Developments in Collective Redress in the Netherlands
By Karen Jelsma
Posted: 6th January 2015 08:54
More frequently consumers buy their products outside their own home country which results in an increase of the cross-border trade. With the increase of the global market, situations can arise in which a large (known or unknown) number of persons throughout the world get injured by a defective product or as a result of a wrongful act. Collective redress mechanisms, including the collective redress mechanisms available in The Netherlands, therefore play an important role. This article will highlight the developments of collective redress in The Netherlands. Below firstly a general overview is given of the options to settle collective mass damage claims in the Netherlands. Subsequently, attention will be paid to a draft bill submitted by the Dutch Minister of Security and Justice on 7 July 2014 that should facilitate the possibility of claiming monetary damages in a collective action. In the last paragraph the developments within the European Union will be set out.
Collective Redress under Dutch Law
Under Dutch law there are two formal litigation mechanisms to settle collective mass damage claims:
- the Dutch Collective Settlements Act (Wet Collectieve Afwikkeling Massaschade, the "WCAM"); and
- the Collective Action based on article 3:305a of the Dutch Civil Code (Collectieve Actie).
The WCAM came into force in the Netherlands on 27 July 2005. The WCAM enables the collective settlement of mass damages claims. Pursuant to the WCAM, the collective settlement has to be concluded between, on the one hand, one or more association(s) or foundation(s) representing the interests of a group of injured parties who suffered damages and, on the other hand, the party or parties allegedly causing the damages. Pursuant to article 1013 of the Dutch Code on Civil Procedures (“DCCP”), the Amsterdam Court of Appeal (the "Court of Appeal") has the sole jurisdiction to declare such collective settlement agreement binding. When determining whether the binding declaration of the settlement agreement can be granted, the Court of Appeal has to review, amongst other things, whether the foundation(s) or association(s) meet(s) the requirements of representativeness (i.e. sufficiently represent(s) the interests of the injured parties) and whether the settlement is reasonable for the injured parties. If the Court of Appeal indeed declares the collective settlement binding, the settlement agreement will in principle bind all injured parties falling within the scope of the settlement agreement, whether known or unknown and whether residing in The Netherlands or abroad. Those injured parties who do not want to be bound by the settlement agreement have the option to opt out, but they must do so within a limited period of time. This period of time is set by the Court.
Since its introduction, the framework of the WCAM has been used in seven cases, being DES, Dexia, Vie d'Or, Vedior, Shell, Converium and – just recently – DSB Bank.
On 1 July 2013 amendments to the WCAM were introduced to enlarge the WCAM's applicability and make it more attractive for parties to come to a settlement. Amongst other things, the amended WCAM enables parties involved in mass damages cases to involve a judge at an early stage for assistance in the negotiation of the collective settlement agreement. Moreover, it is now possible to also use the system of WCAM in insolvency matters. Formerly, the liquidator in a bankruptcy had to determine all claims of creditors individually. Basically, a liquidator has now been given the possibility to settle all claims of the creditors so that a creditor's meeting can be avoided and the creditors can be put directly on the distribution list. The DSB Bank case is the first bankruptcy case in which the system of the WCAM has been used.
The Collective Action (Article 3:305a DCC)
Already, on 1 July 1994 the collective action was introduced. A collective action can be brought by a foundation (stichting) or association (vereniging) whose statutory goal it is to represent the interests of (groups of) injured parties having similar damage claims and having a similar interest in holding a third party liable for the damages suffered by such (group of) injured parties. The foundation or association initiating the collective action must have full legal capacity (article 3:305a paragraph 1 DCC). Furthermore, the foundation or association shall have no course of action if, in the circumstances, it has not made a sufficient attempt to achieve the objective of the collective action through consultations with the third party. Under current Dutch law the collective action cannot be used to claim monetary damages from the third party (article 3:305a paragraph 3 DCC). The main reason why the Dutch legislator decided to exclude the possibility of claiming (monetary) damages in a collective action is because it took the view that damage claims would be less suitable to be dealt with by way of collective action considering all individual circumstances of the injured parties involved.(1) However, the collective action can be used to seek a declaratory judgment against the third party to establish that the third party acted wrongfully. On the basis of such a declaratory judgment, the individually injured party can negotiate with respect to its compensation or initiate individual proceedings before a district court. Furthermore, the individual injured persons can give a power of attorney to one party to file a claim on their behalf. By doing so it is possible to combine the claim for declaratory judgment obtained on the basis of a collective action with a claim for damages for individual parties.
