The Netherlands: A Rising Hub for Shareholder Litigation
The Netherlands has emerged as a pivotal hub for shareholder litigation in Europe, standing out with a robust legal framework and a notable increase in class action lawsuits. As highlighted in the December 2024 edition of the Class Actions & Investor Litigation guide within the annual IPE report, the country ranks second only to the United Kingdom in this field. Institutional investors seeking redress for corporate misconduct now consider the Netherlands an essential jurisdiction for legal recourse.
Joeri Klein, General Counsel Netherlands & co-head of group-wide investment recovery at Deminor, shared his expertise in the original IPE article, shedding light on this dynamic and evolving market. This article revisits those insights, offering a concise summary and providing additional context on the critical developments in Dutch shareholder litigation.
The Growth of the Dutch Market
The Netherlands accounted for 18% of the European class actions market in 2023, up from 10% in 2019. This surge is marked by high-profile cases involving corporations like ABN-Amro, Airbus, ING, Petrobras, and Stellantis, as well as landmark settlements such as the €1.3 billion for Fortis/Ageas in 2018 and the €1.4 billion settlement for Steinhoff in 2022. According to Klein, "These two settlements are regarded as big successes for institutional investors seeking redress for losses caused by corporate wrongdoing."
The upcoming Philips litigation in 2024 further exemplifies the sector's momentum. Klein notes, "When we started litigation funding fifteen years ago, there was one or two other providers. For the upcoming Philips case, I know of at least eight. There may be more."
The Netherlands is still developing ways to improve options for collective securities litigation, such was with the enactment of the Wet Afwikkeling Massaschade in Collectieve Actie (WAMCA) in 2020. The WAMCA has introduced the option of opt-out cases for Dutch claimants. Although its full value is yet to be demonstrated, it expands the already broad range of options available under Dutch law for collective shareholder actions.
Challenges and Strategic Considerations
The WAMCA legislation showcases the Netherlands' innovative approach to shareholder litigation, prioritising accessibility and procedural efficiency. However, the reliance on out-of-court settlements has limited the development of case law, which could offer clearer guidance for future disputes.
Also, litigation funders are becoming increasingly active, frequently establishing competing claimant foundations to launch collective opt-out securities cases. This trend can spark scepticism and concerns among institutional investors, who may also find themselves inundated with offers.
As Klein emphasises,
"Our job as a litigation funder is never to invest in a case that won't end in a recovery."
Additionally, collective securities actions often involve extended timelines, frequently exceeding five years, which require careful consideration as well. While generally no fees are incurred by institutional investors without a win, there is still a significant time investment needed by institutional investors to monitor the case and to provide information or documentation during the conduct of the case if required.
Institutional investors must also weigh the reputational implications of joining a case. Serving as a named plaintiff heightens the importance of ensuring the case has strong merits and a high likelihood of success — not only regarding the outcome (such as a win or settlement) but also in terms of the compensation achieved through participation. If a case is resolved after five years with, for example, a 4% recovery of losses, it may prompt internal discussions or lead to questions from beneficiaries about the value and justification of participating in the litigation.
Strategic considerations for Institutional Investors
Participation in Dutch collective securities actions requires careful evaluation. Key factors to consider include:
- Resource Allocation: Understanding the long-term requirements of joining complex collective litigation.
- Financial Objectives: Aligning potential pay-outs with reasonable expectations based on past successes.
- Reputation Management: Balancing public perception with fiduciary responsibilities.
As Klein concludes,
"Joining or leading a claim merits due deliberation by any asset owner, but I consider the Netherlands to be one of the best jurisdictions in Europe to effectively redress collective shareholders' claims."
Looking Ahead
The Netherlands is steadily establishing itself as a centre for shareholder litigation. However, overzealous judicial scrutiny and regulatory changes may pose challenges to this progression.
The Dutch model stands as a beacon for institutional investors pursuing justice and accountability. With careful navigation, stakeholders can capitalise on its potential and set new benchmarks for collective redress across Europe.
