By Albert Knigge & Huib Lebbing | Houthoff
Today, the Dutch House of Representatives approved the draft bill on Redress of Mass Damages in a Collective Action. With this bill, the options for starting collective actions will be broadened. The bill will allow claim vehicles to seek damages in a collective action.
Currently, Dutch collective actions can only be used as a stepping stone towards obtaining financial compensation. Damages cannot be claimed. The draft bill also introduces a number of safeguards to prevent abuse of the Dutch collective action system, especially in view of the increasing commercial use of collective actions by claim vehicles. Therefore, the bill adds stricter requirements for the standing of a claim vehicle and the scope of the collective action. Lastly, the bill introduces procedural changes to enhance the efficiency and effectiveness of these proceedings, including the appointment of an exclusive representative, the consolidation of collective actions if these actions are based on the same events, and the obligation for the parties to try to negotiate a settlement agreement after an exclusive representative has been appointed.
The draft bill will now be discussed in the Senate. After approval by the Senate, the bill will enter into force on a date to be announced. The bill will apply to collective actions brought on or after the date of its entry into force. These actions can relate to events that took place before that date. However, the old regime will apply to actions that are brought on or after the date of its entry into force, but that relate to events that took place before 15 November 2016, the date that the draft bill was submitted to the Dutch parliament.
DUTCH COLLECTIVE ACTIONS
Currently, Dutch collective actions can be initiated by a claim vehicle under Article 3:305a Dutch Civil Code (DCC). A claim vehicle can only be a foundation or an association with full legal capacity which aims to promote the similar interests of other persons, in so far as it represents these interests under the terms of its articles of association and these interests are sufficiently safeguarded by the claim vehicle. Any civil claim can be brought in collective actions, except a claim for damages. Dutch collective actions can only be used as a stepping stone towards obtaining financial compensation. After the claim vehicle has obtained a declaratory judgment holding that the defendant acted unlawfully, the claim vehicle usually tries to reach a collective settlement agreement. If parties reach an agreement, they can submit a joint petition to the Amsterdam Court of Appeal, asking the court to declare the settlement binding on everyone who is represented. After being approved by the court, the settlement will bind everyone who is represented, unless they choose to opt out in a timely manner. If parties do not reach an agreement, the only way for claimants to obtain damages is by submitting an individual claim or a bundle of individual claims for damages. In an individual claim, it is likely that the court will follow the decision of the court in the collective action.
The draft bill introduces the possibility to claim damages in a collective action and adds stricter requirements regarding the standing of the claim vehicle and the scope of the collective action. It also introduces procedural changes to make proceedings more efficient and effective.
The proposed standing requirements relate to the claim vehicle’s governance, representativeness, transparency and its funding. The draft bill incorporates principles that have already been laid down in a soft law instrument: the Claim Code 2011, a code of conduct for claim vehicles which the courts have given increasing weight to in recent years.
A claim vehicle will only be admissible in its claim if 1) the claim vehicle meets all the standing requirements; 2) the claim vehicle has made it sufficiently plausible that bringing a collective action is more efficient and effective than bringing individual claims because there is numerosity, questions of law and fact are sufficiently similar and – if the claim is brought to obtain compensation – the persons represented individually and jointly have a sufficiently large financial interest, and 3) the defectiveness of the collective action was not summarily apparent when the writ was submitted.
SCOPE OF THE COLLECTIVE ACTION
The draft bill also aims to narrow the scope of collective actions, in order to prevent foreign claimants settling disputes in Dutch proceedings that are not or are only vaguely related to the Netherlands. Therefore, the draft bill proposes that a claim vehicle can only bring a collective action if the legal claim has a sufficiently close relationship with the Netherlands. A sufficiently close relationship exists if 1) the majority of persons whose interests the legal action aims to protect have their habitual residence in the Netherlands; or 2) the party against whom the legal action is directed is domiciled in the Netherlands and additional circumstances suggest a sufficient relationship with the Netherlands; or 3) the event to which the legal action relates took place in the Netherlands. If the claim is not sufficiently related, the claim vehicle has no standing.
COURSE OF THE PROCEEDINGS
The draft bill also introduces changes to the normal course of the proceedings. The claim vehicle has to register its collective action in a central register. If several claim vehicles bring a collective action addressing the same events, these collective actions will be consolidated. If the court grants the claim vehicles that brought a collective action standing, it will appoint one of them as the exclusive representative. The other claim vehicles remain party to the proceedings. The exclusive representative will represent the interests of those claim vehicles and of the persons the collective action aims to protect. Those who don’t want to be represented in this collective action can opt-out after the appointment of the exclusive representative. Foreign persons can be represented, provided that they opt-in.
Following the appointment of an exclusive representative, the court will set a period for parties to try to negotiate a settlement agreement. After a settlement agreement is reached and declared binding, there is a second opportunity to opt-out. If no agreement is reached, the proceedings will continue. However, if at a certain point in the proceedings the court deems this appropriate, it can order the parties to submit a proposal for settling the claim, on the basis of which the court can determine compensation. The court will have to ensure that the amount of compensation awarded is reasonable and that the interests of the persons the collective action aims to protect are sufficiently safeguarded.
LITIGATION COSTS AND LAWYERS’ FEES
The Netherlands have a moderated ‘loser pays’ rule. The costs that can be reimbursed by the winning party are usually limited to the court registry fee, the costs of witnesses and experts and a limited fixed amount for lawyers’ fees. However, the bill allows the court to deviate from this rule by awarding a much higher amount for costs to the winning party. If the court finds that the defectiveness of the claim is summarily apparent, it can order the claim vehicle to pay a higher amount of lawyers’ fees, up to a maximum of five times the fixed amount, unless fairness dictates otherwise. If the proceedings result in a collective claim settlement ordered by the court, the court may order, if so requested, that the defendant pay reasonable and proportionate court costs and other costs that the claim vehicle has incurred, unless fairness dictates otherwise.
The bill on Redress of Mass Damages in a Collective Action will be applied to collective actions that are brought on or after the date of its entry into force. These actions can relate to events that took place before that date. However, the old regime will apply to actions that are brought on or after the date of its entry into force, but that relate to events that took place before 15 November 2016, the date that the draft bill was submitted to the Dutch parliament.
An informal and unauthorised English translation of the draft bill can be found here.
NETHERLANDS COMMERCIAL COURT (NCC)
Since 1 January 2019, parties can choose to bring a cross-border collective action before the Netherlands Commercial Court (NCC). The NCC provides for proceedings in English and for obtaining a judgment in English. Click here for our news update on the NCC.
Compliments of Houthoff, a member of the EACCNY