Of apples and oranges – the similarity test in Dutch collective actions

Dutch law allows for foundations and associations to file claims on behalf of a class of third parties if their position is ‘sufficiently similar’ and provided certain other criteria are met. The mechanism of collective redress is applied in the Netherlands in cases where substantial financial interests are at stake, such as in securities cases and cartel damages cases, in data breaches cases under GDPR, as well as fundamental rights cases. In all of these cases, the question comes up to what extent the interests of the represented class are sufficiently similar, such that litigating the matter on a collective basis is more efficient than litigating this on an individualized basis.

A question of what is ‘sufficiently similar’ is topical for several reasons:

  • The Dutch courts have had to decide on this in a flurry of collective claims over the past 6 months.
  • Internationally, and in particular in the UK, courts or at least litigants have struggled with the same matter resulting in relevant guidance for the Dutch practice.
  • Collective actions are on the rise in Europe [1]Directive (EU) 2020/1828 of the European Parliament and of the council of 25 November 2020 on representative actions for the protection of the collective interests of consumers and repealing … Continue reading, and the question of which cases are, and which are not suitable for collective action will come into play in all European jurisdictions.
  • Practically: failing to meet this test will result in a rejection of certification of the claim, and the claimant being found to have no standing. Considering that it may take a year or more of costly litigation, and even longer to prepare the case, not passing the certification test is a huge budgetary blow for the claimant. Claimants who are dependent on external funding will find that often time, adverse costs orders are not covered under the funding agreement. In particular ‘ad hoc’ claimants who have not accrued a war chest through previous cases may run a risk of bankruptcy as they are unlikely [2]This may be different of the class action vehicle has charged members of the represented class a fee for signing up to the class action. However, for various reasons, this is no longer common in the … Continue reading to have access to any other source of funding. By the same token, the willingness to settle on the part of the defendant may increase dramatically with certification.

A little background

As of 1 January 2020, the Dutch regime for collective actions was overhauled when WAMCA [3]Wet Afwikkeling Massaschade in Collectieve Actie, or WAMCA for short. entered into force. WAMCA applies to facts after 15 November 2016 and brought before the court after 1 January 2020. Unlike the former regime referred to as WCAM [4]Wet Collective Afwikkeling Massaschade, or WCAM for short. Under WCAM, it was not possible for a claim vehicle to claim specified damages. In liability cases, this meant that the vehicle would seek a … Continue reading, allows for the class action vehicle to claim specified damages on behalf of the represented class.

At the same time, the law was changed in the following respects, which are relevant to the topic of similarity:

  1. Under WAMCA, the case will be litigated on the merits only after the court has confirmed that the claimant has standing to bring the case, and after the court will have defined what the claim will be exactly, and for the benefit of whom. In line with Anglo-Saxon practices, this confirmation is often referred to as ‘certification’.
  2. Under WAMCA, damages can be claimed on an opt-out basis for, briefly put, residents of The Netherlands only. Others can choose to participate in the case, on an opt-in basis. This domestic scope rule did not exist under WCAM and indeed, under WCAM the represented class could and often did consists of members from a global background.
  3. The fact that damages can be claimed under WAMCA brings into play the issue of damages assessment on a group level whilst properly including individual circumstances, and the principle that the defendant should be found liable to compensate the actual damage (proven by the claimant or estimated by the court), and nothing more.

To date, approx. 30 cases have been filed under WAMCA, not all of which are aimed at seeking damages, but none of which have come to a resolution in first instance. Nevertheless, the Dutch court has ruled on the ‘sufficiently similar’ requirement under WAMCA in one instance, which will be discussed below.

At the same time, several WCAM cases were still pending in the courts after introduction of WAMCA, and indeed: some cases can only be tried under WCAM as the relevant facts predate the temporal scope of WAMCA. Over the past six months or so, the courts have ruled in a handful of cases on the similarity test under WCAM. All of these will be discussed below, in respect of the similarity test.

The applicable standard of similarity under Dutch law.

Art. 3:305 of the Dutch Civil Code (DCC) holds that a foundation or association can file a claim in the interest of protecting similar interests of other persons, if this is in furtherance of the statutory purpose of such foundation or association and to the extent the interests of those persons are sufficiently protected [5]This last requirement was introduced in the WAMCA, which entered into force on 1 January 2020 and which applies to cases dealing with facts which occurred after 15 November 2016..

A landmark decision for the definition of the similarity test, is the Baas in Eigen Huis v. Plazacasa case [6]HR 26 februari 2010, ECLI:NL:HR:2010:BK5756 (Baas in Eigen Huis/Plazacasa).. In this case, it was set out that the similarity test holds that the interest which are meant to be protected by the collective action, must lend themselves for bundling, such that efficient and effective protection of the interested persons is promoted. If this is the case, the issues can be resolved in one case, without having to involve the specific circumstances relating to the individual interested parties. A sufficient similarity of interests does not necessarily imply that the positions, backgrounds and interests of those on whose behalf a collective action is brought are identical or even essentially the same. In a collective action, therefore, a certain abstract test is appropriate. Whether or not (a substantial part of the) interested persons agrees with the collective action, or even takes an adverse position, in itself is not an obstacle for finding that the case does serve the protection of similar interests. A sufficient level of similarity in position, background and interest of the group members suffices. These do not need to be identical or even predominantly the same. The norm is whether an abstract assessment of the issues a stake and the claims, is possible.

Similarly, and only just preceding the Baas in Eigen Huis case, in the World Online case, the Dutch Supreme Court confirmed [7]Hoge Raad 27 november 2009, ECLI:NL:HR:2009:BH2162, NJ 2014/201. the finding of the court of appeals that ‘even if there are great differences between the investors in terms of, amongst other, level of professionalism, level of information, care that was applied when taking the investment decision and the amount of the loss, and the fact that some are not a natural person but a corporation’ this does not stand in the way of finding that the interests are sufficiently similar. The court held that these circumstances can be taken into account if and when damages are assessed for each of the individual investors, in follow on proceedings.

The similarity test applied over the past six months.

Stichting Volkswagen Car Claim v. Volkswagen AG et al. (WCAM)

On 14 July 2021, the Amsterdam District court ruled in respect of the ‘diesel fraud’ case against a group of Volkswagen dealers, largely in favor of the claimant. The foundation in this case is seeking compensation for a class of persons who have bought new and second hand cars from several Volkswagen dealers.

The court held that the fact that the case was filed on behalf of several classes of interested parties, against several groups of defendants, did not mean that the case did not lend itself for bundling, as these distinctions were made sufficiently clear in the claim, and the common denominator for the claimants was that all possessed or had leased a Volkswagen car, and that all defendants had either sold or procured Volkswagen cars.

In the preceding interim decision from 2019 [8]20 November 2019, Amsterdam district court, C/13/647072 / HA ZA 18-432., the court had also ruled that the claim for nullification of the contracts with the car dealers on grounds or error, lent itself for bundling: although the decision on the merits would require an assessment of all facts and circumstances which may have had an influence on the decision-taking process of the members of the represented class, the case deals with in essence the same issue, being the presence of software which manipulates the outcome of emissions tests, which was not known to any of the class members. The court said it did not want to rule out in advance that this circumstance would be so relevant, that irrespective of other facts and circumstances, this can be decisive for the outcome of the case and the possible awarding of the declaration of law.

The court in this case had previously also ruled that the claim on the basis of unfair businesses lent itself to bundling in respect of the installation of the software mentioned above. The court did not find this to be so in respect of the information provided by the defendants, as this may vary from case to case.

In the recent 2021 decision, the court contemplates that one of the defendants argued that the claims against it had not been tolled by the claiming foundation, and that they had become time barred under applicable German law. The court finds that indeed, claims of individual car owners have become time barred, and that therefore the claims do not serve to protect ‘similar interests which lend themselves for bundling’. It seems, however, that the court could have sufficed by stating that there simply is no interest whatsoever, and that similarity of the (lacking) interests was not the issue.

