Holding the first European professorship in collective redress since 2007, Ianika Tzankova is a pioneer in the field. She combines academia with practice and is internationally recognised for her knowledge of strategies for resolving cross-border mass disputes, using innovative litigation and alternative dispute resolution approaches.
Michiel van Eersel specialises in banking and finance litigation. He assists clients in their interactions with financial regulators and sector disciplinary bodies, as well as advising on and providing legal assistance in conflicts with banks and insurance companies, including in collective actions. He has deep expertise in all aspects of financial regulation, including with respect to anti-money laundering, cryptocurrency and blockchain and distributed ledger technology.
Quirijn Bongaerts intimately knows the intricacies and politics of securities litigation and inquiry proceedings before the Amsterdam Enterprise Chamber. He represents investors in fraud-related securities litigation (Fortis, Steinhoff), assists minority investors in event-driven litigation and acts for consumer groups in consumer mass claims (diesel emissions claims against VW, Daimler and Fiat).
Joost Edixhoven is a seasoned litigator specialised with two decades of experience in the fields of corporate litigation, insolvency, class actions and mass torts litigation. He currently acts for consumer groups in consumer mass claims against various car manufacturers relating to Dieselgate and advises in high-profile insolvency related matters. Joost has a keen interest in CSR issues.
1 What are the most popular dispute resolution methods for clients in your jurisdiction? Is there a clear preference for a particular method in commercial disputes? What is the balance between litigation and arbitration? What are the advantages and disadvantages of the most popular dispute resolution methods?
In commercial and corporate matters, there is a range of dispute resolution methods. The parties’ preference for a particular option depends on the type of proceedings and the characteristics of the subject matter in issue. As the quality of the Dutch judiciary is highly regarded both nationally and internationally, a large and, until recently, stable number of cases have been litigated before the Dutch courts. There is a trend of gradual decline of the number of commercial matters submitted to the Dutch judiciary over the past few years. On the other hand, especially pursuant to the recent Act on Collective Damages Claims (WAMCA) a substantial number of cases started with high complexity and long duration.
Looking at the statistics for arbitration and litigation of new commercial cases, most cases that do not settle tend to end up with litigation rather than arbitration. Value does not necessarily play a role in this assessment, as high-value cases are litigated before the courts and in arbitration (eg, Yukos, Petrobras, Steinhoff and previously Fortis). In addition, the Enterprise Chamber of the Amsterdam Court of Appeal remains the go-to forum for company-related matters, such as takeover disputes between bidders and minority shareholders (eg, Altice in 2020), squeeze-out proceedings and, rare but impactful, matters regarding compensation to holders of expropriated securities (SNS Reaal). However, commercial matters involving high-stake interests tend to become protracted and vulnerable to delaying tactics. Compared to some other jurisdictions, the Dutch system might still be preferable over many of its European counterparts from a timing perspective; however, one should expect complicated and high-value matters to take at least several years from service to judgment by the court of first instance.
2 Are there any recent trends in the formulation of applicable law clauses and dispute resolution clauses in your jurisdiction? What is contributing to those trends? How is the legal profession in your jurisdiction keeping up with these trends and clients’ preferences? What effect has Brexit had on choice of law and jurisdiction clauses?
In Dutch contracts the parties generally prefer the applicability of Dutch law, regardless of the preferred dispute resolution mechanism. This is for a good reason, since extensive Dutch case law on the interpretation and application of (commercial) contracts has resulted in an interpretative framework that consists of a gradual transition from a more flexible approach based on the parties’ intentions to a stricter one, based on a more objective interpretation of the contract.
Dispute resolution clauses are often multi-layered and regularly contain escalation mechanisms in, for instance, the following order: (1) a limited period in which the parties should engage in amicable discussions; (2) eventually followed by progression of the matter to negotiations between members of senior management (including the requirement to meet in person); (3) followed by mediation with explicit reference to names of mediators or a more general selection mechanism; and, finally, (4) the appointment of a binding expert determination process, or arbitration or litigation. The expert determination would constitute a binding contractual obligation. Furthermore, it is possible to litigate international commercial matters in English before the Netherlands Commercial Court (NCC) as a specifically designated court. This essentially is a branch of the Amsterdam District Court and the Amsterdam Court of Appeal.
