Class Actions
29 January 2019
The last News Update on class actions pointed out some recent European developments, the most important being the draft directive on representative actions for the protection of the collective interests of consumers (COM(2018) 184 final). The Dutch government continues to recommend that the European directive should facilitate – and maybe even follow the example of - the Dutch draft bill making collective damages claims possible. The bill has yet to be discussed in plenary debate in the Dutch parliament.
Meanwhile, several judgments have been handed down in cross-border collective redress actions. In September, two Dutch district courts ruled on their competence in different collective actions by claim vehicles allegedly representing international investors in claims against the multinationals Steinhoff and Petrobras. The courts assumed jurisdiction in the proceedings against Steinhoff and Petrobras, although the court dealing with the Petrobras claims declined to exercise its jurisdiction over two of the claims. The district courts did so despite pending parallel proceedings abroad and the fact that the investors the claim vehicles represented did not trade shares on the Dutch market in the companies that they had taken actions against. In October, the Amsterdam Court of Appeal declared a claim vehicle inadmissible in its appeal in a case initiated against Trafigura. Finally, an important judgment was handed down under the Dutch Act on Collective Settlement of Mass Claims (Wet Collectieve Afwikkeling Massaschade or WCAM). In July, the Amsterdam Court of Appeal approved the Fortis settlement agreement, binding a class of former Fortis investors. The settlement payment of over EUR 1.3 billion is the highest in the history of class settlements in the Netherlands.
Amsterdam District Court 26 September 2018 (Steinhoff)
In December 2017, Steinhoff, a South African global retailer, announced that the publication of its 2017 annual accounts had to be postponed and that previous financial statements might have to be adjusted due to the recent discovery of accounting irregularities. After the announcement, its shares, which are listed in Frankfurt and Johannesburg, dropped significantly in value. In Germany, an investor filed a damages claim against Steinhoff at the Frankfurt Landgericht on 19 December 2017. He also requested that the proceedings be referred to the Oberlandesgericht for a model case judgment under the Capital Markets Model Case Act (Kapitalanleger-Musterverfahrensgesetz or KapMug). However, for KapMug proceedings, at least nine other investors have to bring an equivalent claim based on the same facts in the Landgericht. In 2018, the Dutch investor association VEB brought a collective action against Steinhoff before the Amsterdam District Court. Both proceedings concern the same issues.
The Amsterdam District Court assumed jurisdiction because Steinhoff is registered in the Netherlands. It rejected Steinhoff's argument that because the Dutch proceedings concern the same parties as the German proceedings, the court lacked jurisdiction or should stay the proceedings (Article 29 Regulation (EU) 1215/2012 (Brussels I Recast)). The court observed that an individual investor started the German proceedings, whereas VEB represents many investors. VEB said it does not represent that particular German investor nor investors that will start German proceedings against Steinhoff in the future. In these circumstances and due to the current state of the German proceedings – only one investor had brought a claim and the Landgericht had not yet confirmed its jurisdiction – the District Court also rejected the argument that KapMug proceedings concern the same parties as the Dutch collective action.
The court also decided that it would not stay the Dutch proceedings on the basis of Article 30 Brussel I Recast either, because the decisions of the Dutch and German courts will not be incompatible. A KapMug model judgment would apply to German proceedings that have been initiated prior to the model judgment. The court also observed that it is still unclear whether the German court has jurisdiction under Article 7.2 Brussels I Recast. The court made it clear that the Dutch collective action does not face these restrictions as it concerns all investors allegedly harmed by Steinhoff unless they opt-out, and Steinhoff is registered in the Netherlands. Furthermore, the court considered that it may stay the proceedings on the basis of Article 30 Brussels I Recast, but it is not forced to do so. The court found staying the proceedings is not in the interest of the claimants not covered by the KapMug proceedings, as it is uncertain whether a KapMug model judgment will be given within a reasonable time. The court will continue with the proceedings on the merits.