FNV v. Wibra Supermarkt BV (WCAM)

On 5 July 2021, the Amsterdam district court ruled in the matter brought before it by the labor union FNV against Wibra supermarkets.

FNV is an association which can bring claims on the basis of art. 3:305a DCC. It filed a claim against Wibra for making workers compensate certain working hours, during which the shops had not been able to retain their services due to Covid-19 related restrictions.

The court ruled that the interest of the workers represented by FNV were sufficiently similar, in the way that the collective labor agreement had been applied in respect of the matter at stake, regardless of how this played out in practice for individual workers.

Data Privacy Stichting v. Facebook (WCAM)

On 30 June 2021, the Amsterdam district court issued an interim decision in the case brought by the Data Privacy Stichting against Facebook on the matter of (amongst other) admissibility of the case. The case relates to facts which only to a limited extent fall within the temporal scope of WAMCA. However, in view of Section 119a Transition Act New Civil Code in conjunction with Section III paragraph 2 WAMCA, the WAMCA does not apply to this case, because the legal actions in this case were instituted before the date of entry into force of the WAMCA (1 January 2020). The case is therefore covered (largely) by WCAM.

The Foundation is seeking a declaration that Facebook acted unlawfully against the class represented by the Foundation by, amongst other:

  1. not complying with the information obligations of art. 12, 13 and 14 GDPR and its equivalents under the national law that preceded the GDPR;
  2. By giving third parties access to personal data of the class members without properly and timely informing them thereof;

and several other breaches, including the Unfair Business Practises Act.

The represented class constitutes of all natural persons who, in a non-commercial capacity, are or were on Facebook in the period 1 April 2010 through 1 January 2020, whilst residing in the Netherlands.

According to Facebook, the claims of the Foundation do not lend themselves to collective proceedings, because the factual and legal questions are not the same, or at least not sufficiently similar, and the interests of the individual interested parties differ. Facebook contends that there are various factual allegations that cover almost a decade; there are different groups of users and different legal provisions apply; the use of the Facebook service involves a considerable amount of fine-tuning at individual level, as different user agreements, policies and information provisions apply to users, depending on the time period during which each of them used the Facebook service.

The court considered that the question of whether the interests involved in the claims lend themselves to bundling also depends on the nature of the claims made. The claims of the Foundation are limited to declarations for law that there is unlawful act, unfair trade practices and unjustified enrichment. Unlike in, for instance the Elco Foundation v. Rabobank et al. case (see below) the Foundation does not claim a declaratory judgment relating to error, in the assessment of which individual circumstances are rather important. The court finds that the claims of the Foundation relate to various sufficiently narrowly defined actions of Facebook. These claims are essentially based on the fact that Facebook has violated the privacy of its users by processing personal data without the necessary consent. With the claims, the Foundation seeks a judgment on the question of whether the personal data of (certain) users of the Facebook service have been processed in accordance with the applicable regulations. Such a judgment on the lawfulness or otherwise of the actions of Facebook et al. with regard to the processing of personal data lends itself to a collective action. This is not altered by the fact that over time there have been different terms of use and different statutory regulations.

Milieudefensie et al. v. Royal Dutch Shell (WCAM)

On 26 May 2021, the district court of The Hague ruled in the case of environmental NGO Milieudefensie and various other Dutch and foreign environmental NGO’s and individuals, against Royal Dutch Shell (‘RDS’e). Milieudefensie filed claims on a collective basis against RDS, seeking an order for it to bring its CO2 emissions policies in line with Paris Climate Agreement.

The court held that the interests of ‘current and future generations of the world’s population’, as served principally with the class actions, is not suitable for bundling. It held that although the entire world population is served by curbing dangerous climate change, there are huge differences in the time and manner in which the global population at various locations will be affected by global warming caused by CO2 emissions. Therefore, this principal interest does not meet the requirement of ‘similar interest’.

The court held, however, ‘that interests of current and future generations of Dutch residents and [with respect to one of the Dutch NGO’s the Waddenvereniging, aimed at protecting the interests of (those living on) the Dutch group of Wadden-islands, FMP] of the inhabitants of the Wadden Sea area, a part of which is located in the Netherlands, as served in the alternative with the class actions, are suitable for bundling, even though in the Netherlands and in the Wadden region there are differences in time, extent and intensity to which the inhabitants will be affected by climate change caused by CO2 emissions. However, these differences are much smaller and of a different nature than the mutual differences when it concerns the entire global population and do not stand in the way of bundling in a class action.

The court therefore declared not admissible the claims insofar as they serve the interest of the world’s population, except for the interest of Dutch residents and the inhabitants of the Wadden region.

It is interesting to see that the court finds that the interests of anyone outside the Netherlands, is not sufficiently similar to the interests of those living within. The court does not explain why this is so, other than that it finds that the differences within the Netherlands are ‘much smaller and of a different nature’. Considering that the merits of the case have been decided on a global scale, and on the basis of an abstract reasoning (impact of CO2 emissions on global warming, statistical models, activities of RDS all over the world), and if anything: the interests of those living in countries which are less well-off than those in the Netherlands are even more affected by global warming, it seems that the interests of all would benefit from this case. At the same time, the fact that the case has formally been decided for the benefit of Dutch nationals only, does not seem to have had any bearing on the actual decision, in the sense that it is not apparent in what way the decision would have been different if the court would have allowed the case to be heard for the wider class.

Stichting Elco Foundation v. Rabobank et al. (WCAM)

The Stichting Elco v. Rabobank et al. case [9]District Court of Amsterdam, 9 December 2020, ECLI:NL:RBAMS:2020:6122. related to the scandal of manipulation by a group of panel banks of the interbank interest rates LIBOR and EURIBOR. The foundation, according to its articles of association, represented all financial institutions in the EU, to the extent they had had exposure to LIBOR or EURIBOR in non US transactions, excluding from the class those parties which participated in the LIBOR and EURIBOR determination process, such as the defendants themselves. Defendants included the Dutch anchor defendant Rabobank, and four other, foreign panel banks.

The court held that the interests of the represented group, met the similarity test:

The represented class, according to the articles of association, is a wide group of persons who have in common – briefly put – that they have a place of establishment or office in the EU and who have engaged in transactions outside the US which in one way or the other are related to the interest benchmarks. The fact that a multitude of laws may apply to the claims of the foundation, in itself does not stand in the way of giving a judgement on the issues raised by the foundation, considering that the foundation has asked for declaratory relief only. These issues are, as the foundation rightly argued, in general separate from the specific circumstances relevant to the interested persons. That means that, [the claims] lend themselves for bundling.

This seems to be in line with existing case law under WCAM. As damages assessment is a matter for the court to deal with after certification, it seems that the outcome would not have been different under WAMCA.

The court finds, however, that in this case, to the extent the claims are based on the legal theory of unjust enrichment, these are not suitable for collective redress, as an individual assessment is required of both enrichment and impoverishment.

Considering that declaratory relief was sought, it is understandable that the court finds that it cannot give a relevant declaration for each of the individual situations imaginable for this very wide group of both interested parties, but also defendants.

However, the court declines to allow the case as a whole to proceed, on the basis in particular that the claim relates to such a variety of facts over a very long period of time, that it will not be able to give a meaningful declaration in the end, meaning that the interests of the interested persons are not served by proceeding on a collective basis. The facts of the LIBOR and EURIBOR case, as presented to the court, related to a pattern of behavior covering a period of 10 years. For individual parties to claim damages, however, they would need to show individual transactions and the specific effects of individual manipulations of these interbank rates, for them to be able to prove they suffered a loss. The court expressly considers that the facts of this case deviate from the World Online situation discussed above, where the legal matters could be decided abstract of the specific circumstances of individual investors.

