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Towards Effective Collective Redress in Europe: New Dutch Mechanism to Open Courts to Opt-Out Damages Claims

Related Lawyers: Lucy Rigby, Samantha Derksen
Related Practice Areas: Competition Disputes
Authors: By Lucy Rigby and Samantha Derksen*

As part of a larger trend in Europe, the Dutch Parliament has passed legislation that will enable opt-out damages claims in relation to a broad range of causes of action, including antitrust infringements and those based on violations of consumer, environmental, and data protection laws. The law is widely expected to come into force on 1 January 2020.

The rationale for change

In March of this year, the Dutch legislature passed legislation facilitating the introduction of opt-out damages claims in the Netherlands, in the form of the Wet Afwikkeling Massaschade in een Collectieve Actie (the “WAMCA”).

Pre-WAMCA (and as the position stands at the time of writing), collective redress in the Netherlands is possible in one of three ways – each with its own clear limitations. First, a foundation (stichting) or association (vereniging) can seek declaratory or injunctive relief on behalf of a ‘class’ of claimants (the “Declaratory Route”). The Declaratory Route does not allow the foundation or association to seek damages arising from the harm suffered; instead, class members need to initiate follow-on, individual actions to obtain monetary redress.

Second, individual claims can be assigned to a claim vehicle: the assigned claims are ‘bundled’ together and brought in the claim vehicle’s name; however, the claim vehicle cannot act on behalf of a defined class of those who have suffered harm, only those whose claims have actually been assigned to it. Lastly, the Wet Collectieve Afwikkeling Massaschade 2005 (the “WCAM”) allows for the settlement of mass claims on an opt-out basis. Via the WCAM, the Amsterdam Court of Appeal can make a settlement binding on all injured parties that have not opted-out of the settlement, including in relation to non-Dutch injured parties.[1]

The shortcomings of the existing structures in allowing for effective redress on a collective basis are those which commonly beset regimes lacking an opt-out procedure for damages claims. Where damages claims cannot be brought by a representative on an opt-out basis – i.e. where affected entities are not automatically part of the action if they fit the description of the class – would-be claimants each have to be aware of their loss associated with a putative defendant’s conduct, and each must then actively choose to sign up to a claim.

It is said that one of the reasons Dutch lawmakers were inspired to legislate in favor of better collective redress is the plight of the so-called ‘DES Daughters’— a group of women who each suffered harm after they were exposed to the drug Diethylstilbestrol (DES) in the womb. DES was an anti-miscarriage drug prescribed to women from the 1940’s to the 1970’s; it was also proven to be a cause of cancer, birth defects, and other developmental abnormalities. The negligence claim brought by those affected by the drug was eventually settled under the WCAM (and indeed the case was a factor in the WCAM’s introduction), but this was only after fourteen years of litigation via various proceedings in which no collective damages could be claimed, followed by protracted settlement negotiations. The lawmakers reasoned that if, at the time litigation was contemplated, opt-out collective damages actions had been possible, the parties would have reached a collective settlement much earlier.[2]

The WAMCA is therefore a symbol of Dutch lawmakers’ intent to provide an efficient mechanism for victims of unlawful behavior to obtain damages and to broaden access to justice. The legislation represents recognition on the part of policymakers that, for victims of mass harm, collective redress often offers the only route to justice. Absent a mechanism for the vindication of rights on a collective basis, claims (no matter how meritorious) can simply fail to be brought due to the prohibitive relative cost of launching individual proceedings. 

The new legislation: permitting opt-out damages claims  

The WAMCA will widen the scope of the Declaratory Route described above. It will allow a foundation or association not only to seek declaratory or injunctive relief, but also to seek damages on behalf of a ‘class’ of affected persons (individuals or corporates) on an opt-out basis. In this respect, the WAMCA fills in the obvious gap in the existing Dutch regime. 

The new procedure will be able to be applied to various causes of action, including antitrust infringements, those based on contraventions of consumer law, breaches of environmental legislation, and violations of the GDPR. Dutch-domiciled persons falling into the definition of the class will automatically be included in the proceedings, and they can opt-out if they do not wish to be part of the action for any reason (for example, because an individual would prefer to bring a separate proceeding). An individual that does not opt-out will automatically be bound by the outcome of the action.[3] By contrast, non-Dutch victims will have to actively opt-in if they wish to benefit from the outcome.[4] However, at the request of one of the parties to the action, the court may change the opt-in procedure for non-Dutch victims to an opt-out procedure. In such cases, all victims—whether Dutch or non-Dutch—will by default be included in the class unless they opt-out.[5]

Although the new legislation is expected to enter into force on 1 January 2020, it will not be able to be applied to all future proceedings as a matter of course. Instead, the mechanism is temporally restricted such that it cannot be utilized in relation to actions pertaining to an event or events that took place before 15 November 2016—the date the first iteration of the proposed law was published.[6] According to the notes accompanying the proposed amendment that added this temporal restriction, if a case pertains to a series of events, some of which took place prior to 15 November 2016, and some of which took place after, the new procedure will be able to be employed.[7] The new mechanism will also not apply to actions initiated before the entry into force of the new collective mechanism. That is to say that it will not be possible to file a claim under the old regime and then somehow convert the claim into an opt-out action from the date of WAMCA’s entry into force.[8]

Insofar as the territorial aspects of the new legislation are concerned, the WAMCA makes it clear that the opt-out procedure can only be applied when the individual claims have a sufficiently close connection with the Netherlands - in particular, Dutch courts will only have jurisdiction if one of the following three circumstances applies: (i) it is plausible that the majority of the class members reside in the Netherlands; (ii) the defendants are domiciled in the Netherlands ,and additional circumstances suggest they have a sufficient relationship with the jurisdiction, or; (iii) the underlying events took place in the Netherlands.[9] This is to be contrasted with the WCAM, the extra-territorial effects of which - and the corresponding rather expansive approach to jurisdiction adopted by the Amsterdam Court of Appeal - have proved controversial. The high point of this controversy was brought about by the Converium case, wherein the Amsterdam Court of Appeal declared a settlement binding on the class even though the alleged wrongdoing took place outside the Netherlands, and none of the potentially liable parties and only a limited number of the potential claimants were Dutch residents.[10]

Procedural requirements: how will the new regime work?