Rotterdam District Court 19 September 2018 (Petrobras)
Following the well-known Lava Jato investigations and revelations in Brazil in 2014, investors and claim vehicles in several countries initiated individual and collective proceedings against Petrobras, one of the world's largest oil companies. A major part of these claims was recently settled by an opt-out class action settlement in the US for almost USD 3 billion. In the Netherlands, the Dutch claim vehicle 'Stichting Petrobras Compensation Foundation' claims to represent all other worldwide investors – outside the scope of the US class – who allege that they incurred losses before July 2015 due to corruption involving a number of former Petrobras executives. The Stichting is seeking a declaration from the Rotterdam District Court that Petrobras and some of its former executives and Dutch group companies acted unlawfully. In its preliminary decision of 19 September 2018, the court only ruled on its own competence as Petrobras and the Brazilian defendants had contested its international jurisdiction. It did not decide on the admissibility or merits of the claims. The court agreed with the defendants that there are insufficient indications that damages were incurred in the Netherlands and that the Brazilian courts are capable of dealing with these kind of investors' claims. However, the court nevertheless accepted jurisdiction for five of the seven claims, because these claims were sufficiently closely connected to the claims against one of the Dutch subsidiaries. The court also decided that the former arbitration clause in Petrobras's bylaws cannot be relied upon in this collective action. According to the court, the English translation of this clause is insufficiently clear despite the reference in the clause to the Market Arbitration Chamber. This deviates from US and Brazilian court decisions in which the same clause was successfully invoked by Petrobras. As the court did not grant leave for an interim appeal or a stay, the proceedings will continue on the admissibility of the Stichting and possibly the merits of the remaining claims.
Amsterdam Court of Appeal 16 October 2018 (Trafigura)
The Dutch claim vehicle 'Stichting Union des victimes de déchets toxiques d’Abidjan et banlieues' appealed the Amsterdam District Court judgment of 30 November 2016 which had declared the Stichting inadmissible in its claims against Trafigura. The Amsterdam District Court had found that the interests of the Probo Koala slops alleged victims were not adequately safeguarded by the Stichting. In the appeal proceedings, the Amsterdam Court of Appeal confirmed the inadmissibility of the Stichting.
The Stichting had brought a claim for damages on behalf of a large group of alleged victims that it purported to represent. Its standing was based on powers of attorney from them. It then changed its claim primarily into a collective redress claim in its own capacity while representing the alleged victims' interests and alternatively in its capacity acting on the basis of powers of attorney on behalf of these victims. Under Dutch procedural law, the plaintiff's capacity to start proceedings has to be determined by interpreting their writ. The Amsterdam District Court ruled in the first instance that the writ could be interpreted as the Stichting's intention to start a collective action as well and dismissed Trafigura's objections to the change of claim.
However, the Court of Appeal ruled that the writ did not indicate that the Stichting intended to start a collective action in which the Stichting acted in its own capacity but in the interest of alleged victims. It ruled that Trafigura could reasonably have understood that the Stichting had filed its claim on behalf of the natural persons claiming to be victims. A change of claim resulting in a change of the plaintiff's capacity is not allowed under Dutch procedural law. Since the Stichting had withdrawn its alternative capacity based on powers of attorney in the meantime, this decision resulted in full inadmissibility.
Amsterdam Court of Appeal 13 July 2018 (Fortis settlement)
In 2007, Fortis, a Belgian/Dutch bank and insurer, was broken up after it joined with Royal Bank of Scotland and Santander to take over ABN AMRO. The Dutch government nationalised the Dutch insurance and banking subsidiaries while the majority of Fortis's Belgian activities were sold to BNP Paribas. Fortis (which later became Ageas) kept the rest of its insurance activities. The value of Fortis shares dropped massively and Fortis investors started various individual and collective proceedings against Ageas in Belgium and the Netherlands.
On 14 March 2016, Ageas and several representative organisations reached a settlement agreement. They submitted a joint WCAM request to the Amsterdam Court of Appeal to declare this settlement binding on all investors that would fall within the scope of the settlement class. The court ruled at first that the interests of certain shareholders were not well represented in the settlement agreement. It also had doubts about the remuneration that the representative organisations had negotiated for themselves. The court feared it would have a negative impact on the compensation of the shareholders. After adjustments were made, the court approved the second amended and restated settlement agreement and declared it binding on 13 July 2018. It rejected the request to declare the agreement binding in respect of one of the representative organisations (VEB), because it considered the additional compensation for the VEB members unreasonable. Since the court cannot declare the agreement to be partially binding, and the court did not find it acceptable to let the collective settlement fail on this one point, it declared the agreement binding as a whole. Ageas agreed to pay over EUR 1.3 billion to the investors concerned, the highest amount in the history of class settlements in the Netherlands. With the binding declaration, the proceedings against Fortis/Ageas and its stakeholders (e.g. directors) have come to an end. However, investors that are entitled to compensation that choose to withdraw from the binding declaration (opt-out) can still start proceedings against Ageas. They must opt-out within a period of five months after publication of the settlement, ending on 31 December 2018.
Click here for an informal and unauthorised English translation of the ruling. More information can be found on the website of Forsettlement.