In addition, the court deemed relevant that the interested parties were all professional parties, who, if substantial financial interests are at stake, are capable of filing individual claims, meaning that collective redress is not necessary to allow access to an effective remedy.

As said, the case was decided under WCAM. The reasoning may also have applied under WAMCA (apart from that the class in that case cannot consist of non-Dutch financial institutions), considering the typical circumstances of this case: an enormous variety of possible individual positions.

Conclusion as to Dutch law

The standard as developed in the Baas in Eigen Huis and World Online cases under WCAM stand and it seems that it will continue to be the standard under WAMCA. The standard is not a high threshold, nor is it meant to be a high threshold.

A quick look at the UK provides a similar picture: Merricks v. Mastercard

On 11 December 2020, the U.K. Supreme Court handed down its ruling in Merricks v Mastercard [10]Mastercard Incorporated and others (Appellants) v Walter Hugh Merricks CBE (Respondent) [2020] UKSC 51, dismissing Mastercard’s appeal against the English Court of Appeal’s April 2019 decision. Class representative Merricks commenced follow-on damages litigation after the EC’s Decision in respect of breaches of competition law, by commencing a U.K. class action in September 2016 on behalf of approximately 46.2 million U.K. consumers. The action seeks approx. GBP 14 billion in damages for the inflated prices paid by U.K. consumers. Collective competition claims must be certified to be able to continue as a collective action. Certification requires that the claims are brought on behalf of an identifiable class of persons, raise common issues, and are suitable to be brought in collective proceedings.

At first glance, the ‘common issues’ and ‘suitable for collective proceedings’ tests are not unlike the ‘similarity test’ applied by the Dutch courts. The UK Supreme Court’s majority decision was that the applicable test whether or not claims are “suitable” to be brought in collective proceedings is a relative judgement, meaning one needs to determine whether the claims are more appropriately brought as collective proceedings rather than individual proceedings. This is also decisive when contemplating whether the claim is “suitable for an award of aggregate damages”. In essence, what is required is that an aggregate damages award is more suitable than “a multitude of individually assessed claims for damages”. This is much more efficient than going through the burden of thousands of individual claims.

Conclusion

The question as to whether or not claims are suitable for collective redress, because they are sufficiently similar, seems to be approached benevolently by the Dutch courts, be it in labour cases, GDPR damages cases or cartel damages cases, or whatever the nature of the collective action. In the UK this does not appear to be any different. Cases where individual circumstances are decisive for a finding of legal wrongdoing, nevertheless are not suitable for collective action. The distinction becomes blurred in cases where claims are based on grounds of error or unjust enrichment, but in all events: the facts of the particular case will be decisive.

References

References
1 Directive (EU) 2020/1828 of the European Parliament and of the council of 25 November 2020 on representative actions for the protection of the collective interests of consumers and repealing Directive 2009/22/EC.
2 This may be different of the class action vehicle has charged members of the represented class a fee for signing up to the class action. However, for various reasons, this is no longer common in the Dutch market of collective actions.
3 Wet Afwikkeling Massaschade in Collectieve Actie, or WAMCA for short.
4 Wet Collective Afwikkeling Massaschade, or WCAM for short. Under WCAM, it was not possible for a claim vehicle to claim specified damages. In liability cases, this meant that the vehicle would seek a declaration of liability, so that either members of the represented class could commence follow on litigation, to claim specific, individualized damages on the basis of the general finding of liability, or that a collective settlement would be reached between the vehicle and the defendant. The collective settlement can be submitted to the court by the claimant and the defendant jointly, for the court to approve the settlement and declare it binding on the entire represented class, on an opt-out basis.
5 This last requirement was introduced in the WAMCA, which entered into force on 1 January 2020 and which applies to cases dealing with facts which occurred after 15 November 2016.
6 HR 26 februari 2010, ECLI:NL:HR:2010:BK5756 (Baas in Eigen Huis/Plazacasa).
7 Hoge Raad 27 november 2009, ECLI:NL:HR:2009:BH2162, NJ 2014/201.
8 20 November 2019, Amsterdam district court, C/13/647072 / HA ZA 18-432.
9 District Court of Amsterdam, 9 December 2020, ECLI:NL:RBAMS:2020:6122.
10 Mastercard Incorporated and others (Appellants) v Walter Hugh Merricks CBE (Respondent) [2020] UKSC 51

Update on the transposition of the EU Directive on representative actions for consumers into Dutch law

At the beginning of the year, we published an article with regard to the ‘Directive on representative actions for the protection of the collective interests of consumers’. This Directive aims to ensure that Member States put in place at least one effective and efficient collective redress procedure that allows ‘qualified entities’ to bring representative actions to protect the collective interests of consumers.


Qualified entities are representative organizations (in particular consumer organisations) or public bodies which have been designated as a ‘qualified entity’ by a Member State. To be designated as a qualified entity, a representative organization must meet the criteria as laid down in the Directive. The qualified entities are written down on a list held by the European Commission. Inclusion on this list serves as proof that a representative organization is qualified to bring a case before a court in another Member State.


The Netherlands already has an effective system of collective redress with the Act on Redress of Mass Damages in Collective Action (“WAMCA”). As we predicted in our previous article, the preliminary draft of the proposed transposition of the Directive in the Netherlands showed that the WAMCA will only need slight amendments. This draft was presented by the Minister for Legal Protection on May 1, 2021. In this blog we will highlight a few of the proposed amendments from the preliminary draft.


Informed consumers


Representative organizations must provide information, in particular on their website, about ongoing representative actions (Article 13(1, 2) Directive). With this information, consumers are able to make a better informed decision about whether they wish to participate in a representative action and to take the necessary steps in a timely manner.


The WAMCA already obliges representative organizations to publish information on their website about the status of pending proceedings (Article 3:305a(2)(d) DCC). The Directive adds the requirement that representative organizations need to publish information about the results of any pending actions (Article 13(1)(c) Directive). The draft incorporates this requirement in Article 3:305a(2)(d) DCC).


Conflict of interest restrictions


A substantial number of collective actions are funded by commercial third parties. Third party litigation funding enables consumers to obtain redress when they do not have the financial means to do so. The good news is that funding by third parties is not excluded by the Directive. The Directive, however, does impose restrictions to avoid conflicts of interest between a funder and the representative organization (Article 10(2)(b) Directive). For example, Member States must ensure that class actions cannot be brought against a defendant that is a competitor of the funder or against a defendant on whom the funder is dependent. This restriction is now included in Article 3:305a(2)(c) DCC.


Cross-border actions before the Dutch Court


If a qualified entity in another Member State brings a case before the Dutch court, the court is not allowed to review all WAMCA requirements of Article 3:305a DCC. The court is only allowed to review the requirements that relate to the claim and the specific procedure (Article 6 Directive). The court can for example still assess whether the statutory purpose of the representative organization allows it to institute a specific collective action (Article 6(3) Directive). The court is also allowed to test whether the qualified entity has sufficient means to bear the costs of initiating a specific collective action (Article 10 Directive). These requirements for a specific collective action cannot be assessed in advance. At the time of the designation of the representative organization as ‘qualified entity’ by another Member State, it may not be clear which specific actions will be initiated. The draft proposes to amend Article 3:305c DCC to reflect the foregoing.


