Collective action procedures are already well developed in Dutch law, which allows claims on behalf of a number of injured parties to be commenced in one action by an association or foundation with full legal capacity established for this purpose. Until recently, it was not possible to claim damages in a collective action; this had to be done in separate damages proceedings following the collective proceedings. However, the Collective Damages Act, which enters into force on 1 January 2020, makes it possible to file a claim for monetary damages in a Dutch collective action procedure for claims which relate to events occurring on or after 15 November 2016.
A procedure that facilitates the collective settlement of mass damages claims has been operating successfully in the Netherlands for several years now.
What forms of collective actions are permitted in this jurisdiction and under what authority?
Where numerous parties (“Injured Parties”) have an alleged claim for compensation of damage suffered as a result of one or more similar acts by another party (“Responsible Party”), under Article 3:305a of the Dutch Civil Code (“DCC”), an association or foundation (a “Representative Organisation”) can represent the interests of these Injured Parties and initiate one single claim against the Responsible Party before the Dutch court. Provided that the Responsible Party meets the criteria set out in Article 3:305a DCC, (set out below), it may initiate a collective action.
Under the new Collective Damages Act (Wet Afwikkeling Massaschade in Collectieve Actie) (“WAMCA”) a central (public) register is established in which all pending collective actions will be recorded. When initiating a claim, the Representative Organisation must enter the collective action in this register no more than two days after serving the writ of summons. The entry will trigger a period (in principle three months but it can be extended to six months), during which other Representative Organisations may file collective actions on behalf of the Injured Parties they represent and which are in respect of the same event(s), and similar facts and legal points. During this period the court will stay the initial collective action. After the period has lapsed, all collective actions initiated regarding those same events will be dealt with on a consolidated basis. If there is more than one Representative Organisation, the court will select the most suitable organisation as so-called Exclusive Representative (see below).
For the WAMCA to apply, the procedure must have a sufficiently close connection with the Dutch jurisdiction. Under the WAMCA, the Representative Organisation can claim collective (monetary) damages on behalf of the Injured Parties. This means that the question of whether and to what extent a party suffered damage does not have to be answered on an individual basis, as was the case under the old regime. A court judgment granting or dismissing claims in the collective action is in principle binding for all Injured Parties who are domiciled in the Netherlands and did not opt-out, and for all Injured Parties not domiciled in the Netherlands who opted-in (see below).
The old regime will apply to actions relating to events that took place before 15 November 2016. Where this regime is still applicable, the Representative Organisation will have to ask the Dutch court for a declaratory judgment regarding the liability of the Responsible Party. If the liability of the Responsible Party is established in a judgment between the Responsible Party and the Representative Organisation, each Injured Party can then separately bring its own claim for compensation on that basis.
It is possible to appeal the judgment of the court in a collective action, first to the Court of Appeal and thereafter to the Dutch Supreme Court.
The Dutch Act on Collective Settlement of Mass Damages Claims (Wet Collectieve Afwikkeling Massaschade) (“WCAM”) facilitates the collective settlement of mass damages claims in a procedure that is very similar to the United States’ “damages class action” procedure. Under WCAM, the interests of a group of Injured Parties can be represented by a Representative Organisation, which may be the same entity that initiated the collective action set out above. Should the Representative Organisation subsequently agree to a settlement with the Responsible Party regarding the compensation payable to the Injured Parties represented by it, they can file a joint petition with the Amsterdam Court of Appeal to declare the settlement agreement collectively binding. Provided that the requirements under WCAM for a settlement agreement are met, the Amsterdam Court of Appeal will declare the settlement agreement collectively binding. Notification of the judgment and of the possibility to opt out of the settlement agreement within a certain period of time (which must be at least three months), is then sent to the Injured Parties. Injured Parties who do not opt out are bound by the settlement.
WCAM was most recently amended on 1 July 2013. The amendments facilitate – amongst other things – mass damages claims in insolvency proceedings. Liquidators can now pool claims in a WCAM settlement which, if declared binding, means that the liquidators no longer have to verify each claim individually.