Although the WAMCA, in common with the existing Declaratory Route, allows foundations and associations to file claims on a collective basis, the new mechanism imposes more exacting requirements with regard to the governance, funding, and representation of these bodies.[11]

The Declaratory Route generally requires that foundations and associations safeguard the interests of the persons their legal actions aim to protect, but sets no specific requirements.[12] To fill that gap, academics and practitioners developed the so-called Claim Code, which lists specific requirements foundations and associations need to abide by, including that: (i) they have sufficient experience and expertise; (ii) they have no financial interest, and; (iii) they remain independent from external funders. Officially, the Claim Code has no legal force. However, courts take (non-)compliance with it into account as one of the factors in determining whether foundations and associations sufficiently safeguard the relevant interests, as required under the Declaratory Route.

WAMCA now elevates many requirements from the Claim Code into law—including those mentioned above (albeit in slightly different and more concise language). It also adds limited further requirements, including that foundations and associations have sufficient financial means to litigate the proceedings, and that they are sufficiently representative, taking into account their constituency and the size of the represented claims.[13]

It is also worth noting that the prospect of competing claims is specifically envisaged in the new legislation. In such a scenario, the court will consolidate the cases[14] and elect a so-called Exclusive Representative on the basis of four considerations: (i) the size of the group of persons represented; (ii) the extent of this group’s financial interest; (iii) the other work that the representative entity performs for the persons represented, in or out of court, and; (iv) the work carried out or prior collective actions brought by the representative entity.[15] Importantly, a decision in respect of the designation of an Exclusive Representative will not be able to be appealed.[16] The court can, however, appoint multiple Exclusive Representatives where the nature of the collective action, the representative entities, or the interests of the class members offers reason to do so.[17]

As in other jurisdictions where opt-out claims are permitted (such as the UK, Canada and the US), the class certification stage of an action is very important, representing a gateway through which all claims need to proceed. The test presented to claimants at certification must not be so stringent as to deter and otherwise cut off meritorious claims, but equally it must be sufficiently robust to filter out baseless claims and maintain confidence in the judicial system.

While details may well be shaped by jurisprudence, WAMCA arguably strikes the balance well. A putative class representative must prove that it is sufficiently plausible that a collective action is more efficient and effective because: (i) the questions of law and fact underlying each of the individual claims are sufficiently similar; (ii) the number of persons whose interests the legal action protects is sufficient; and (iii) in a case where compensation is requested, these persons have individually or collectively a sufficiently large financial interest.[18]

Collective settlements

The WAMCA is designed to incentivize litigants as much as possible to resolve disputes through a collective settlement. A foundation or association only has standing to pursue a class damages claim if it has made a reasonable attempt to settle the case.[19] Further, after the appointment of an Exclusive Representative, the court will set a timeframe to allow the parties to attempt to reach a collective settlement.[20] When a settlement is reached and approved by the court, class members are granted an opportunity to opt-out[21] and, following the expiration of that period, the settlement then becomes binding upon all class members.  

The Netherlands: at the forefront of a wider European trend

Historically, European jurisdictions have been slower to adopt class action mechanisms than the U.S. Indeed, the European Union’s approach to collective redress has been notably cautious. However, the WAMCA is one example of Europe’s gradually changing attitude and is to be viewed alongside other positive developments, such as the EU’s directive on collective redress which looks to be approved by European lawmakers in late November. In isolation and as part of a wider trend, the WAMCA is a welcome acknowledgment that collective redress is a vital tool in ensuring greater access to justice. 

Footnotes

[1] See reference to the Converium case below, in relation to the extra-territorial aspects of the WCAM mechanism.

[2] Dutch House of Representatives Documents (Kamerstukken II) 2017/2018, 34.608, Nr. 6, p. 5-6.

[3] New art. 1018f(1) Dutch Code of Civil Procedure (Wetboek van Burgerlijke Rechtsvordering) (“Rv”).

[4] New art. 1018f(5) Rv.

[5] New art. 1018f(5) Rv.

[6] New art. 119a(2) Transition Law new Dutch Civil Code (Overgangswet nieuw Burgerlijk Wetboek).

[7] Dutch House of Representatives Documents (Kamerstukken II) 2018/2019, 34.608, Nr. 13, p. 2.

[8] New art. 119a(1) Transition Law new Dutch Civil Code.

[9] New art. 305a(3)(b) Dutch Civil Code (Burgerlijk Wetboek) (“BW”).

[10] Amsterdam Court of Appeal (Gerechtshof Amsterdam), 17 January 2012, ECLI:NL:GHAMS:2012:BV1026, NJ 2012/355.

[11] Compare art 305a BW with new art. 305a BW.

[12] Art. 305a(2) BW and new art. 305a(2) BW.

[13] New art. 305a(2) and (3) BW.

[14] New art. 1018c(6) and art. 1018d(3) Rv.

[15] New art. 1018e(1) Rv.

[16] New art. 1018e(1) Rv.

[17] New art. 1018e(4) Rv.

[18] New art. 1018c(5)(b) Rv.

[19] New art. 305a(3)(c) BW.

[20] New art. 1018g Rv.

[21] New art. 1018h(5) Rv.

*Lucy Rigby is a senior associate and Samantha Derksen is an associate in the London office.

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