Cross-border actions in another Member State


A Dutch qualified entity can also bring an action in another Member State. For a representative organization to be designated as a qualified entity for the purpose of bringing cross-border representative actions, that entity must comply with the following criteria of the Directive (Article 4(3) Directive):

  1. it can demonstrate 12 months of actual public activity in the protection of consumer interests prior to its request for designation;
  2. it is not the subject of insolvency proceedings and is not declared insolvent;
  3. it makes publicly available certain information, in particular on its website;
  4. it is a legal person that is constituted in accordance with the national law of its Member State;
  5. it has a legitimate interest in consumer protections according to its articles;
  6. it has a non-profit-making character; and
  7. it is independent and not influenced by persons other than consumers.
    The first three requirements were not (all) included in the WAMCA. For this situation Article 3:305e DCC is introduced. Article 3:305e DCC adds these three requirements from the Directive.
    Firstly, the representative organization must prove that it has been publicly active in the area of protection of consumer interests for 12 months (Article 4(3)(a) Directive, Article 3:305e(2)(a) DCC). The Minister of Legal Protection explicitly states this requirement is not applicable with regard to domestic actions. This means that representative organizations that have been set up especially for the purpose of a specific action (ad hoc entities) are still permitted in domestic actions in the Netherlands. This is positive news as ad hoc entities make an effective contribution to access the right to collective actions for consumers.
    Secondly, an additional requirement is placed on the representative organization to not be the subject of insolvency proceedings and not to be declared insolvent (Article 4(3)(d) Directive, Article 3:305e(2)(b) DCC).
    Thirdly, information about the sources of the funding of a representative organization in general must be made publically available (Article 4(3)(e) Directive, Article 3:305e(2)(c) DCC). For example, the standard annual contribution that is paid to a representative organization by its members that is separate from a specific collective action, or a government subsidy. The WAMCA already included other information that needed to be publicly available on the website of the representative organization in line with the Directive (Article 3:305a(2) DCC).

Opt-in for foreign consumers


The Directive stipulates that Member States should provide for an opt-in mechanism, or an opt-out mechanism, or a combination of the two. Consumers domiciled in a Member State other than the Member State in which the collective action is brought, can however only be bound by the outcome of a collective action if they explicitly agree to it (opt-in). The present Article 1018f(5) DCCP formulates an exception to this opt-in rule. The Directive does not allow this exception (Article 9(3) Directive). The Minister of Legal Protection therefore proposed to amend Article 1018f(5) DCCP in line with the Directive.


We foresee some complications with this amendment and the opt-in mechanism. It could for instance be difficult to reach out to foreign consumers as it would take a lot of effort and investments from a representative organization to get into contact with these consumers and help them to join the collective action in a Member State other than the Member State in which they are domiciled. This could lead to the outcome that the group of foreign consumers is smaller than under an opt-out mechanism. With an opt-out model foreign consumers will be included in the procedure, unless they opt-out, so that the defendant is better confronted with the losses he has caused. An opt-out regime also reduces the barriers for consumers to participate in a collective action allowing them to receive compensation.


Contact


For questions or comments, please contact Michelle Krekels.

Comparative analysis between the UK, Dutch and French approach to passing-on in competition cases

Cartel damages litigation is an increasingly hot topic in Europe. For those who are not familiar with this topic a short explanation. Under normal market conditions, enterprises set their own market prices for their products. Under cartelized conditions, however there is some form of concerted practice (either explicit or tacit) which could lead to an agreement on prices for instance. If competitors agree on a price, this will normally lead to higher prices than under normal circumstances. Competition law prevents competitors this kind of behavior, setting high penalties (potentially in the billions of Euros for world-wide players) when trespassers on the EU competition laws are caught. However, these penalties, severe as they might appear, nevertheless pale into insignificance compared to civil damages claims. The gap between the normal market price and the artificial cartelized price is the so-called cartel damage. In addition, to give you an idea of the enormity of these kind of damages we give as an example the trucks case. Six truck companies were caught red handed by the European Commission in a cartel that lasted (at least) from 1997 to 2011. They were fined 3.8 billion euros. However, estimates are that the total of cartel damages amount to a staggering figure of 200 billion euros. These stakes are high enough to ensure massive court battles. The defendants have no other option than to put forward any possible or impossible argument to prevent the court from a decision that might cause their bankruptcy. For the claimants on the other side it is inevitable to go to court, since their losses have been so high.

Therefore, when stakes are as high as they are, there is no other option than to be very thorough in all the arguments and defenses that are brought to the court. Let alone to be meticulous in the first place as where to litigate.

Several legal topics have drawn special attention over the last few years. In this series of articles, we will shed light on the most hotly debated. Today we discuss the passing on defense. We made a comparative analysis between the Netherlands, France and the United Kingdom. The Netherlands and England (along with Germany) are considered mature jurisdictions in cartel damages litigation, while France (along Spain and Portugal for instance) are on the move to join this lawyer’s paradise.

Passing-on

“Passing-on” in competition cases is where overcharges caused by a cartel, which affect the customers of the cartelists (direct purchasers), are passed-on by these purchasers to buyers further down the supply chain (indirect purchasers). The pass-on argument as a defense may be invoked by a cartel member as a (partial) shield against a claim for damages and by an indirect purchaser as a sword to support the argument that it has suffered damages and/or to evidence cartel collusion.

Legal background

The passing on defence is valid under both EU and national laws.

The Damages Directive [1]Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law … Continue reading (and implementation laws in the Member States) has set two important presumptions reversing the burden of proof:

– as far as direct purchasers are concerned, it is presumed that they have not passed the overcharge on to their own customers. Thus, it is up to the defendant in the antitrust action for damages to prove that the overcharge has indeed been passed on and that its direct purchasers have not suffered any (or less) damage (Article 13 Damages Directive);

– concerning the indirect purchasers, it is presumed that their supplier has passed on the overcharge. Therefore, the burden of proof is here again placed on the defendant in the action for antitrust damages (Article 14 Damages Directive).

Those in itself contradictory presumptions could potentially apply to all claims. The presumptions in itself apparently are designed to help the (potential) claimants in a case.  Everyone familiar with civil litigation knows that a sentiment of wrongdoing is not the same as proving you were wronged. Therefore, it is extremely important to have the burden of proof shifted to the wrongdoers.  In that regard, national courts have established a common understanding for the enforcement of the passing on defence it is for the defendants to prove passing on and the extent thereof as well as the absence of volume effects.  This outcome is consistent with the acquis communautaire on the burden of proving pass-on (i.e. in line with the EU principle of effectiveness) that has been codified in Article 13 Damages Directive. So how do courts apply these presumptions in practice in their case law? We believe that this would lead to the conclusion that the odds should favour the claimants. However, do courts indeed apply this presumption? We compared the United Kingdom, the Netherlands and France.

United Kingdom approach

In two recent landmark cases the UK Supreme Court (SC) and the UK High court rendered decisions on the UK evidential standard in connection to the passing on defense. The Courts emphasized that claimants should be neither undercompensated nor overcompensated and therefore the evidential burden in relation to mitigation of loss on defendants / cartel members should not be ‘unreasonably high’. This is an approach in which no apparent choice seems to be made in favor of the claimants or the defendants.

In June 2020, the SC overturned a decision of the Court of Appeal in which it had decided that it required defendants (cartel members) to prove the (virtually) exact amount of loss mitigated in order to reduce claimed damages. [2] UK Supreme Court 17 June 2020, case refere The SC decided that the law does not require such high evidential standard and that the Court of Appeal had erred insofar that it required ‘unreasonable precision’ from the defendants in the proof of the amount of loss that the claimants had passed on to end customers. This decision was rendered in the context of a damages lawsuit brought by several supermarkets against Mastercard, Visa and several other large banks for the use of certain payment card schemes, in particular the multilateral interchange fees (MIFs)[3] applicable in the EEA, which the European Commission found to be anti-competitive in 2007.

