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The Netherlands

Author: Ianika Tzankova/ Eric Tjong Tjin Tai - with support from Karlijn van Doorn

I. Overview

Dutch law operates on the principle that parties can only bind themselves and court decisions only bind parties to the court procedure. Collective redress would therefore in principle need all involved parties as party to the procedure, or necessitates numerous procedures between different plaintiffs covering the same subject matter. As this is found to be unnecessarily cumbersome for parties as well as the judicial system, Dutch law has adopted several mechanisms to handle collective redress.

The Netherlands has two specific collective redress regimes: WCAM and collective action. A third option is the use of common procedural law with a special organisation collecting individual claims, often a Stichting (foundation). The Stichting is also a common (though not the only) form in which the first two forms of collective redress operate. This is a normal foundation, with the statutory purpose of claiming damages on behalf of certain individuals (these are also called Claimstichting, which is not a formally recognised name). The individuals pay a relatively small amount to participate in the foundation, which may be used by the foundation to fund the procedural costs (in particular the advocate costs) of a court procedure, or to negotiate and reach a settlement (collective (WCAM) or only covering the participating individuals).

These three mechanisms, described in detail below, are general collective redress mechanisms, as The Netherlands does not have a sectoral approach. For example, any damage caused by an event or a series of similar events can be subject to a WCAM settlement. There is a specific procedure for consumer cases, art. 3:305d BW, however consumer organisations may still use art. 3:305a BW.

Regarding standing, first under the WCAM, the party or parties compensating the damage and an organization representing the victims will draft a settlement agreement. All the contracting parties then have to approach the court to make it binding for all victims. The representative organization has to have full legal capacity to act in court, and the interest of the group that the organization is seeking to protect must be covered by its articles of association. The compensating party (also) must have sufficient legal capacity according to Dutch law. Secondly, collective action proceedings to protect similar interests of other individuals must be commenced by an organization which according to its articles of association aims at furthering said interests (art. 3:305a BW). Thirdly, under the mandate or transfer of claims scheme, the organisation must derive standing from a mandate of the actual victims or from transfer of the claims, and it must offer proof of this (in particular the identities of the victims and the claims, see HR 27 november 2009, LJN BH2162 (VEB/World Online).

Dutch procedural law does not have a certification phase as such. A limited check on the acting organisation is performed with the requirements of admissibility (combined with the requirements for standing, discussed above under a). A few additional remarks can be made. Under the WCAM, the request will be denied if the representative organisation is not sufficiently representative of the whole group (art. 7:907(3)f BW; under the collective action scheme, the representative organization is not admissible if it did not put sufficient effort into attempts to reach an amicable settlement (art. 3:305a(2) BW). The interests of the persons being represented have to be similar or equivalent, i.e. you have to be able to abstract from individual claimants; finally, when a mandate or transfer of claims is used, due to alleged abuse of Claimstichtingen there is discussion about instituting some form of certification or a code of behaviour. At present no regulation exists.

It is important to highlight that there are some rules of procedure specific to the WCAM application procedure in Articles 1013-1018 BRv. The Amsterdam Court of Appeal is the only competent court for a WCAM action. Once the agreement is declared binding, all damaged parties under the contract become party to the settlement, unless they opt-out in time by written notification. Other proceedings against the compensating party or parties are stayed during the settlement procedure. The Court will summon all known damaged parties with a letter, and will assign one or more newspapers to publish a call for claimants. The Court's declaration, i.e. settlement, is similarly communicated and published. Appeal in cassation to the Supreme Court is only possible on joint petition by all applicants. The Act uses a 'damage scheduling' approach, under which compensation is awarded to claimants not on the basis of their personal characteristics but rather on the basis of the characteristics of the group of which the particular individual claimant is a member. The procedure is a verzoekschrift procedure (civil procedure started with an application or request) and follows the general rules for such a procedure, insofar as no particular rules apply. Some additional requirements apply to the application, such as the requirement of a short description of the agreement. However, both the collective action and mandate/ transfer of claims are normal dagvaardingsprocedure (civil procedure started with a summons).

