On 29 January 2019, parliament adopted the Act on a collective action for damages (the "Act"). This will make it possible to claim damages for and on behalf of a 'class' of victims of a tort or breach of contract (among other things). The Act was published in the Staatsblad (State's Gazette) on 1 April 2019. On 4 December 2019, the entry-into-force date was set at 1 January 2020.
What is it?
A collective action enables an association (vereniging) or foundation (stichting) to file an action in protection of similar interests of a group of other people (the "class" for lack of a better term). This collective action already existed since 1994, but could, until now, not be used to claim compensation of damages in ready money.
The association or foundation (the "collective claimant") must represent the interests of the class according to its articles of association. In addition, there must be sufficient safeguards that the interests of the class are adequately represented. To that end, the Act introduces a number of requirements around funding, governance and representation. The collective claimant must, for example, have sufficient funding to bear the cost of the action. Litigation funding is not excluded, but the say over the claims in the action must be with the collective claimant in a sufficient degree.
The collective claimant must demonstrate that a collective action will be more effective and efficient than the adjudication of individual claims, because there is sufficient commonality in the issues of fact and law, the class is sufficiently numerous and, if the claim is for payment of damages, the financial interest is substantial enough.
What does the procedure look like?
The collective action will ordinarily have the following distinct phases:
1. A filing phase in which collective claimants may file their claim. A collective claimant files its claim with the court and publishes it in the 'collective actions register'. Other collective claimants will have the opportunity to file a claim related to the same event or subject matter within a period that the court sets, which is at least three months.
2. A 'certification' phase. The court establishes that the collective claimant meets all admissibility requirements. The defendant may, unlike 'normal' cases, initially limit its defenses to admissibility issues. It does, therefore, not need to file a full-blown defense at this stage that ends when the court appoints the exclusive collective claimant (the "lead plaintiff"). In case of more than one collective claimant, the court will select the most suitable collective claimant to conduct the litigation as representative of the class and of the other collective claimants. The latter remain a party to the collective action, but cannot file briefs or pleadings unless the court allows it. To facilitate the appointment of a lead plaintiff and to streamline the collective action, all collective actions in relation to the same event or subject matter are concentrated before one court. At this stage, the court will also determine the individuals that will form the class.
Opt in/out: After certification and appointment of the lead plaintiff, members of the class have the opportunity to opt-out within a period that the court sets, which must be at least one month. 'Victims' that have no domicile or residence in the Netherlands, but who suffered damage as a result of the same event, will have the opportunity to opt-in, unless the court order that be part of the class bar an opt-out. After opt-in, they will be part of the class.
3. A settlement phase. After the appointment of the lead plaintiff, the court will provide the parties the opportunity to try and reach a settlement. This is a mandatory phase. If the parties reach a settlement, it must be submitted to the court for approval. If the court approves the settlement, it becomes binding on the class. There is another opportunity to opt-out at this stage.
4. A merits phase. Should a settlement not be reached, the court will review the case on its merits. If the defendant has not done so yet, it may file its defence on the merits. The court may order both parties to submit a proposal for the collective resolution of the damages. One would expect the court to usually do this only after it finds the claim grounded. After having ruled that the claim is upheld and possibly the submission of these proposals, the court will determine the compensation and the collective resolution of the damages. This determination may include 'damage scheduling' (i.e. determining damage groups to which different groups of victims may belong). The whole class, whether or not represented by a collective claimant, shall be bound by the judgment (except for the 'opt-outs').
How will the admission to the Dutch courts be managed?
First, the Dutch courts must have jurisdiction, either on the basis of an instrument of international law such as the recast Brussels Regulation or under Dutch common private international law (most of which has been written into a statute these days). Second, the Act introduces certain criteria on the admissibility of a collective action. Apart from a number of criteria that deal with the quality of representation and the like, the collective action must have sufficient nexus with the Netherlands and its 'legal sphere'. There will be sufficient nexus if:
a. the collective claimant demonstrates to the court's satisfaction that that the majority of people the interests of which its action aims to protect has residence in the Netherlands;
b. (i) the defendant has domicile in the Netherlands and (ii) additional circumstances indicate nexus with the Netherlands;
c. the event on which the action is based occurred in the Netherlands.
The court will only have to assess whether the collective action is admissible after it has established its jurisdiction. The requirement that there must be sufficient nexus applies to any collective action, not only to collective actions for damages (with some exceptions for small claims and for 'public interest' actions). This is new. The requirement was introduced to prevent an influx of collective actions that have 'nothing to do with the Netherlands'.
To what extent the requirement will help to prevent that collective actions are brought before the Dutch courts with a nexus that is tenuous at best remains to be seen. In particular, nexus rule (b) has the potential to unduly interfere with the Brussels Regulation. Under the Brussels Regulation, in principle, the court of the defendant's domicile has jurisdiction. The rules of the Brussels Regulation take priority over national rules of procedure. The rule that there must be additional circumstances to create nexus over and above the defendant's domicile in the Netherlands has the potential to interfere with the rule that there is jurisdiction of the court of its domicile under the Brussels Regulation.
We do not, therefore, exclude that claimants will bring cases only because there is an 'anchor defendant' in the Netherlands and join foreign defendants in that collective action on the basis that all claims must be adjudicated jointly in order to avoid conflicting judgments, although the nexus with the Netherlands apart from the defendant's domicile is tenuous.
Loser pays as safeguards against abuse litigation?
In general, the losing party is responsible for some of the litigation costs. The cost order is based on a standard schedule that awards fixed amounts for certain steps in the litigation. Under the Act, the court may under certain circumstances award a much higher amount of costs to the winning party, if it finds that the claim must be summarily dismissed. Whether this will be a sufficient deterrent against bringing unmeritorious claims remains to be seen.