Key considerations of the SC regarding the evidential burden of defendants:

  • Claimants should not be under-compensated but neither overcompensated when suffering harm from a competition law breach.
  • In the UK, pass-on is an element in the quantification of damages that is required by the compensatory principle and required to prevent double recovery through claims in respect of the same overcharge by a direct purchaser and by subsequent purchasers in a chain. Against this background, the SC considered that “justice is not achieved if a claimants receives less or more than its actual loss”. (217)
  • A balance is required between the compensatory principle and the principle that disputes should be dealt with ‘at a proportionate cost’. In that light “the court and the parties may have to forego precision, even where it is possible, if the cost of achieving that precision is disproportionate, and rely on estimates”. (217).
  • The SC considered that it sees no reason why in assessing compensatory damages there should be a requirement of greater precision in the quantification of the amount of an overcharge which has been passed on to end consumers because there is a legal burden on defendants in relation to mitigation of loss. (219).

The preceding approach does not offend the principle of effectiveness of EU Law, according to the SC:

“As we have said, the relevant requirement of EU law is the principle of effectiveness. The assessment of damages based on the compensatory principle does not offend the principle of effectiveness provided that the court does not require unreasonable precision from the claimant. On the contrary, the Damages Directive is based on the compensatory principle.” (220)

“ As the regime is based in the compensatory principle and envisages claims by direct and indirect purchasers in a chain of supply it is logical that the power to estimate the effects of passing-on applies equally when pass-on is used as a sword by a claimant or as a shield by a defendant.” (224)

On 25 February 2021, the UK High Court rendered a decision in which it validated the approach to pass-on of the SC decision of June 2020.[4] The UK High court referred to several key considerations of the SC in its decision, among which the compensatory principle and the fact that claimants should not be overcompensated for their damages as much as they should not be undercompensated. In addition, the decision implies that the pass-on approach can / should also be applied in complex and a-typical cases of passing on of overcharges, as the underlying case, which would pose a difficult and costly evidential burden on both parties.

This case stems from the foreign exchange cartel and a damages lawsuit filed by Allianz Global Investors and other claimants against several banking groups for their participation in the aforementioned cartel. The case involves investment funds who seek to generate a return for their investors and in so doing make use of the foreign exchange services provided by banks. Pass-on in this case is said to occur when an investor redeems or withdraws his investment from the fund. The High Court made clear that even though this is not a typical pass-on case involving the sale and purchase of goods in a supply chain, the compensatory principle equally applies. Defendants should not be subject to double recovery (12).

Claimants argued that the defendants’ pass-on defense should be stricken out because there was no real prospect of success, mainly because investors would have no cause of action against the banks. They also argued that it would have great impact on the future scope of claims, in terms of disclosure of documents and provision of evidence. The UK High Court did not agree that there would be no real prospect of success. The UK High Court said that the defense was appropriate and therefore it considered it necessary to “investigate precisely how the alleged wrongdoing of the Defendants impacted upon the investment fund (…) and how that affected the sum payable to the investor”, by disclosure and by factual and perhaps expert evidence. The pass-on defense could therefore be advanced to trial.

Our preliminary conclusion is that the UK courts do not favor one party over the other. It seems as if the courts feel that over-compensation is just as bad as under-compensation. In addition, in this argument there seems to be a deviation from the choice for the principle of effectiveness. So how do the Dutch approach this?

The Dutch approach

In Dutch case law the threshold for an effective passing-on defense has been set relatively high, contrary to the standard that has been set in the UK. The principle of effectiveness and the scope of the Cartel Damages Directive have served as normative and guiding principles for Dutch courts in this regard. The landmark judgements stem from a follow-on damages case between electricity transmission operator TenneT and electricity equipment corporation ABB.

On 8 July 2016, the Supreme Court ruled in the cartel damages case between ABB and TenneT that ABB was liable for the damage suffered by TenneT through the cartel on the market of gas-insulated switchgear.[5]

Amongst others, the Dutch Supreme Court considered in this case that even without retroactive effect for material law, the Damages Directive nevertheless has to be taken into account in order to sure the European l’effet utile and the principle of equality (4.3.1 and 4.3.4). In other words, it was clear that the Damages Directive was not applicable in this case but the Supreme Court did consider it. With reference to article 12 (3) of the Damages Directive, the Supreme Court decided that the evidential burden in connection to passing on is in principle on the cartel member. Furthermore, the Supreme Court confirmed that the court is authorized to estimate damages if it is not possible to determine the amount of damages precisely. So with reference to the not applicable Damages Directive the Supreme Court clearly decided in favor of the claimant.

The District Court of Gelderland delivered judgment on 29 March 2017 and ABB was ordered to pay € 23 million in compensation for the damage caused by the cartel.[6] ABB argued against the extent of the damage by invoking the passing-on defense. The District Court did not agree with this and found that the question whether this defence is reasonable, the principle of equality, the principle of effectiveness and the scope of the Damages Directive serve as normative and guiding principles (4.17). The court considered that “the object of the Damages Directive is not that the infringer should be given a hook to get out his liability of damages. The intention is that the compensation to be paid by the infringer should accrue to the direct and indirect customers in the chain to whom the additional costs were charged” (4.18). The court also ruled that the chance of end consumers bringing their own damages actions (and thus the risk of double compensation) was negligible. Once again and even clearer than the Supreme Court the court here argued in favor of the claimant, especially because they took into account the possibility of actual passing on, but that it was unlikely that further down the line any consumer would collect these scattered damages.

The so-called efficiency defense has been paid particular attention to in this context. Nowadays, almost every claimant advances this defence. Parties claim the harm suffered and alternatively claim compensation by invoking the efficiency defence. Briefly stated, the efficiency defence results in the court nevertheless awarding compensation to the claimant even if strictly speaking, the claimant is unable to prove the harm. This is of course a slippery slope from the point of view of legal certainty. However, it does seem to follow the European starting position, which is that the process should not be made too difficult for claimants and which forms the basis for the Damages Directive.It is a means of ensuring that private litigation is not made impossible from the very start.

The French approach

In France, in cases in which Pre-Damages Directive rules apply, the question of the burden of proof regarding the passing on defense is not entirely settled yet.

According to the Circular of 23 March 2017, the new Article L481-4 of the French Commercial Code (including burden of proving passing on) does not apply to damages claims resulting from an infringement, which took place before its entry into force, that is on 11 March 2017.

Prior to the adoption on 9 March 2017 of the rules implementing the Damages Directive in France, there was no specific legal provision on the issue of pass-on of overcharge in cartel damages cases. The general civil law provisions, namely Art, governed the issue. 1315 of Old French Civil Code (Art. 1353 of the New French Civil Code with the exact same wording).

In accordance with  a ruling of the Cour de cassation[7], several French civil and commercial courts of first instance have handed down judgments putting the burden on the claimant to prove the absence of passing on.[8] While in two cases the Paris Court of Appeal considered that it was for the defendant to prove the passing on after the plaintiff had brought some indicia showing that there was no passing-on[9], it recently quashed a ruling of the first instance court where it found that the plaintiff which had been granted damages had not provided any evidence that there had not been any passing on.[10] Most recently however, the Paris Administrative Court of Appeal[11] and the French Court of Cassation[12] held that, in accordance with EU law and principles, the burden of proof regarding the passing on of the illegal overcharge lies with the defendant. Besides the economic aspects (additional damages in form of loss of profit and the difficult proof of causality), there are therefore strong legal arguments to counter any potential passing-on defence. As the case law stands, it therefore seems highly recommendable to the plaintiffs that they bring as much evidence as possible about the absence of passing-on, allowing then the French Courts to shift the burden of proof on the defendant to establish passing-on.

Therefore, overall it appears that the French courts are slowly marching away from Albion to get closer to the Dutch approach regarding cases in which Pre-Damages Directive rules apply.

On the other hand, with regards to cases where post-Damages Directive rules apply, there is no doubt that the plaintiffs will fully benefit from the presumptions set by the Damages Directive.

