The Legal System Generally
The Netherlands is a civil law country, which means actions at law typically arise either under the Dutch Civil Code (e.g. an action arises when a person commits an act prohibited by the Dutch Civil Code) or under a dispute stemming from a contractual agreement between the parties. There is no trial by jury and all civil cases are typically decided before a panel of three appointed judges.
Under the Dutch Civil Code, there are essentially two different procedures that allow for the resolution of group claims: the Collective Action proceeding and the Wet Collective Afwikkeling Massaschade (The Act on the Collective Settlement of Mass Damages, otherwise known as the “Financial Settlement Act”). Neither is akin to the U.S.-style class action.
a. The Collective Action – is an opt-in proceeding (meaning that those who wish to participate in any judgment or settlement must affirmatively join the action) that may be brought by an association or foundation, on behalf of its members, pursuant to any action at law. An association or foundation may be started solely for the purpose of pursuing a collective action and may be a generic investors or consumers organization. The interests of members of the group must be similar, although this is relatively easy to prove because the court is neither able to determine causation nor award monetary compensation. The court will only address questions about the alleged conduct of a defendant and then the individuals involved in the collective action must bring independent actions in order to recover any damages (or pursue a settlement).
b. The Financial Settlement Act – Is an act that is designed solely to make settlement agreements, related to collective actions, binding and enforceable against all aggrieved individuals. In order to fall under the purview of the act, the settlement must deal with either damages caused by a singular incident or a series of similar incidents. This act does not contain any mechanism by which a court can determine liability. If one party wishes to incentivize another party to negotiate a settlement, they must use either the collective action procedure, publicity, litigation in another country, or some other means. Once parties have entered into a settlement agreement, this act allows them to apply to the Amsterdam Court of Appeals to have the settlement agreement declared binding and enforceable. Unlike the collective action procedure, the Financial Settlements Act is an “opt-out” action (meaning aggrieved individuals must send written notice to a designated individual by a court-established deadline if they wish to pursue an independent action and not partake in the settlement).
Costs of Litigation
- Dutch attorneys are prohibited from representing clients on a contingent fee basis.
- Since collective actions are pursued via associations or foundations, litigation is typically funded through membership fees and donations.
- The Netherlands is a loser pays system and the prevailing party is entitled to recover both reasonable attorney fees and reasonable costs incurred in pursuing the litigation. Generally, the attorney fees awarded to the prevailing party represent only a small portion of the actual costs because the court utilizes fixed figures based on factors such as the amount in dispute and the number of court-related activities that occurred.
Kessler Topaz’s Experience in the Netherlands
Kessler Topaz was co-counsel in the groundbreaking Royal Dutch Shell European Shareholder Litigation case that that recovered $352 million on behalf of non-U.S. investors in the Dutch Enterprise Court, relating to Royal Dutch Shell plc’s 2004 restatement of oil reserves. This settlement of securities fraud claims on a class-wide basis, under the Dutch Financial Settlements Act, was the first of its kind, and sought to resolve claims exclusively on behalf of prominent European institutional investors from nine countries, representing more than one billion shares of Shell.
Continuing our presence in the Netherlands, which is a growing center of investor litigation, Kessler Topaz is now litigating another action against Fortis Bank (in the same Court as Royal Dutch Shell) on behalf of Fortis shareholders.