On 12 November 2010, the Amsterdam Court of Appeal delivered an important decision regarding an international collective settlement of mass claims using the Shell decision as a precedent. The court assumed jurisdiction to declare an international collective settlement binding in a case where none of the potentially liable parties and only a limited number of the potential claimants were domiciled in the Netherlands. The decision is provisional, but if it becomes final, which is highly likely, it will have to be recognised in all European Members States, Switzerland, Iceland and Norway under the Brussels I Regulation and the Lugano Convention. The Netherlands is the only European country where a collective settlement of mass claims can be declared binding on an entire class on an “opt out” basis. This makes the Netherlands an attractive venue for settling international mass claims, irrespective of whether any (class action) litigation has taken place in the Netherlands. This is even more so since the U.S. Supreme Court in Morisson v. National Australia Bank and Hoffman-La Roche v. Empagran denied non-U.S. claimants in securities and anti-trust cases the right to bring their claims before U.S. courts.
Background of the case
Converium Holding AG (“Converium”) is a Swiss reinsurance company (currently known as SCOR Holding AG). Converium was a wholly owned subsidiary of Zürich Financial Services Ltd (“ZFS”) until 2001, when ZFS sold all its Converium shares through an initial public offering. Converium shares were listed on the SWX Swiss Exchange and Converium ADSs were listed on the New York Stock Exchange. Converium’s share price declined after the company announced increases to its loss reserves in the period from 2002 through 2004. These announcements led to securities class actions in the United States under U.S. securities laws against Converium and ZFS on behalf of a worldwide putative class of all purchasers of Converium securities during the relevant period.
The United States District Court for the Southern District of New York (the “U.S. Court”) certified a class consisting of all U.S. persons who had purchased Converium securities on any exchange, as well as all persons (regardless of their residence) who had purchased Converium securities on a U.S. exchange. However, the U.S. Court excluded from the class all non-U.S. persons who had purchased Converium securities on any non-U.S. exchange (the “Non-U.S. Purchasers”). The U.S. class action was settled and the settlement was approved by the U.S. Court. Converium and ZFS agreed to collectively settle the potential claims of all Non-U.S. Purchasers under Dutch law with a Dutch foundation established for that purpose that represented the Non-U.S. Purchasers. The Non-U.S. Purchasers were predominantly domiciled in Switzerland and the U.K. Only a few were domiciled in the Netherlands. De Brauw acts as legal counsel to ZFS in this settlement and in the proceedings before the Amsterdam Court of Appeal requesting this settlement be declared binding.
Dutch Act on the Collective Settlement of Mass Claims
The Dutch Act on the Collective Settlement of Mass Claims[i] (Wet collectieve afwikkeling massaschade, the “WCAM”) entered into force on 27 July 2005. Pursuant to the WCAM, the parties to a settlement agreement may request the Amsterdam Court of Appeal (the “Court”) to declare the settlement agreement binding on all persons to which it applies according to its terms (the “interested persons”). The settlement agreement must have been entered into between one or more potentially liable parties and one or more foundations or associations representing the interests of the interested persons. If the Court declares the settlement agreement binding, all interested persons are bound by its terms, unless an interested person timely submits an “opt out” notice. All other interested persons have a claim for settlement relief and are bound by the release in the settlement agreement. The Court will refuse to declare the settlement agreement binding if, among other things, the amount of settlement relief provided for in the settlement agreement is not reasonable or the petitioners jointly are not sufficiently representative regarding the interests of the interested persons. Since the entry into force of the WCAM in 2005, the Court has declared a settlement agreement binding in five cases. To date, the most eminent case has been the Shell settlement, approved by the Court on 29 May 2009. Although no case law on this issue exists at this point, the Shell decision implies that the binding declaration must be recognised by the courts in all EU Member States under the Brussels I Regulation, and also in Switzerland, Iceland and Norway under the Lugano Convention.
The Court followed substantially the same line of reasoning for its provisional ruling on jurisdiction as in the Shell decision. The most important difference is that the Converium settlement is of an even more international nature. The Shell settlement concerned a worldwide settlement between a Dutch and a British Shell entity and the worldwide group of Shell’s shareholders, excluding all U.S. shareholders, who purchased their shares during the relevant period in relation to Shell’s recategorisation of certain of its oil and gas reserves in 2004. A substantial number of these shareholders were domiciled in the Netherlands. In the Converium settlement, however, none of the potentially liable parties and only a limited number of the interested persons were domiciled in the Netherlands. The Court furthermore emphasised the importance of the fact that a Dutch foundation represents the interested persons and is obliged under the settlement agreement to distribute the settlement relief, suggesting that even without any Netherlands domiciled interested persons the Court may have jurisdiction to declare the settlement binding.
The ruling on jurisdiction is provisional until the interested persons have been notified and given the opportunity to submit a defence. However, it is highly unlikely that the ruling on jurisdiction will be reversed. The final hearing of the case will most likely take place during the summer of 2011.
It should be noted that the Court is fully aware of the significance of its judgment in creating an alternative venue to declare international collective settlements in mass claims binding on all class members. The Court explicitly referred to the limitations for the U.S. courts to do so in securities and anti-trust cases as a result of the U.S. Supreme Court’s decisions in Morrison v. National Australia Bank and Hoffman-La Roche v. Empagran.
The WCAM is the only European statute that provides for a procedure to declare a collective settlement in a mass litigation case binding on all class members on an "opt out" basis. Using the Shell decision as a precedent, the Converium decision confirms that the Amsterdam Court has not only jurisdiction to declare an international collective settlement binding on all class members, whether they are domiciled in Europe, the United States or elsewhere, but also an appetite to facilitate such settlements even if the parties to the settlement and the class members hardly have any connection to the Netherlands.
The judgment of the Court must be recognised in all EU Member States, Switzerland, Iceland and Norway. Whether the judgment is able to be recognised in other countries depends on their respective laws. As the Ahold decision proves, the Netherlands is willing to recognise a court-approved U.S. class action settlement so that any class members who did not opt out are bound by the settlement. Whether that would be sufficient for U.S. courts to recognise a court-approved WCAM settlement remains to be seen.
Because the Netherlands is the only European country in which a collective settlement in a mass litigation case can be declared binding on all class members on an “opt out” basis and such a decision has to be recognised in the rest of Europe, the Netherlands is Europe’s most attractive venue to facilitate such settlements. It is irrelevant in this respect whether the settlement is the outcome of class action litigation or not and if so, in which country such litigation took place.