Next time we discuss the bundling of claims!

bureau Brandeis, 4 June 2021

Marc Barennes, Tessel Bossen, Hans Bousie & Sarah Subremon

[1] Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union Text with EEA relevance (OJ L 349, 5.12.2014, p. 1–19)

[2] UK Supreme Court 17 June 2020, case references UKSC 2018/0156 Sainsbury’s Supermarkets Ltd and others (Respondents) v MasterCard Incorporated and others (Appellants); UKSC 2018/015 Sainsbury’s Supermarkets Ltd (Respondent) v Visa Europe Services LLC and others (Appellants).

[3] MIFs are charged by a cardholder’s bank (issuer) to a merchant’s bank (the acquirer) for each transaction made to the merchant with a payment card. In practice, the acquiring banks passed these fees on to merchants by charging a merchant services charge (MSC), for which they were seeking damages. The banks however argued that the supermarkets had passed-on the overcharges by the MIFs/MSCs to their end consumers by raising retail prices.

[4] UK High Court 25 February 2021, Case no CL-2018000840.

[5] Supreme Court 8 July 2016, ECLI:NL:HR:2016:1483.

[6] District court of Gelderland 29 March 2017, ECLI:NL:RBGEL:2017:1724.

[7] Cour de cassation, 15 May 2012, Le Gouessant.

[8] Paris Commercial Court, 26 March 2018, Provera; Paris Commercial Court, 20 February 2020, Cora; Rennes High First Instance Court, 7 October 2019, FRSEA.

[9] Paris Court of Appeal, 20 September 2017, JCB; Paris Court of Appeal, 6 February 2019, Doux.

[10] Paris Court of Appeal, 14 April 2021, Johnson & Johnson.

[11] Paris Administrative Court of Appeal, 13 June 2019, SNCF Mobilités.

[12] French Court of Cassation, 12 February 2020, Collectes valorisation énergie déchets. This case does not relate to antitrust damages and may only be referred to by analogy.

References

References
1 Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union Text with EEA relevance (OJ L 349, 5.12.2014, p. 1–19)
2 UK Supreme Court 17 June 2020, case refere

Litigation boutique bureau Brandeis opens Paris office with focus on antitrust litigation

bureau Brandeis / 26 Feb 2021

Today, bureau Brandeis launched its Paris office. Throughout the EU, collective actions are on the rise in many areas, in particular antitrust damages cases. bureau Brandeis has been active in this and other high stake areas of litigation for many years , with a clear preference for the challenger. It now joined forces with seasoned French antitrust litigators Marc Barennes, Sarah Subrémon, David Reingewirtz and Philippe Zeller to increase its access to the French market and expand its network of first-class economists, data collectors and litigation funders. The office of bureau Brandeis Paris is located in 4 rue de Penthièvre, 75008 Paris, in the heart of the Paris business arrondissement.

bureau Brandeis Paris is the first European plaintiff litigation boutique in France dedicated primarily to assisting companies, public entities and groups of individuals harmed by competition law infringements. Other fields of high stake litigation will be added in due course.

bureau Brandeis Paris founding members declared: “We are thrilled to set up this office together and work with our Amsterdam colleagues in getting justice and compensation for large groups of antitrust victims.”

Hans Bousie, partner of bureau Brandeis Amsterdam about this new venture: “Clients want these cases brought where is best for them, whether that is in Amsterdam or elsewhere. With the opening of bureau Brandeis Paris, we take a major step in developing our EU presence, with unique access to claims funding. We are thrilled that Marc, Sarah, David and Philippe open a bureau Brandeis office in Paris. We share the same values and work from the belief that litigation is a tool to obtain justice. Apart from that, they are the nicest French (wo)men you can imagine. We are looking forward to working with them in antitrust cases and in other areas of litigation in the future”.

bureau Brandeis was established in Amsterdam in 2014, as a boutique law firm, specialized in litigation, and has a preference for the challenger. bureau Brandeis is a law firm with an emphasis on litigation and in (international) arbitration. We act, often together with other law firms at home or abroad, for national and international companies and other organizations, with a preference for the challenger. We participate in the social debate.

Marc Barennes was a référendaire with the General Court of the European Union and an officer with the European Commission (DG Competition) for 15 years, after starting his antitrust career with a US law firm in Brussels and Paris. He also gained significant experience in private damages actions as a senior executive of an antitrust claims aggregator in the past two years.

Sarah Subrémon is a former Deputy Rapporteur General of the French Competition Authority and a former official with the European Commission (DG Competition) and the English Competition and Markets Authority, where she worked for more than 15 years. She started her career as an antitrust lawyer in Paris. She joins bureau Brandeis Paris from an antitrust claims aggregator where she was also a senior executive.

David Reingewirtz is an antitrust and commercial litigator. After practicing antitrust law in various well-known UK and US law firms in Paris, Brussels and Washington for 8 years, David was appointed Secrétaire de la Conférence du stage in 2008, a prestigious position for French litigators. He then co-joined an independent litigation boutique, specializing in antitrust, commercial and criminal disputes.

Philippe Zeller is an antitrust, regulatory and public litigator. After earning his Ph.D. in public law and lecturing in this field in various law schools, Philippe joined prestigious US and French law firms in Paris where he held Counsel and Partner positions. He specializes in litigating cases before the French independent administrative agencies and Courts.

Breaking News: Visa en Mastercard face billions of pounds damages claims in the UK

Hans Bousie & Tessel Bossen / 19 Jun 2020

The so-called interchange fees set by Visa and Mastercard that have to paid by retailers on all card purchases are illegal, the UK Supreme Court said on Wednesday. [1]UK Supreme Court 17 June 2020, [2020] UKSC 24. This means that Visa and Mastercard will now definitely be faced with potential billion pound follow-on damages claims from merchants.

Whenever a customer uses a credit/debit card to make a purchase in a store, the merchant´s bank account must pay a transaction fee to the card-issuing bank of the customer.  These fees are called multilateral interchange fees (MIF). The UK Supreme Court said Wednesday that the MIFs charged within the Visa and Mastercard payment card schemes are illegal.

This decision has major implications for Visa and Mastercard, because numerous damages claims have already been initiated by merchants in the UK and now it is clear that all these procedures can proceed to a trial to decide compensation. According to the lead counsel of J Sainsbury, the potential damages could amount to a billion pounds.

In July 2018, the high court decided already that the interchange fees of the companies were restricting competition and breached UK and European competition rules. [2]Court of Appeal 4 July 2018, 2018 EWCA Civ 1536. This decision has (for the most part) been confirmed by the decision of the Supreme Court.

The Supreme Court confirmed i.a. that Visa and Mastercard had to meet a more onerous evidential standard than that normally applicable in civil litigation with regard to proving that the interchange fee model should be exempt from European competition rules. One of the conditions in order to qualify for an exemption is that the efficiencies and benefits for the consumers (here: the merchants) outweigh the disadvantages they have to bear as a result of the restriction of competition. The Supreme Court said that the adverse effects should be outweighed by the benefits for (in this case) the merchants in so far that they would be fully compensated for the disadvantages. Visa and Mastercard did not succeed in proving that the merchants benefitted of the interchange fee model to that extent.

The procedures stem from a decision of the European Commission of 2007. [3]European Commission decision of 19 December 2007, case COMP/34.579 (Mastercard). In that decision, the Commission found that the interchange fees of Mastercard were illegally high for 15 years. The Commission did however not decide whether the interchange fee as such would be illegal. The decision of the UK Supreme Court clarifies that this is the case.

We reported on these proceedings and their background in multiple editions of our Cartel Damages Litigation Quarterly Report in Q (2018-QI, Q3 and 4, and 2017-Q2, Q3 and Q4).