Although market parties cherished high hopes of luring matters from London to Amsterdam due to Brexit, this has not yet materialised. It is too early to say that Brexit has resulted in a shift of litigation to the Netherlands. Lack of familiarity with the process may be the cause of this reluctance. In view of the recognition and enforcement in the Netherlands of judgments by UK courts and vice versa, it is relevant that the responsible minister stated on 13 December 2021 that the bilateral treaty between the UK and the Netherlands dated 17 November 1967 regarding this matter does not apply any more. Although it is not entirely clear how recognition and enforcement of judgments between the UK and the Netherlands will be effectuated, The Hague Choice of Court Convention of 2005 may provide a solution in this respect. If it should be assumed that there is no legal basis for mutual recognition, then irrespective a formal judgment of the competent court of the relevant state, cases must be litigated before the courts of the other state all over again (albeit that such courts may attach some importance to such foreign judgment).
3 How competitive is the legal market in commercial contentious matters in your jurisdiction? Have there been recent changes affecting disputes lawyers in your jurisdiction? How is the trend towards ‘niche’ or specialist litigation firms reflected in your jurisdiction?
Disputes lawyers can be found in full-service firms and litigation boutique or niche firms and even as in-house counsel. The more successful full-service firms have rigorously streamlined their character by demerging specialisations offering limited synergies and cross-selling opportunities, by focusing their efforts on blue chip clients and high-value matters. Non-essential specialisations have been disposed of.
Other full-service firms have preserved their identity as, for example, the go-to-practice for small and medium-sized enterprises (SMEs) or as the cheaper alternative for big companies’ lower value work. As a result, they might be increasingly unable to attract higher value and challenging work and justify significant hourly rates. To the extent that SMEs form part of the clientele, these firms tend to be more vulnerable. Recently, the covid-19 pandemic played a particular role in this respect, affecting SMEs more than larger clients. Furthermore, law firms had to reassess their relations with Russian clients in general and terminate business with clients affiliated with the Russian government or placed on the sanctions lists due to the Russian aggression against Ukraine starting in February 2022.
Going boutique is still very much in vogue. This development started shortly after 2000 with the first litigation-only firms and IP boutiques setting up shop and it is still ongoing in an increasing number of areas of law, including insolvency and restructuring, finance, data protection, commercial and corporate litigation as well as private enforcement of competition mass claims. In 2021, Birkway entered the scene with a seasoned team consisting of well-established practitioners focusing on dispute resolution in more complex cases, more in particular with an international angle and in mass claims. The trend as observed is also demonstrated by the recent entry into the market by various class action firms from the United States.
Furthermore, it is noted that U-based litigation funders are more and more entering the Dutch legal market as they believe that the Netherlands provide for an attractive jurisdiction to pursue and fund – mainly collective – legal actions. Sometimes, it seems that US law firms wish to be active in the Netherlands both as claimant side counsel and as litigation funder. These firms need to observe specific professional rules and standards that restrict such combinations of activities.
A related development is the increasing competition between claim organisations. This may also give rise to carriage disputes leading to a beauty contest in which the competing organisations are to demonstrate why the court should decide to appoint them as the sole exclusive representative (or possibly co-exclusive representative) representing the members of the class of aggrieved consumers, investors or users, in an action pursuant to the WAMCA.