The Amsterdam Court of Appeal is exclusively competent to deal with the petition to declare a settlement agreement collectively binding. Its decision may only be appealed to the Dutch Supreme Court on the joint request of the Responsible Party and the relevant Representative Organisation. A preliminary ruling may also be requested from the Dutch Supreme Court. In the settlement agreement, the Responsible Party does not necessarily have to accept liability for the damage suffered (unless its liability has already been established in a prior collective claim, as described above).
The new WAMCA is designed to provide sufficient room for settlement of the dispute. After the period to opt out/in has lapsed, the court will set a period for the parties to try to reach a settlement. If no settlement is reached, the case will proceed. The court also has the discretion to order the Exclusive Representative and the defendant(s) to provide it with a proposal on the collective settlement of the alleged damage, which it may use to determine the damages allocated to the Injured Parties. If, in the course of the proceedings, the Exclusive Representative and the defendant(s) reach a settlement, the same conditions apply as for settlements under the WCAM.
Who may bring them?
Article 3:305a DCC provides that only Representative Organisations may bring collective actions. A Representative Organisation is an association (vereniging) or foundation (stichting) established under Dutch law, which is permitted to represent the interests of the Injured Parties in accordance with the criteria set out in Article 3:305a DCC.
Previously, quality requirements for Representative Organisations were introduced on the basis of which a Representative Organisation could be declared inadmissible in its claim if the interests of the persons that it is meant to represent are “insufficiently safeguarded”. The courts would also take into account the (non-binding) Claim Code published by an independent commission, which contains a set of governance requirements for Representative Organisations, to assess whether a Representative Organisation was sufficiently safeguarding the interests of the Injured Parties. A second edition of this Claim Code was published in 2019.
The new WAMCA now introduces additional admissibility requirements for Representative Organisations and their claims, including funding, transparency and governance requirements. For example, the Representative Organisation should in principle: (i) have sufficient means to fulfil the costs of initiating the proceedings and sufficient authority over the claims to be initiated; (ii) be transparent in respect of the salaries of its directors and the calculation of the contributions by its representees (iii) be able to show that it has the experience and expertise to bring such an action; and (iv) have proper means to involve its representees in the decision-making process. Its founders/directors are not permitted to have any profit motive that may be promoted through the Representative Organisation.
Furthermore, the collective action must have a sufficiently close connection to the Dutch jurisdiction (“scope-rule”). This will exist if: (i) the majority of individuals on behalf of whom the collective action is initiated reside in the Netherlands; or (ii) the defendant resides in the Netherlands and there are additional circumstances that show a sufficient connection with the Netherlands; or (iii) the circumstance(s) on which the collective action is based took place in the Netherlands.
Finally, a collective action is inadmissible if the Representative Organisation has not first attempted to settle the case with the Responsible Party, by sending it a letter of claim offering a two-week period in which to enter into settlement negotiations. If no settlement is reached the case will proceed, provided that the Representative Organisation is deemed admissible (see above), the collective action is not deemed prima facie inappropriate and the Representative Organisation has sufficiently demonstrated to the court that the collective action is more efficient and effective than individual proceedings.
If there is more than one Representative Organisation, the court will select the most suitable organisation as the Exclusive Representative for the group/class of Injured Parties represented in the collective action. The decision of the court will be based on the size of the class and the number of claims represented by the Representative Organisation, as well as the actions performed by that Representative Organisation for its representees or in previous cases. The appointment of the Exclusive Representative cannot be appealed. The Exclusive Representative will represent all members of the class and will be point of contact for the defendant. Although the other Representative Organisations will remain parties in the proceedings, in principle only the Exclusive Representative will be allowed to submit procedural briefs. The court may rule that unrepresented claimants are also allowed to submit procedural briefs.
Opt in or opt out?
Under the old regime, each individual party has to commence its own separate action to benefit from the court decision in the proceedings brought against the Responsible Party by the Representative Organisation. Individual parties may even commence separate proceedings in relation to the extent of the Responsible Party’s liability, despite the decision in the collective action. They can also decline to be bound by the decision in the collective action.
For proceedings under WAMCA, the court will offer Injured Parties residing in the Netherlands the option to opt out of the proceedings (available for at least a month following the decision appointing the Exclusive Representative). However, unless decided otherwise by the court, Injured Parties who are not domiciled in the Netherlands will have expressly to opt in to the collective action for a judgment to have a binding effect on them. Again the court will offer them this option, available for at least a month following the appointment of the Exclusive Representative. However, parties will be able to request the court to order that the opt out mechanism also applies to foreign Injured Parties in the interest of, for example, finality.
