netherlandsAs the rise of collective investor actions has gone global, one of the questions that has arisen is whether a country other than the U.S. would become a preferred forum in which investors might pursue their claims, even investors from outside the forum country. Australia is among the countries that have been suggested. Another country that has comes up in this conversation is The Netherlands, which recently was the location of a massive investor settlement. Investors angered by several high profile scandals in other countries have also filed claims in The Netherlands. All of these developments have added to the suggestion that The Netherlands may be becoming a preferred forum for investor actions from around the world.


However, a recent court decision in an investor action filed in the Netherlands against BP and arising out of the Deepwater Horizon platform disaster may suggest that Netherlands collective action procedures may not be available for  investors seeking to recover purely financial losses where the alleged wrongdoing took place outside the Netherlands and there are no other factors connecting the case to Netherlands.


The attractiveness of Netherlands as a possible forum for collective investor action is due to the availability since 2005 of the Dutch Collective Settlement Procedures. These procedures have been used in the past to settle collective investor actions, but the procedures received a substantial boost in March 2016 when they were used to complete a $1.3 billion settlement involving former shareholders of the financial company Fortis. In my post discussing the settlement (here), I also discuss the features of the settlement procedure as well as prior collective investor settlements that have been reached using the procedures. The watershed settlement in the Fortis action drew significant attention to the Dutch collective settlement procedures and fueled further discussion of the possibility that the Netherlands might  become a preferred jurisdiction for collective investor action.


In connection with a series of recent scandals around the world (and outside of Netherlands), plaintiffs lawyers in combination with litigation funding firms and investor associations have been initiating actions in Netherlands, hoping to use the Dutch collective settlement procedures.


For example, as discussed here, the Netherlands-based investor association VEB (the same organization that led the BP case discussed below) initiated an action under Dutch law on behalf of Volkswagen shareholders who purchased their shares through a Dutch  bank or broker, following the car company’s emissions scandal. At least one other shareholder group has also filed an action, on behalf of a global class of all VW shareholders, in The Netherlands, as discussed here. Other groups are attempting to pursue scandal-related claims in Dutch court on behalf of investors from Tesco, Toshiba, and Petrobras, among others.


The attractiveness of the Netherlands forum is that the procedures may be used to try to reach a global settlement, on behalf of all investors, which not only is of obvious interest to the claimants and their attorneys, but it also is of interest to defendants hoping to use a single procedure to resolve all claims.



However, a September 28, 2016 decision in an action in Netherlands courts on behalf person who bought ordinary shares of BP in the period leading up to and just after the 2010 Deepwater Horizon platform explosion. BP had filed an action under the Dutch Civil Code seeking a declaratory judgment regarding BP’s liability toward investors based on its disclosures prior to and immediately following the explosion. The action was brought by VEB, the Dutch investor-representative group mentioned above.  VEB’s webpage (in Dutch) about the BP action can be found here. BP moved to dismiss the lawsuit for lack of international jurisdiction.


As discussed in a September 29, 2016 memorandum from the European-based Stibbe law firm (here), which along with the U.S. law firm Sullivan & Cromwell represents BP in the proceeding, on September 28, 2016, the Amsterdam District Court granted the defendants’ motion to dismiss. A copy of the Court’s opinion (in Dutch) can be found here.


The Court ruled that the fact that the investors may have held securities in the Netherlands is insufficient for jurisdiction of the Dutch courts in the absence of other connecting factors.  The Court said that VEB had failed to assert relevant other connecting factors. The Court said that its conclusion was reinforced that the action that under the collective action proceeding under the Dutch Civil Code that  VEB launched against BP, VEB cannot claim damages but can only seek a declaratory judgment regarding liability.


In reaching its conclusion, the Dutch court relied on a June 16, 2016 decision by the European Court of Justice in a case involving Universal Music International Holding B.V., which can be found here and which is discussed here. This prior case before the ECJ involved a claim where the damages consisted exclusive of financial damage that materialized directly in the petitioner’s bank account held in one Member State as a direct result of an unlawful act committed in another Member State. The ECJ held that in those circumstances, and absent any other connecting factor, jurisdiction cannot be attributed to the courts of the Member State.


The Dutch court’s ruling in the BP action suggests some potential limitations for prospective claimants seeking to use the Dutch collective action procedures, as a result of jurisdictional limitations arising from the  Netherlands’ membership in the EU. Under applicable EU principles, as stated by the ECJ, a Member State’s court cannot exercise jurisdiction over a claim seeking purely financial damages, even if the damages occurred solely in the Member State, if the wrongdoing occurred in another Member State and there are not other connecting factors.


As the blog post about the ECJ ruling linked to above, it is unclear what connecting factors might be sufficient. But this jurisdiction limitation could reduce the potential availability of the Dutch collective action procedures in circumstances where the alleged wrongdoing took place outside the Netherlands, even if there were damages in The Netherlands, at least in the absence of other “connecting factors.”


Special thanks to a loyal reader for calling my attention to the Amsterdam District Court decision.