4 What have been the most significant recent court cases and litigation topics in your jurisdiction?
A significant matter from the viewpoint of corporate responsibility concerns the protracted litigation initiated by an environmental organisation and a number of Nigerian farmers against Royal Dutch Shell for damages caused by oil spills in the Niger delta between 2004 and 2007. In 2015, The Hague District Court assumed jurisdiction over the case against the Dutch parent company and the Nigerian subsidiary. In 2021, the Court of Appeal ruled that Shell was liable to the farmers as it failed to demonstrate under the applicable Nigerian law that the oil spills were caused by sabotage. These decisions set new standards for corporate responsibility of Dutch parent companies for damages caused by subsidiaries abroad. In another case brought forward by the same environmental organisation mentioned before against Shell, The Hague District Court ruled on 26 May 2021 that Shell must bring down its carbon dioxide emissions with 45 per cent by 2030 and also use its best efforts to realise reductions in emissions by third parties, including its customers. This breakthrough judgment in terms of the position of the judiciary and preventing climate change is currently under appeal.
Another noteworthy matter relates to the expropriation, on 1 February 2013, of shares and bonds issued by the Dutch bank and insurance company SNS Reaal. This expropriation took place against the backdrop of the financial crisis, when SNS Reaal threatened to collapse, which, at the time, was perceived as a systemic risk. For years, the Dutch State had argued that no compensation was due as no value had been lost to the bondholders and shareholders as the company was facing bankruptcy. Only in February 2021, the Enterprise Chamber of the Amsterdam Court of Appeal awarded €800 million plus legal interest, being the difference between the amount that the bondholders would have received in the case of bankruptcy and the amount they received in the nationalisation process. The shareholders, who would not have received anything in the case of a bankruptcy, received no compensation. This matter is the first of its kind.
5 What are clients’ attitudes towards litigation in your national courts? How do clients perceive the cost, duration and the certainty of the legal process? How does this compare with attitudes to arbitral proceedings in your jurisdiction?
Apart from a number of exceptions, from an international perspective court fees and adverse cost risks are considered hardly material in major commercial disputes. The exceptions are to be found in IP-infringement cases and in matters brought before the NCC. Lastly, the situation will be different in cases brought under the new collective actions regime as claimants can claim for compensation of their expenses, including their liabilities to litigation funders. This provision is asymmetric, as claimants can be fully reimbursed in the event of success while defendants can only receive limited compensation in the event of frivolous litigation.
As pointed out earlier in this interview, larger commercial disputes tend to take longer, and this is usually perceived as a nuisance. On the other hand, clients with experience in pursuing disputes all over the globe consider the Dutch judiciary reliable and knowledgeable, relatively swift and affordable.
Still, summary proceedings and proceedings regarding corporate disputes before the Enterprise Chamber offer viable routes for parties seeking clarity at short notice (within up to three months and sometimes even days). These types of proceedings generally tend to be ‘predictive’ to the outcome in litigation on the merits and this short-term clarity can therefore be helpful against the background of settlement attempts as well.
6 Discuss any notable recent or upcoming reforms or initiatives affecting court proceedings in your jurisdiction (including any changes as a result of the covid-19 pandemic).
A noteworthy and long-expected development concerned the change of the Dutch legislation on collective actions. The Netherlands has had a (codified) collective actions regime since 1994 and it changed with effect as of 1 January 2020 with the entry into force of the WAMCA. As of that date, it became characterised by the following features: (1) applicability in all areas of law); (2) collective actions for damages are allowed for matters concerning events that took place as of 15 November 2016 or commenced before and continued after that date (matters regarding events before that date will be covered by the former regime which only allows for a declaratory judgment); (3) the action can be initiated only by foundations or associations that meet certain criteria in terms of the formulation of their articles of association and their activities, governance and funding capability, if the collective interests are similar and the protection of the collective interests by the organisation are sufficiently guaranteed; (4) the non-profit entities can be pre-existing or ad hoc established; (5) during the certification phase lead claimant will be appointed if there are multiple competing candidates; (6) a combined opt-out (for Dutch claimants) and opt-in or opt-out (for non-Dutch claimants) regime. The implementation of the Directive on representative actions for the protection of the collective interests of consumers (Directive (EU) 2020/1828) will lead to a mandatory opt-in for non-Dutch claimants.