References

References
1 UK Supreme Court 17 June 2020, [2020] UKSC 24.
2 Court of Appeal 4 July 2018, 2018 EWCA Civ 1536.
3 European Commission decision of 19 December 2007, case COMP/34.579 (Mastercard).

bureau Brandeis climbs in Legal500-rankings

bureau Brandeis / 23 Apr 2020

In its latest publication Legal500, one of the most prestigious legal directories worldwide, has recognized the growing success of bureau Brandeis as one of the leading litigation boutique firms in the Netherlands.

bureau Brandeis comes in highly recommended for Dispute Resolution (Commercial Litigation), Privacy and data protection, Media & entertainment, Information Technology, Intellectual Property, Telecoms and EU & Competition

Of all Dutch litigation firms we are proud to have the highest number of recommended partners and senior counsels: Christiaan Alberdingk Thijm (Media, Telecoms, Intellectual Property and Information Technology),  Louis Berger (Commercial Litigation), Hans Bousie (EU Competition and Media/Entertainment), Bas Braeken (EU & Competition, Telecoms and Commercial Litigation), Frank Peters (Commercial Litigation), Machteld Robichon (Media/Entertainment, Telecoms and Information Technology), Jozua van der Beek (Commercial Litigation) and Vita Zwaan (Privacy and Data Protection).

We are especially excited to see a number of our young stars Caroline de Vries, Syb Terpstra, Sophie van Everdingen and Sam van Velze entering the rankings.

bureau Brandeis is grateful to its clients and partnering law firms for trusting us for their most important matters. Our success is their success.

Coronavirus-helpdesk bureau Brandeis

At times of need, bureau Brandeis is always there for its clients. That is why we have set up a special coronavirus helpdesk to answer any questions you may have.

The spread of the coronavirus affects all companies and industries. This has major
implications and raises all kinds of legal questions, such as:

  • What to do if your customer or client is on the verge of bankruptcy?
  • Is the agreement your company depends on enforceable (whether or not in preliminary relief proceedings by claiming performance of the contractual obligations)?
  • Conversely, what can you do if you want to defend yourself against a possible claim for performance that would put your company in dire straits?
  • Do I have to treat all my creditors equally, now that things are a little tighter financially?
  • Etc.

Many legal questions about the consequences of the coronavirus have already been answered (in Dutch) by bureau Brandeis in this blog post.

Those of you who do not speak Dutch and for other relevant questions, please contact Hans Bousie or Stefan Campmans at our corona helpdesk either by phone or email.

And if you have any questions that are not our area of expertise, such as tax or labour law, we are happy to refer you to colleagues with whom we work closely, so we can solve your problem together.

bureau Brandeis closely follows the developments concerning the coronavirus. In light of the Dutch government’s recommendation to work from home where possible, we have implemented a remote working plan for our attorneys and staff. The firm has an excellent IT infrastructure and we do not expect any delay in offering our services to you.

Meetings

Meetings are being rescheduled to telephone or video conference as much as possible. We have cancelled our in-house seminars and limited our external visits to Court appearances until the end of March. We will continue to monitor the directives of the authorities and will take additional measures when necessary.

Impact

The coronavirus has a big impact on the businesses of our clients. We are grateful that many of them have reached out for our guidance on the issue. Please do not hesitate to contact us should you require legal advice on the coronavirus or any other matter. We are committed to continue to assist our clients during these challenging times.

Breaking news in cartel damages litigation

Hans Bousie / 05 Feb 2020

Yesterday [1]Amsterdam court of Appeal CDC-Kemira, 4 February 2020. the court of appeal in Amsterdam, the Netherlands, overturned an earlier decision [2]Amsterdam court, CDC-Kemira 10 May 2017. of the lower Amsterdam court in the so-called Sodium chlorate case. The lower court ruled earlier that the limitation period has run out according to several national regulations a.o. Spanish and Swedish law. Until now it was widely accepted in the European Union that limitation periods start running at the moment the European Commission renders its decision. In its ground breaking decision, the appellate court though ruled, referring to the so called Cocego case (see below) that the limitation period connected to follow-on proceedings only starts running after the complete appellate term has run, so ultimately at the moment of the final ruling of the Court of Justice of the European Union (CJEU). Thus extending possible limitation periods with years. The appellate court explicitly refers to the principle of effectiveness of private litigation in cartel damages cases.

In Europe, cartel damages litigation is picking up speed. Other than in the US where this kind of litigation has been practised for decades, in Europe it all started 16 years ago with the introduction of Regulation 1/2003 [3]Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty. by the European Commission and three years later with the landmark judgment in the Manfredi case [4]CJEU, Vincenzo Manfredo vs Lloyd Adriatico Assicurazion1 (C—295/04) 13 J. In Manfredi, the CJEU summarized its preceding case law and held that, once an infringement of Article 81 EC [5]101 TFEU. has been committed, any individual should be able to rely on the invalidity of an agreement or practice prohibited under that article. In the Manfredi case, Vincenzo Manfredi, an Italian national, started national private damages litigation against a number of insurers who agreed to a concerted practice of raising their premiums, which was held to be an infringement of national competition law. The Manfredi case has proven to be a cornerstone under the theory and practice of private damages litigation by introducing the principle of effectiveness (Effet Util) into cartel damages litigation [6]The direct effect of European law has been enshrined by the CJEU in the judgement of Van Gend en Loos of 5 February 1963. In this judgement, the Court held that European law not only engenders … Continue reading. The direct effect principle ensures the application and effectiveness of European law in EU countries and this principle has been extended recently.

In 2019 the CJEU held in the so called Skanska case [7]Court of Justice, 14 March 2019, C-724/17. that companies, interpreted as an economic unit, are liable for the damage caused by the cartel. This is also the case when it changes its identity through restructurings, sales or other legal or organisational changes.

The ECJ ruled:

“As stated in paragraph 25 of this judgment, the right to claim compensation for damage caused by an agreement or conduct prohibited by Article 101 TFEU ensures the full effectiveness of that article and, in particular, the effectiveness of the prohibition laid down in paragraph 1 thereof.” [8]Court of Justice, 14 March 2019, C-724/17, p. 43.

Therefore, if the undertakings responsible for damage caused by an infringement of the EU competition rules could escape penalties by simply changing their identity through restructurings, sales or other legal or organisational changes, the objective of suppressing conduct that infringes the competition rules and preventing its reoccurrence by means of deterrent penalties would be jeopardised.” [9]See, by analogy, judgment of 11 December 2007, ETI and Others, C‑280/06, EU:C:2007:775, paragraph 41 and the case-law cited).

The Dutch courts were eager to accept this principle of effectiveness. The Dutch Supreme Court [10]Tennet ABB, Dutch Supreme Court, 8 July 2016, ECLI:NL:HR:2016:1483, p. 4.3.1. first held that according to EU law, anyone must be able to claim compensation for the damage caused to them by an agreement or conduct which is capable of restricting or distorting competition, and that would not preclude national courts from ensuring that the protection of rights guaranteed under the legal order does not result in an unjustified enrichment of the beneficiaries (referring to the Courage and Crehan cases). [11]CJEU 20 September 2001, C-453/99, ECLI:EU:C:2001:465, NJ 2002/43, p. 26 and 30 (Courage and Crehan) )

The determination of damages by the Dutch court takes place in the absence of EU law under Dutch law, with due regard for the principle of equivalence and the principle of full effectiveness. The Supreme Court then considered whether the private damages directive (‘Directive’) was applicable in this case, which clearly it was not, since the infringement referred to the Supreme Court took place long before the introduction of the Directive and the preamble of the Directive even states explicitly that the Directive has no retroactive effect. Nevertheless the Supreme Court (quite remarkably) held that, despite the non-applicability of the Directive, Dutch law has to be interpreted in such a way that the outcome of a case should not be contrary to the Directive.

So the Amsterdam appellate court, follows suit, referring to the Cogeco case [12]Court of Justice, 28 March 2019, C-637/17 in which the CJEU held that the principle of effectiveness can set aside national limitation periods.

