Investor class actions

Investment or securities fraud cases and disputes relating to investment funds or public listed companies may involve a large number of investors. Dutch law offers unique means to bring class action suits (or, in Dutch: “collectieve acties”) or group claims (‘groepsvorderingen’) in such cases. Over the last 15 years, my Firm has played a prominent role in some of the largest investor class action cases in Dutch history.

Dutch class actions
Class actions under Dutch law are subject to specific rules of civil procedure. Usually class actions are brought by an association or foundation which, according to its articiles, represents injured investors. This may be an already existing association or foundation or a SPV specifically set up for the class action at hand. Since 1 Januari 2020, the class action vehicle may also sue the defendent for collective damages. The current Dutch class action system has a lot of similaraties with class actions under US federal law. It certaintly has also a Dutch twist, lying emphasis on negociations and settlements under direction of the Court. An import difference with the US sytem is that Dutch law prohibits class action lawyers to work on a no cure, no pay or contingency fee basis. However, combining a discounted base rate plus success fee is allowed.

Benefits of a class action
A class action has several advantages. By bringing a class action, financial contributions of investors can be pooled and costs can be shared, significantly lowering the legal costs per investor. Individual investors are no longer required to go to court themselves. Furthermore, a class action vehicle usually has significantly more leverage than individual investors, thus making a settlement for damages more likely.

Examples of Dutch class actions
For the last 20 years, The Netherlands have become a prominent place for class action litigation in the EU.
The Dutch courts do not only have jurisdiction in cases between Dutch plaintiffs and defendants, but also in international cases, as long as the case has reasonable links with the Netherlands. Noteable exemples of Dutch class actions are those relating to securities leasing products (‘effectenlease’) against various banks and insurance companies, including Dexia, Fortis and AEGON, investment insurance policies a.k.a. ‘usury policies’ (‘beleggingsverzekeringen’ or ‘woekerpolis’) againgst all major Dutch insurance companies and the missselling of credit derivatives to small business and real estate investors against inter alia ABN AMRO, Rabobank and Deutsche Bank. My Firm has been involved in all these cases. Noteable class actions relating to public listed companies I have been involved in include SNS Reaal, Fortis and World Online.

Collective redress
Since 1 January 2020, it is possible under Dutch law for an association or foundation representing investors to claim for collective damages when there is sufficient coherence between their individual claims. The class action vehicle then acts as a lead plaintiff for all investors belonging to specifically defined groups (classes) even if such investors are not formally associated with or members of the class action vehicle. This does however not preclude individual investors, e.g. those with a relatively large claim for damages, to participate in the class action litigation on an individual or group basis apart from the lead plaintiff, thus being able to influence the outcome of the ligitation and/or negociations. The Dutch class action procedure  is mainly intended for cases where there is a very large number of injured parties and/or individual damages per investor are relatively small. In cases involving a smaller number of investors (e.g. up to 500) and/or a relatively large amount of damage per investor, a group action may be a better alternative. A group action is conducted on the basis of an individual proxy provided by each investor to the claim vehicle, which then acts as their representative in its own name. A group action may also be adviseable if the case at hand is not suited for a class action, e.g. because the assesement of individual damanges is too complex and/or the individual characteristics of the investors play a dominant role in assessing liability or causality.