This revision marks an important change because, until the end of 2019, a foundation or association could only pursue proceedings with a view to getting a declaratory judgement on the defendants’ liability. This was possible for claims under all areas of civil law. However, it was not permitted to claim collectively for damages under this regime. Any such collective action pursuant to the WAMCA may end in a judgment entailing the obligation of the defendant to pay damages or a settlement that the court will declare generally binding. It is also possible to have settlement agreements court-approved under the WAMCA. As a result, the settlement will become effective on all affected parties included within the scope of the settlement agreement who, following announcement of the court’s decision, may elect to opt out. As it concerns a Dutch court decision, it is recognised and enforceable in all member states to the Brussels I-bis Regulation. Notable settlements that have been approved in this manner include Ahold, Converium, Shell and, in 2018, the €1.3 billion settlement concerning Fortis, the largest settlement of its kind in Europe.
Another relevant development will be the implementation in Dutch law of the Consumer Redress Directive. Considering the stage of the legislative process on the level of all member states, it is too early to make a concrete assessment of the consequences.
7 What have been the most significant recent trends in arbitral proceedings in your jurisdiction?
Recently, there have been several court decisions in relation to the enforcement of a SCC arbitral award against the State of Kazakhstan but by far the most significant arbitration matter conducted in the Netherlands is the Yukos arbitration before the Permanent Court of Arbitration. Although the arbitral decision was rendered a few years ago, litigation regarding the validity of this decision is still pending.
The Yukos arbitration relates to the bankruptcy of Yukos Oil and its subsequent expropriation by the Russian State in the early 2000s. Yukos’ international assets comprised two branches of the former oil company: the treasury group and the finance group. In 2005, during the Russian authorities’ attack on Yukos, Yukos’ management decided to insert a Dutch foundation (stichting) into each of the finance and treasury branches of the company. The expropriation resulted in three arbitral awards, ordering the Russian State to pay US$50 billion in damages to former shareholders of Yukos (currently: US$57 billion including costs and interest). On application by the Russian State, the District Court ruled that the arbitral award was invalid. This decision was, however, overturned in February 2020 by the Court of Appeal, deciding that the arbitral clauses in an energy treaty from 1998 ought to be honoured. The purpose of this treaty was to protect investments in central and eastern Europe. The Russian State then lodged an appeal with the Netherlands Supreme Court. This court referred the case back to the Court of Appeal for further and revised decision-making, so the saga continues. At the same time, the Yukos matter is another example of the internationalisation of Dutch court litigation with political ramifications.
Thirdly, the International Arbitration Court, under the auspices of the Netherlands Arbitration Institute, decided on 23 July 2021 in favour of Angolan Sonangol EP against Exem Energy BV, a company controlled by relatives of Angolan former president José Eduardo dos Santos.
The arbitration concerned the 40 per cent stake held by Exem allegedly transferred by Sonangol EP in Esperaza Holdings BV with a value of around US$700 million. Esperaza was used in 2006 by the Angolan national oil company for an investment in the Portuguese oil and gas company Galp SA. As a result of the Arbitration Court’s decision, Sonangol will be reinstated as sole shareholder of Esperaza Holdings BV. The arbiters concluded that the share transaction was contaminated by illegality, allowing its owners to influence the direct control of the national oil company, to reap extraordinary financial advantages in its favour to the detriment of the former and, consequently, of the Angolan State. Based on the factual findings, the Court declared the transaction null and void and that Sonangol is considered the legitimate owner of 100 per cent of Esperaza Holdings BV.
8 What are the most significant recent developments in arbitration in your jurisdiction?
One ongoing development highlighted in the previous edition of this guide concerns the increasingly international dimension of court and arbitral cases. In part, this is a logical result of the relatively large number of Netherlands-based top holdings and (financing) entities of foreign companies. These local entities are frequently included in proceedings as anchor defendants. Also, Dutch structures are sometimes used as a protective shield against political interference in their homeland. Additionally, international parties, including those from countries with a less accessible judiciary, opt to pursue litigation and arbitration in the Netherlands as it is known for its relatively affordable proceedings and reliable judiciary.
9 How popular is ADR as an alternative to litigation and arbitration in your jurisdiction? What are the current ADR trends? Do particular commercial sectors prefer or avoid ADR? Why?
