Types of class action mechanisms. General characteristics

Compared to the legal orders existing in other European countries, the Netherlands provide for genuinely interesting solutions as regards group proceedings. Apart from the typical class action mechanism (which entered into force on 1st July 1994), the Dutch law additionally provides for a specific and definitely independent path of a “group settlement” mechanism that was introduced into the Dutch Civil Code (Burgerlijk Wetboek ) and Code of Civil Procedure (Wetboek van Burgerlijke Rechtsvordering) by virtue of the Class Settlement In Mass Injuries Cases Act (Wet Collectieve Afwikkeling Massaschade, WCAM), which entered into force on 27th July 2005. The typical class action mechanism is regulated by the provisions of the Dutch Civil Code and the Code of Civil Procedure, which were amended on 1st January 2020 by the Collective Redress Act (Wet Afwikkeling Massaschade in Collectieve Actie, WAMCA). The provisions of WAMCA apply to cases initiated on or after 1st January 2020, to events occurring on or after 15th November 2016. The previous legal regime applies to earlier cases.

In the Dutch group proceedings group members are “represented” by an organisation which possesses a legal capacity and acts on its own behalf. Group members themselves do not become parties to the proceedings.

The Dutch class action proceedings are based mainly on an opt-out model (which applies to group members residing in the Netherlands) and partially on the opt-in model (which applies to foreign group members; however, the court has the possibility to apply the opt-out model to those members as well).

An adjudication, when rendered in the case, binds all entities on whose behalf the proceedings were conducted and that did not expressly oppose such an outcome of the proceedings.

The group settlement mechanism also provides for the rules of representation of the group by a competent community organisation. This mechanism also applies an opt-out model – thus the settlement binds solely those group members who do not leave the group within the prescribed time-limit.

Conditions of admissibility and the procedure

Dutch class action proceedings, when the objective side is concerned, are of a universal nature and, in principle, can be applied in all civil cases.

The capacity to commence a class action is vested in an organisation with a legal capacity, acting within this scope on its own behalf, and compliant with specific criteria. Firstly, it should be expressed explicitly in the organisation’s bylaws that its aim is – among others – to protect certain interests. Secondly, the organisation has to prove that it is able to duly protect interests of the group members on whose behalf it acts (the so-called representativeness criterion).

Competent organisations may bring forth an action (on their own behalf and to the group members’ benefit) in each case to protect similar interests of potential group members.  A case can be heard in a group proceeding if the interests to be protected are suitable for joint adjudication, which means that it is more efficient for group members to pursue claims in a group proceeding than to pursue them in individual proceedings.

In Dutch law, there is no prerequisite for the size of the group understood as determining the minimum number of group members conditioning the admissibility of class proceedings. Instead, the legislation stipulates that the number of people whose interests are affected by the lawsuit is to be “sufficient.”

Once the lawsuit is filed with the court, it is published in a special central register, after which other organizations – within a time limit set by the court – have the opportunity to file lawsuits regarding the same event or subject matter. Then, the court verifies whether the organization that brought the lawsuit meets the requirements of the law. If suits are filed by several organizations, the court selects the most suitable organization to act as the exclusive representative of the class in the proceedings. In this case scenario, all cases involving the same event or subject matter are consolidated into one proceeding conducted by one representative. After this stage, there is an opportunity to leave the group (first opt-out) within the time limit set by the court. Next, there is a mandatory phase in which the parties have the opportunity to reach a settlement. If a settlement is reached, group members again have the option to leave the group (second opt-out). If a settlement is not reached, the court will hear the case on the merits.

As far as the group settlement model is concerned, generally speaking, it is a manner for handling compensation issues collectively (Article 7:907.1 BW), however the statute does not provide for sectorial exclusions. The group settlement conclusion procedure consists of several steps.

Settlement negotiations are conducted on the group’s behalf by a competent organisation. If a settlement is concluded, both parties submit it to the special division of the Court of Appeals in Amsterdam which, unless obstacles prescribed in WCAM occur, declares it as binding. As a result of the approval of the settlement by the court, group members become parties to the settlement and obtain the right to receive the agreed amount of compensation from the adversary.