Draft Bill Submitted On 7 July 2014
On 7 July 2014 a draft bill has been submitted by the Dutch Minister of Security and Justice to amend the collective action of article 3:305a DCC. This draft bill abolishes the current prohibition to claim damages in a collective action and introduces a five-step procedure for a collective damages action before the Dutch District Courts with the purpose of parties reaching a settlement agreement.
The five-step procedure included in the draft bill consists of the following steps. Firstly, the court has to review whether certain specific conditions are met, such as whether the foundation or association bringing the collective action has sufficient expertise regarding the claim, whether it adequately represents and safeguards the interests of the persons on whose behalf the action is brought. In addition, the group of injured persons must be of a size justifying the use of the collective damages action. Moreover, the injured persons must not have other efficient and effective means to get redress. If the court has decided that the specific requirements are met, it will render a judgment in relation to the liability of the third party. If liability is established by the court, subsequently a hearing of the parties will take place to try to reach a collective settlement. If no settlement can be reached between parties the court may invite the parties to submit a proposal for collective settlement to the court. The court can also refer the parties to mediation. If mediation is unsuccessful or if the court decides not to refer to mediation, as a last resort, the court will establish a scheme for collective redress based on damage-scheduling. In this stage the court may order the parties to ask the injured persons belonging to the group and who fall within the scope of the scheme to submit a statement of participation (opt in) to the court before the scheme is established.(2)
The current status of the draft bill is that the public consultation has been closed on 1 October 2014. Different views from interested parties from the field have been submitted. At this stage it is unknown whether the bill will be amended (and/or to what extent).
Developments Within The EU
Apart from the development on collective redress in the Netherlands, developments also take place within the European Union. On 11 June 2013 the European Commission presented a non-binding Recommendation to the Member States in which the Member States are recommended to have national collective redress mechanisms available to ensure effective access to justice, and while ensuring appropriate procedural guarantees to avoid abusive litigation. Amongst other things, the Recommendation consists of the following key features:
- the systems at a national level should have both injunctive relief and compensatory relief
- opt in should be the general rule
- contingency fees and punitive damages should be prohibited
- the organisations representing the claimants should have a non-profit character(3)
By June 2015 the Member States should have taken the necessary measures to implement the principles included in the Recommendation. Two years thereafter, by June 2017, the Commission should assess if any further action is needed.
Meanwhile, on 10 December 2013 the European Economic and Social Committee submitted its comments to the Recommendation of the Commission. The Committee has indicated that it regrets that the Commission has not issued a proposal for a directive. The Committee therefore calls on the Commission to present a proposal for a directive.(4) It remains to be seen whether this will happen or not.
Karen Jelsma is a Senior Associate in the Amsterdam office. She is a member of the Litigation and Product Liability practices and focuses on product safety, regulatory and product liability matters and on general commercial litigation (including collective action litigation). Karen often provides advice to manufacturers in a variety of industries on issues such as product safety and product recalls, and liaises with the Dutch authorities with respect to notifications. She also advises and represents medical devices manufacturers. Karen was seconded in the London Product Liability team in 2013 and in the Munich Product Liability team in 2014.
(1) Letter of the Minister of Justice to the President of the House of Representatives of the States General dated 23 October 2008, and Kamerstukken II 2003/04, 29414, nr. 4.
(3) http://europa.eu/rapid/press-release_IP-13-524_en.htm and http://ec.europa.eu/justice/newsroom/civil/news/130611_en.htm