In respect of the WCAM collective settlement procedure, an opt out process is available once the settlement has been declared collectively binding by the Amsterdam Court of Appeal.
Under the old regime, monetary damages cannot be claimed by Representative Organisations. Other than that, there are no limitations as to the type of claims that can be brought or settled collectively, provided that the Injured Parties’ claims result from one or more similar acts by the Responsible Party.
Under the new WAMCA there are no restrictions as to the type of claims that can be brought or settled collectively (again, provided that the Injured Parties’ claims result from one or more similar acts by the Responsible Party). For the limitations to the scope of the proceedings, see above.
Pursuant to recent judgments of the Dutch Supreme Court, a Representative Organisation may suspend the applicable limitation period for claims for compensation of loss and damage on behalf of all Injured Parties, including Injured Parties who have not joined the Representative Organisation.
Judge or jury?
What relief may be obtained?
As mentioned above, for collective actions filed before 1 January 2020 and/or which relate to an event or events occurring before 15 November 2016, the Representative Organisation cannot ask the Dutch court for compensation of damages in a collective claim but only for a declaratory judgment regarding the liability of the Responsible Party. The question of whether and to what extent a party suffered damage must be answered on an individual basis in separate civil proceedings.
For collective actions filed after 1 January 2020 and which relate to an event or events which occurred on or after 15 November 2016, all kinds of relief, including damages, can be claimed. It is expected that under the new regime, the main aim of collective actions will be to reach a collective settlement, either voluntarily between the parties to the proceedings or by decision of the court.
How are such actions funded?
Under the ethical rules applicable to Dutch lawyers, a Dutch lawyer is not allowed to represent clients on the basis of “no win no fee” or “no cure no pay”. Therefore, they cannot be paid exclusively based on the potential proceeds of a collective claim or collective settlement. Pursuant to Dutch case law, however, a Representative Organisation can claim compensation for the “reasonable costs it has incurred for the purpose of establishing liability and the amount of damage”. In the recent Fortis/Agaes case, which entailed a request to declare a settlement collectively binding, the reasonableness of the costs awarded to the Representative Organisations was scrutinised by the Dutch court.
The Netherlands has also seen an increasing number of claims in “regular” legal proceedings initiated by so-called “litigation vehicles”, financed by third-party funders. Typically, the litigation vehicles’ endeavours are financed by (anonymous) third-party funders that speculate on the outcome of the legal proceedings or a possible settlement with the defendant(s). This type of third-party funding is currently unregulated in the Netherlands.
The WAMCA imposes stricter financial requirements on the Representative Organisations filing collective actions. This is to safeguard the interests of the Injured Parties, as well as the Responsible Parties. For example, the board members involved in the Representative Organisation may not have a profit motive that is realised through the organisation, the Representative Organisation must able to prove that it has sufficient means to fulfil the costs of initiating the proceedings and there should be safeguards to prevent a third party funder having a decisive influence over the claims.
Is pre-trial disclosure available?
Dutch law is not familiar with US-style discovery of documents. In the Netherlands, there is a limited obligation to produce documents. In brief, a party with a legitimate interest in disclosure may request that specifically identified documents are produced (such as an email from A to B dated Y with subject Z). Also, the Dutch court may order a party to produce books, records and other documents it is legally obliged to keep. Although rules have not yet been formally codified, the Dutch Supreme Court has indicated that it may be possible to obtain the securing of evidence pre-judgment – that is, ex parte orders of the court to ensure that evidence is preserved until a court has formally ordered its disclosure. Previously, this was only possible in intellectual property cases. The use of this new instrument should lead to more procedural certainty and is expected to render the current system of enforcement of orders for document production more effective. Furthermore, it is possible under Dutch law for any party with a potential claim to file a petition with the Dutch court for a preliminary hearing of witnesses or experts. This is a well-established right under Dutch law and the court will therefore usually allow such a petition.
Likely future scope and development?
Collective actions are becoming increasingly popular in the Netherlands. Now that the limitation preventing the recovery of monetary damages in collective actions has been lifted, it is expected that the WAMCA will increase the number of collective actions brought before the Dutch courts.