Article 7:907 specifies a number of strict conditions to be met by the settlement to make it admissible. If it is admissible, the court approves the settlement, and then announces the decision approving the settlement; the court may announce it, i.a., also via the media. Within the period prescribed by the Court of Appeals in Amsterdam, however not later than three months following the date of such notification, each injured party may file a declaration on leaving the group on whose behalf the settlement was concluded (opt-out model). The settlement may, however, provide for the defendant’s right to withdraw from the settlement where a specific number of people leave the group.

A type of relief (legal protection) that can be obtained (court decision)

In a class action proceeding, the court may apply any type of legal protection, including, for example, a judgment awarding damages, a judgment determining liability, or a judgment canceling a contract. In the previous state of the law, prior to the entry into force of the WAMCA Act, it was not permissible to seek an award of damages in class proceedings in favour of individual injured parties – members of the class. It was only permissible to claim legal protection of a different kind – in particular, to claim liability of a specific entity, arising from tort or defaulting on the provisions of an agreement.

In the case of a group settlement, the court issues a declaratory judgment, by which it determines whether the settlement has binding force (i.e., whether it meets the conditions set by the WCAM). On this basis, those who do not withdraw from the may demand payment of the monetary amounts covered by the settlement.

Costs and manner of financing the proceedings

A general rule that the losing party bears the costs of proceedings applies in class action proceedings. If the claim is recognised to be obviously unfounded at the admissibility examination stage, the court may award the defendant a multiple of the costs (up to five times).

In turn, in the case of the proceedings aimed at the conclusion of a group settlement, injured parties as a rule do not bear the costs related to the proceedings (e.g. costs of the announcement on the approval of the settlement). However, in practice, organisations representing injured parties who are their members collect membership premiums from them (which are usually low). There is no losing and winning party in the group settlement mechanism, nevertheless  usually the costs are incurred by the party paying the compensation, according to the provisions of the settlement.

Dutch lawyers’ professional ethics rules do not allow to fix the attorney’s fee on the ‘no win, no fee’ principle.

Under Dutch law, it is admissible to have a third party finance a class action.

Practice and significance of the institution. Development trends

Group proceedings mechanisms and, especially, the group settlement mechanism are enjoying growing popularity in the Netherlands. Since 2005, i.e. when the WCAM was passed, many group settlements have been concluded under that procedure. A notorious DES case regarding a medication which was to prevent miscarriages, but proved to be harmful to foetuses’ health or the case related to the bankruptcy of the Vie d’Or life insurance company provide good examples of such cases. Group proceedings mechanisms are quite popular in the financial services sector in the Netherlands, with a good example provided by the Dexia bank case related to the so called share-lease agreements concluded mostly by the customers, which resulted in investors’ losses.

On the other hand, the group settlement concluded in 2009 between the Royal Dutch Shell concern and its shareholders who accused Shell of communicating misleading financial information validated the possibility of confirming settlements concluded in cross-border cases by the Dutch court (although strongly connected with the Dutch jurisdiction). In 2010 the group settlement concluded in the so-called F-cubed case was approved – in this case most of the group members were not residents of the Netherlands. In connection therewith, at present the Netherlands are considered an important forum for international class actions which may conclude in a settlement.

A significant amendment of the provisions on the group settlement came into force on 1st July 2013. It allowed, among others, for the conclusion of group settlements in bankruptcy proceedings.

The entry into force of the WAMCA law on 1st January 2020 has further increased the popularity of class actions in the Netherlands.

One of the most famous judgements in recent years should be considered the one in the case of oil giant Shell, handed down on 26th May 2021. In the judgment, the court ordered the oil company to reduce its CO2 emissions by 45%.

Due to the entry into force of Directive 2020/1828 of the European Parliament and of the Council (EU) of 25th November 2020 on representative actions brought for the protection of the collective interests of consumers and repealing Directive 2009/22/EC, an amendment to the WAMCA Act implementing the aforementioned Directive will enter into force on 25th June 2023. Once the provisions implementing the Directive enter into force, certain foreign organizations will be able to bring representative actions for damages.