A big step towards enacting a collective damages mechanism by the Dutch

As part of a larger trend in Europe, the Dutch House of Representatives (Tweede Kamer) voted on Tuesday 29 January to enact a proposed law that would allow a foundation (stichting) or association (vereniging) to initiate damages proceedings on behalf of a class of victims. Now it is up to the Senate (Eerste Kamer) to enact the legislation. This is a positive and welcome step forward for collective redress in Europe. 

The Dutch are intent on providing an efficient mechanism for victims of companies’ unlawful behaviour to obtain damages, and thereby, to the extent possible, justice - while ensuring this does not lead to the introduction of a ‘claim culture’ into their legal system. The ‘DES-daughters’ - women who were exposed to the DES drug before birth - inspired Dutch lawmakers. For such victims, collective redress often offers the optimal solution, including when it is too expensive, time-consuming or painful for a victim to initiate individual proceedings.

Options currently available

If victims want to seek collective redress in the Netherlands, they can currently do so in one of three ways. First, a foundation or association can seek declaratory or coercive relief on behalf of a class. This mechanism does not allow the foundation or association to seek damages arising from the harm suffered, and the collective action would need to be followed by individual damages claims if monetary relief is desired.

Second, a separate law (Wet Collectieve Afwikkeling Massaschade 2005 or WCAM) allows the Amsterdam courts to make a settlement binding on all injured parties that have not opted-out of the settlement, including in relation to non-Dutch injured parties. The extra-territorial effects of this law and the rather expansive approach to jurisdiction have proven controversial, the high point of which was Converium. In this case, an Amsterdam court 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.

Third, individual claims can be assigned to a ‘claim vehicle’. The assigned claims are then bundled and brought in the claim vehicle’s name. This is currently the only mechanism that allows for (semi-) collective damages claims and has clear limitations. Most obviously, it does not allow claim vehicles to act on behalf of a defined class; the vehicle can only act for those victims that have assigned their claims to it.

The proposed law

The law called Wet Afwikkeling Massaschade in een Collectieve Actie (WAMCA) is proposed to replace the first mechanism described above with a new mechanism, allowing a foundation or association not only to seek declaratory or coercive relief, but also damages on behalf of a class of victims, be it individuals or corporate entities. In this sense, it fills a significant void in the current regime.

The proposed law does impose stricter requirements on these foundations and associations with respect to governance, litigation funding and representation, and it also includes a procedure for choosing the ‘exclusive representative’ of a class in the event that multiple foundations or associations bring claims arising from the same harm, on behalf of the same class of victims.

Importantly, the proposed law is limited in its extra-territorial effects. In part because the Dutch want to avoid so-called ‘forum-shopping’, the action must have a sufficiently close connection with the Netherlands for the Dutch courts to have jurisdiction. Although judgments are binding on all Dutch residents - unless they opt out - the proposed mechanism functions on an opt-in basis for non-Dutch victims (like the UK’s opt-out regime relating to competition law infringements, as introduced by the Consumer Rights Act 2015).

The transition Scheme

The ‘transition scheme’ (comparable to ‘transitional arrangements’ in the UK) proved to be a main point of contention at the recent hearing in the House of Representatives. Specifically, there was disagreement amongst lawmakers as to which types of breaches the law should apply to, and from which point.

Initially, the proposed law was drafted to apply to all new actions initiated after the date of entry into force, irrespective of when the underlying events took place. However, before the hearing, a coalition of political parties, including the largest, proposed an amendment under which the new law would not apply 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. Despite heavily restricting the application of the proposed law and being met with opposition during the hearing, on Tuesday 29 January, the House of Representatives adopted the amendment as part of the proposed law.

Notwithstanding, this is the first step in what is set to be a ground-breaking and positive development for claimants.

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