The CJEU ruled:

“Accordingly, the rules applicable to actions for safeguarding rights which individuals derive from the direct effect of EU law must not be less favourable than those governing similar domestic actions (principle of equivalence) and must not make it in practice impossible or excessively difficult to exercise rights conferred by EU law (principle of effectiveness).” [13]judgment of 5 June 2014, Kone and Others, C‑557/12, EU:C:2014:1317, paragraph 25

This Dutch judgment is surely welcomed by plaintiffs litigating in the Netherlands, and of course can have a great impact on the position of defendants. Not only will it possibly influence current cartel damages litigation in the Netherlands, but if the Dutch Supreme Court will uphold this ruling, this could have an immense impact on the strategy of defendants. In the near future defendants might be forced to decide to decline appealing a European Commission decision because together with the appeal they might prolong the limitation period to the benefit of anyone claiming damages connected to this specific cartel.

Hans Bousie

On behalf of the cartel damages team of bureau Brandeis, 5 February 2020

References

References
1 Amsterdam court of Appeal CDC-Kemira, 4 February 2020.
2 Amsterdam court, CDC-Kemira 10 May 2017.
3 Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty.
4 CJEU, Vincenzo Manfredo vs Lloyd Adriatico Assicurazion1 (C—295/04) 13 J
5 101 TFEU.
6 The direct effect of European law has been enshrined by the CJEU in the judgement of Van Gend en Loos of 5 February 1963. In this judgement, the Court held that European law not only engenders obligations for EU countries, but also rights for individuals. Individuals may therefore take advantage of these rights and directly invoke European acts before national and European courts.
7 Court of Justice, 14 March 2019, C-724/17.
8 Court of Justice, 14 March 2019, C-724/17, p. 43.
9 See, by analogy, judgment of 11 December 2007, ETI and Others, C‑280/06, EU:C:2007:775, paragraph 41 and the case-law cited).
10 Tennet ABB, Dutch Supreme Court, 8 July 2016, ECLI:NL:HR:2016:1483, p. 4.3.1.
11 CJEU 20 September 2001, C-453/99, ECLI:EU:C:2001:465, NJ 2002/43, p. 26 and 30 (Courage and Crehan) )
12 Court of Justice, 28 March 2019, C-637/17
13 judgment of 5 June 2014, Kone and Others, C‑557/12, EU:C:2014:1317, paragraph 25

Major revision of the regime for collective actions in the Netherlands

Michelle Krekels & Daniëlle Brouwer / 17 jan 2020

Introduction

The Dutch regime of collective actions has been thoroughly revised. This revision has created new opportunities for damages actions, requiring claimants, funders and other players in this field to conduct a comprehensive assessment of methods by which they can advance their case.

On March 19, 2019, the amendment of the Act on the Resolution of Mass Claims in Collective Action (‘Wet Afwikkeling Massaschade in Collectieve Actie’) (‘’WAMCA’’) was approved by the Senate and has come into force and effect on January 1, 2020. This amendment introduces the possibility to claim damages in a collective action while at the same time adding stricter requirements for claim vehicles to have standing, as well as changing the international aspects of future collective actions. Furthermore, courts will appoint a quasi-lead plaintiff (“Exclusive Representative“) when there are competing actions. This will be further elaborated upon below, and clarified in a schematic overview.

The possibility to claim damages

In the Netherlands, a claim vehicle (foundation or association) can represent the interests of injured parties and initiate a claim against the responsible party before the Dutch court. Under the old regime, the claim vehicle could not claim collective damages on behalf of the injured parties as it could only seek a declaratory judgment regarding liability. Each injured party had to bring its own claim for compensation in follow on litigation, or settle on a collective or individual basis.

Since January 1, 2020, it is allowed to also claim damages on behalf of the injured parties. It is expected that this will fill in a significant void in the old regime.

Standing of the claim vehicle

The WAMCA adds stricter requirements regarding the standing of a claim vehicle (article 3:305a of the Dutch Civil Code) in terms of governance, objective, representation and funding. Although many of these aspects were adhered to by professional players of good repute on a (semi) voluntary basis anyway, as they tended to apply the Dutch Claim Code, it is now mandatory to have (i) a non-commercial objective, (ii) a supervisory board, (iii) a mechanism for decision-making by the persons whose interests are represented, (iv) sufficient economic means for the costs of the class action and (v) sufficient experience and expertise for running a class action.

The scope of the collective action

Until now, Dutch courts have proved to be welcoming of collective actions with international aspects. Under the WAMCA, for the Dutch courts to have jurisdiction, it is required for the case to have a sufficiently close connection with the Dutch jurisdiction. A sufficiently close relationship exists if (i) the majority of persons whose interests are at stake have their habitual residence in the Netherlands; or (ii) the party against whom the legal action is directed is domiciled in the Netherlands and additional circumstances suggest a sufficient relationship with the Netherlands; or (iii) the event(s) to which the legal action relates took place in the Netherlands.

The appointment of an “Exclusive Representative”

Before a claim vehicle can start a collective action under the WAMCA, it has to make a reasonable attempt to settle the case with the counterparty. A letter that gives the counterparty two weeks to respond is sufficient in this case. After two weeks, the claim vehicle is allowed to submit a writ for a class action.

Under the WAMCA the claim vehicle has to register its collective action in a public register after the submission of the writ, within two days after the filing of the action (‘Centraal register voor collectieve vorderingen’). The entry in the registry triggers a three-month period, during which other claim vehicles can file alternative (competing) collective actions that are based on the same event(s). This period can be extended by the court with another three months.

If several claim vehicles bring a collective action addressing the same events, these collective actions will be consolidated. If the court grants the claim vehicles that brought a collective action standing, it will appoint one of them as the Exclusive Representative to represent the interests of the class and of the other claim vehicles. The Exclusive Representative is chosen by the court from the central register based on all facts and circumstances, indicating that such a party is the most appropriate and well equipped to have that role. This is likely to have as an effect that less professional parties, and ad hoc commercial initiatives, may find it harder to enter the market of collective actions.

Although the other claim vehicles remain parties to the proceedings, the court will decide whether to allow each claim vehicle to file their own pleadings. This resembles somewhat the lead plaintiff system in the United States.

Opt-out and opt-in possibilities

Under the old regime, there was only one opt-out moment: after a settlement agreement is reached and declared binding by the court upon the class. Under the WAMCA there are two opt-out moments. The first one is after the appointment of the Exclusive Representative and the decision of the court on the scope of the action and the definition of the “class”. The second opt-out option is after a settlement agreement is reached between parties and declared binding by the court.

Under the WAMCA, a class settlement is not required, but attempting to reach one is an integral part of the proceedings.

A major change is that foreign injured parties can only be represented in the proceedings when they opt-in under the WAMCA – under the old regime this was on an opt-out basis. This may impact the size of the cases to be brought before the Dutch courts.

In conclusion, under the WAMCA a court decision granting or dismissing the collective action is binding on all members of the class who reside in the Netherlands and did not use their right to “opt out” of the action. The same applies to members residing abroad, who joined the collective action by opting in.

Settlement agreement or judgement

The collective action ends with the approval by the court of a settlement concluded by the parties or with the judgement of the court on the claim of the claimants. The judgement of the court can either be a rejection or granting of the claim(s). The settlement agreement approved by the court or the giving judgement by the court are also recorded in the public register (‘Centraal register voor collectieve vorderingen’).

Transitional law

The WAMCA applies to collective actions for damages initiated on or after the date of its entry into force for events that took place on or after 15 November 2016. The old regime will apply to actions that relate to events that took place before 15 November 2016.

Expertise

bureau Brandeis’ collective action team boasts specialists in collective actions and mass claims settlements and often works with interest groups and class action claim funders. Our team is also active in class actions which are mainly based in the US and have their effects in the Netherlands as well.

For more information please contact Michelle Krekels.