On the participation of foreign plaintiffs, presuming jurisdiction of the Dutch Court, a foreign representative organization can participate, so long as it has full legal capacity to act in court. Regarding foreign individuals, under the WCAM, every victim who is included in one of the categories of the settlement and does not opt-out in time is bound by that settlement, including foreign parties (see e.g. Hof Amsterdam 12 november 2010, NJ 2010/683, LJN: BO3908 (Converium)). Note that these are not directly plaintiffs in the procedure, but rather through a representative body. Moreover, the representative organizations are not plaintiffs in the Dutch terminology, but applicants in the application proceedings. Finally, the interests of these foreign parties have to be covered by the articles of association in order for them to be affected. Furthermore, foreign individuals can be part of collective action or participate in an organisation on the same basis as Dutch individuals.

Under the WCAM, the settlement obtains binding effect on all victims included in the terms of the settlement, except for the individuals who have declared their wish to opt-out of the settlement. The opt-out declaration has to be made within the appointed time set by the court (art. 7:908(2) BW and art. 1017(3) BRv). The settlement itself does not constitute an admission of fault. The individuals who have opted-out are not bound at all, and the judge who decides on their case is free to deviate from the settlement (Aandelenlease cases, HR 5 June 2009). Under the collective action and mandate/ transfer of claims systems, the judgement has res judicata effect only between the parties in the procedure (and/or the claims adjudicated therein). Furthermore the Hoge Raad has judged that a declaration of law in such a procedure may serve as starting point in similar procedures started by other victims (HR 27 november 2009, LJN BH2162 (VEB/World Online), r.o. 4.8.2): this has for other victims practically the same effect as res judicata. Hence a collective action may be useful as a step towards an individual award of damages.

When facing available remedies, all possible sorts of compensation for the damage can be obtained under the WCAM regime. The usual form is a fixed fund from which monetary compensation is paid to the victims. If the compensation is monetary and the total allotted sum does not suffice to pay all victims, the individual amounts of compensation will be reduced from the moment the deficiency becomes apparent. In a collective action on the basis of art. 3:305a BW, all causes of action and forms of relief can be pursued, with the exception of monetary relief (damages). This exception also covers a declaratory judgment on liability for damages. It is however possible to obtain a declaratory judgment of breach of contract/breach of duty of care (e.g. VEB/World Online). Finally, provided that the organisation has standing, all possible remedies are available, including declaratory judgment and award of damages. The award of damages is only possible for the claims on which the procedure is based.

On costs, in general in a Dutch civil action, the prevailing party usually gets compensation for lawyers' and experts' fees based on a schedule reflecting the amount of the claim and the actions required to arrive at a judgment. This only covers a very small portion of the total lawyers' fees incurred. Court fees will also be awarded and depend on the amount involved. The winning party is entitled to recover legal expenses incurred in the pre-trial phase if they are reasonable and are not to be viewed as procedural costs. There is no requirement that lawyers' fees in collective actions be approved by court. Further, contingency fee arrangements are prohibited for members of the Dutch Bar.

Funding is obtained through the representative organisation, either from its own funds (in the case of interest groups like the Vereniging van Effectenbezitters (Dutch society of stockholders)), by paid contributions from the victims to the organisation, or by individuals directly bearing the costs.

The court may declare that the costs of the WCAM-procedure are to be paid by one or more of the petitioners (art. 1016 lid 2 Rv). Further, if following the collective action, victims have to start subsequent individual actions to establish causation, liability and damages, they have to fully bear their own costs except where compensation is obtained under the general rules.

There is a legislative proposal to (further) simplify the collective settlement of mass claims. This involves simplifying the verification of claims in insolvency in the case of a WCAM settlement. Moreover, a quality criterion for the representative associations' admissibility is added: the interests of the persons whom are being represented have to be adequately safeguarded. Thirdly, the proposal introduces a pre-procedural comparition (personal appearance/meeting).

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