Amsterdam Court of Appeal accepts jurisdiction in international class-settlements

On 17 January 2012, the Amsterdam Court of Appeal has issued a judgment of major importance on (international jurisdiction in) international class-settlements. The Court has declared the international collective settlements for non US-residents in the Converium-case action binding, notwithstanding the fact that this case hardly had any connection with The Netherlands at all. Dutch corporate lawyer Hidde Reitsma, owner at law firm AMS attorneys, explains.

The Dutch act on the Collective Settlement of Mass Claims

This act – under its Dutch abbreviation called the “WCAM” – was introduced in 2005, and has been a great success of efficient legislation ever since. The WCAM aims to enable effective and efficient (collective) settlement of mass damages claims by Dutch corporate lawyers. Under the WCAM, the Court of Appeal in Amsterdam can declare a settlement agreement of a mass damages claim, concluded between an organisation that aims to guard the interests of those who have suffered losses, and the responsible party parties, binding in relation to the entire group of claimants. All these claimants can claim payment of their claims under the binding agreement. It goes without saying that there are major advantages in a collective settlement of mass damages through the WCAM. It offers a method to avoid  an uncountable number of individual proceedings, with potentially high costs and uncertain risks.

Dutch corporate lawyers and collective settlement agreements

In this case, the collective settlement agreements have been closed on 2 July 2010, between Scor Holding (previously, and hereinafter named “Converium”) and Zürich Financial Services LTD (“ZFS”) as potential liable parties, and 2 organizations that aim to guard the interests of potential claimants in this case. Converium was a subsidiary of ZFS, listed in Switzerland ( share The portion of registered capital of a private or public limited company
» Meer over share
) and the US (American Depositary Shares, ADS). The  share The portion of registered capital of a private or public limited company
» Meer over share
price has dropped when Converium increased loss reserves in 2002-2004, which resulted in securities class actions in the US on behalf of a worldwide putative class.

Approved settlements in the US

The United States District Court, however, excluded from all non-U.S. residents who had purchased on any non-U.S. exchange. The U.S. class action was settled and these settlements were approved, but as a consequence of the exclusion of non-US residents, many potential claimants had no rights under this class-settlement. Converium and ZFS have then settled the potential claims of all non-U.S. purchasers with two Dutch organizations, even though, as mentioned before, only a small minority of these parties were domiciled in The Netherlands – most of them came from Switzerland.

Opt-out: legal advice in The Netherlands

The potential claimants that wish not to be bound to the collective settlement agreement that is now declared binding have an opt-out right. They must declare to use this opt-out such within (approximately – the exact period depends from the date the judgment is published) 3 months. If claimants use their opt-out right, they are still entitled to stat individual proceedings against Converium and ZFS.

Jurisdiction of the Dutch Court of Appeal

In the judgment, the Amsterdam Court of Appeal ruled that it has jurisdiction in this case. In an earlier judgment, of 12 November 2010, the Court of Appeal had provisionally decided that it has jurisdiction in this case. The court has now upheld this decision (no longer as a provisional, but as a final decision). Under the EU-execution regulation and other international treaties, the decision must be recognized in all EU member states, and furthermore in Switzerland, Iceland and Norway (even though this requires individual proceedings for the parties that wish to enforce this decision).

Collective settlement declared binding in the Netherlands

This is of major importance for international class-actions: since this settlement was hardly connected with The Netherlands, the implication seems to be that even without any interested persons having domicile in The Netherlands, the court could have jurisdiction to declare international class-settlements binding, as long as a Dutch organization (a foundation) representing the interested persons is a party to these Dutch proceedings, and involved in distributing the settlement proceedings. Currently, The Netherlands is the only European jurisdiction offering a way to corporate lawyers to have a collective settlement declared binding.

Dutch law firm in international litigation

The lawyers with AMS are very experienced in litigation on cases on international law and the EU execution regulation.