Several applications of ADR are on the rise. Mediation is increasingly embedded in state court proceedings as sitting judges in hearings raise the opportunity of settlement negotiations through mediation. Also, some of the district courts are experimenting with the application of mediation in insolvency matters. This also happens with a view to preventing unnecessary insolvency proceedings, and in light of measures in response to the covid-19 pandemic, this alternative is likely to draw even more attention. Yet it appears that some policy makers in the administration of justice are already in favour of mandatory referrals to mediation. Although mediated solutions generally take place behind closed doors, it is well known that mediation plays a very important role in high-value disputes. For instance, the negotiations preceding the previously mentioned Fortis and Steinhoff settlements involved US-style ex parte mediation.
From these developments, it appears that a mediation-infrastructure is evolving in the Netherlands. The enthusiasm for mediation among private parties seems to be growing; witness the proliferation of standard mediation clauses in the business community. Of particular interest seems the role of NMI as a national umbrella organisation concerned with quality assessment and benchmarking, sitting above various specialised mediation institutes and professional associations of mediators. This structure may be interesting for the development of cross-border mediation in the nearby feature. Such cross-border mediation will depend on the existence of national clearing houses, such as NMI. This is borne out clearly by the European ADR Model Rules, which exactly seek to facilitate cross-border mediation in Europe, using national clearing houses as a starting point. Also, the Ministry of Justice retains a firm interest in mediation, although it is sometimes suspected of promoting mediation out of budgetary considerations.
10 What is the position in relation to litigation funding in your jurisdiction? Is funding available? Have there been any significant developments in this area in your jurisdiction?
Third-party litigation funding is allowed, accepted and increasingly used in the Netherlands especially in relation to mass claim dispute resolution. This applies both in collective actions and in procedures using the assignment model. Third-party funding is also used in high-profile commercial disputes, often involving the enforcement of arbitral or judicial awards. Third-party funders financing mass claims seem to be subject to closer scrutiny than those funding single disputes in terms of capital requirements and exercising control over the proceedings. Unlike most other jurisdictions, in collective redress the (reasonable) fee of the funder can be recovered on top of the awarded damages and other costs related to the proceedings. Funding on the basis of no win no fee-arrangements (ie, no cure no pay) for lawyers is not allowed, except in personal injury cases. It is allowed, however, to use other arrangements on the basis of which the level of remuneration of the lawyers varies with the outcome of the proceedings.
The Inside Track
What is the most interesting dispute you have worked on recently and why?
A collective action against Airbus was initiated concerning its lack of transparency regarding the large-scale bribery and related malpractices. In this matter, the client (being a foundation established for this purpose) represents the interests of shareholders who paid share prices over the years that did not reflect the (impact of) aforementioned malpractices as well as the enormous amounts up to more than US$4 billion that Airbus had to pay off to the enforcement authorities of the US, the UK and France to avoid criminal prosecution. It is the first securities litigation case under the recent Act on Collective Damages Claims (WAMCA).
What do you consider to have been the most significant legal development or change in your jurisdiction of the past 10 years?
The entry into force of the WAMCA per 1 January 2020. The introduction of the NCC in 2019 should be seen in line with the wish of the Dutch judiciary to play a role in global dispute resolution. Although its effects are not entirely clear, the 2020 collective actions regime will further promote access to justice in many areas where private enforcement and adequate legal protection were lacking due to, for example, complexity, inequality of resources between the parties and the limited size of the individual damages. As a result, we expect the number of collective action litigation cases to increase quite dramatically in the coming years.
What key changes do you foresee in relation to dispute resolution in the near future arising out of technological changes?
Covid-19 will undeniably leave a permanent mark on both the national and international litigation landscapes. The pandemic has demonstrated how technology can play a critical role in efficient and low-cost running of litigation. This has manifested itself in online court hearings and online business meetings as well as mediations. Although the Netherlands is fairly advanced in using technology in law, the pandemic has accelerated the process. Furthermore, we expect that the case law referred to above will develop an adequate framework to deal with mass claims.