years, affecting individuals in more than 105 countries. Legal scholars across the world have variously either criticized the cross-border effects of the Dutch WCAM or praised them to the skies! OC Amsterdam’s Jeroen Bedaux, a leading adviser on the collective settlement of mass claims, explores this in more detail below.
The fact is that The Netherlands plays an important role in the collective redress of worldwide mass claims and makes the WCAM an attractive alternative to US and Canadian style class actions and settlements. Where US courts do not assume jurisdiction regarding damage claims from non-US investors in non-US companies on non-US stock markets, Dutch courts assumed jurisdiction even if there is only limited connection with the Dutch jurisdiction.
The Shell reserves collective settlement amounts to USD 353,000,000 with approximately 500,000 class members, the Vedior collective settlement amounts to EUR 4,250,000 with approximately 2,000 class members and the Converium settlement amounts to EUR 58,000,000 with approximately 12,000 class members. The Shell settlement concerns a Dutch and UK Shell entity as defendants, a worldwide class with most of the aggrieved individual shareholders in the UK and a minority in the Netherlands. The Vedior settlement concerns a Dutch defendant and a worldwide class including US shareholders. The Converium settlement concerns French/Swiss defendants with only a very limited number of aggrieved individual shareholders in the Netherlands.
In these three cases, the Dutch court assumed jurisdiction, since either one of the defendants or a (limited) number of shareholders resides in the Netherlands. The legal basis to bind the individuals in the EU Member States, Switzerland, Iceland and Norway follows from either:
(a) the Brussels I Regulation on jurisdiction and recognition of and enforcement of judgments in civil and commercial matters; or
(b) the Lugano Convention on jurisdiction and the enforcement of judgments in civil and commercial matters.
For the individuals residing outside aforementioned countries (such as US citizens) the Dutch Code of Civil Procedure provides that Dutch courts have jurisdiction if at least one party requesting the settlement binding or one of the defendants resides in the Netherlands. This all means that Dutch courts quite easily assumes jurisdiction, even if the connection with the Netherlands is hard to find.
With the Dutch court assuming jurisdiction, it is not said that collective settlements declared binding by the Dutch court will be recognised by courts in other countries.
One of the main issues regarding the cross border effects of the Dutch binding collective settlements is the way the individuals have been notified of the proceedings and the collective settlement. The WCAM provides for notification by regular mail, unless the court decide otherwise in the proceedings. Some Dutch legal scholars are of the opinion that the notification by regular mail only could be contradictory to the direct notification rules following from:
(a) the Council Regulation 1393/2007 on the Service in the Member States of judicial and extra judicial in civil or commercial matters (for EU citizens); or
(b) the Hague Convention on the service abroad of judicial and extrajudicial documents in civil and commercial matters (for individuals residing outside the EU).
In the first Dutch collective settlement (the Dexia case), the court ruled that the notification by regular mail was sufficient. Contrary to the Shell and Converium cases, in the Dexia case the individuals were all known and the vast majority resided in the Netherlands. The Shell and Converium cases consist of a serious number of unknown individuals in a lot of different countries. To illustrate: In the Shell case 110,000 notices to 105 countries in 22 different languages have been sent. The public notices were published in 44 different international newspapers. If and insofar the individuals have not been duly notified, courts in other jurisdiction can easily cease the execution of the collective settlement since it contradicts with the national and/or international rules on proper service. In the Converium and Shell cases (at least) the Dutch court ruled that the service of notification test has been passed in accordance with the relevant national and international rules.
Regarding the international recognition and enforceability, the proof of the pudding is in the eating. The success of the Dutch collective settlement on mass claims fully depends on whether the collective settlement will be recognised by courts in other jurisdictions. Whether courts in other countries will recognize and enforce the binding collective settlements of Dutch courts follows from the international private law rules of each country. The courts in other EU countries are bound to the Brussels I Regulation and therefore have very limited grounds to reject a binding collective settlement:
(a) lack of proper notification of the individual; or
(b) the judgment in which the settlement has been declared binding is manifestly contrary to public policy.
Recognition of the binding collective settlement countries outside the EU depends on their local international private law.
All things considered, the Netherlands is the only European country that is a Valhalla and gateway to cross border collective settlements, since only a limited connection suffices to assume jurisdiction by the Dutch court and aggrieved individuals either residing in the Netherlands or abroad are bound by the Dutch binding collective settlement, unless they timely opt-out.
Jeroen Bedaux is a commercial and corporate litigator based in OC’s Amsterdam and is acknowledged as a leading adviser on the Collective Settlement of Mass Claim, having advised on Dexia, the Association of Stockholders in the Shell Collective Settlement and on a group of international banks in the DSB Collective Settlement.