Of apples and oranges – the similarity test in Dutch collective actions

Frank Peters / 23 jul 2021

Dutch law allows for foundations and associations to file claims on behalf of a class of third parties if their position is ‘sufficiently similar’ and provided certain other criteria are met. The mechanism of collective redress is applied in the Netherlands in cases where substantial financial interests are at stake, such as in securities cases and cartel damages cases, in data breaches cases under GDPR, as well as fundamental rights cases. In all of these cases, the question comes up to what extent the interests of the represented class are sufficiently similar, such that litigating the matter on a collective basis is more efficient than litigating this on an individualized basis.

A question of what is ‘sufficiently similar’ is topical for several reasons:

  • The Dutch courts have had to decide on this in a flurry of collective claims over the past 6 months.
  • Internationally, and in particular in the UK, courts or at least litigants have struggled with the same matter resulting in relevant guidance for the Dutch practice.
  • Collective actions are on the rise in Europe[1], and the question of which cases are, and which are not suitable for collective action will come into play in all European jurisdictions.
  • Practically: failing to meet this test will result in a rejection of certification of the claim, and the claimant being found to have no standing. Considering that it may take a year or more of costly litigation, and even longer to prepare the case, not passing the certification test is a huge budgetary blow for the claimant. Claimants who are dependent on external funding will find that often time, adverse costs orders are not covered under the funding agreement. In particular ‘ad hoc’ claimants who have not accrued a war chest through previous cases may run a risk of bankruptcy as they are unlikely[2] to have access to any other source of funding. By the same token, the willingness to settle on the part of the defendant may increase dramatically with certification.

A little background

As of 1 January 2020, the Dutch regime for collective actions was overhauled when WAMCA[3] entered into force. WAMCA applies to facts after 15 November 2016 and brought before the court after 1 January 2020. Unlike the former regime referred to as WCAM[4], allows for the class action vehicle to claim specified damages on behalf of the represented class.

At the same time, the law was changed in the following respects, which are relevant to the topic of similarity:

  1. Under WAMCA, the case will be litigated on the merits only after the court has confirmed that the claimant has standing to bring the case, and after the court will have defined what the claim will be exactly, and for the benefit of whom. In line with Anglo-Saxon practices, this confirmation is often referred to as ‘certification’.
  2. Under WAMCA, damages can be claimed on an opt-out basis for, briefly put, residents of The Netherlands only. Others can choose to participate in the case, on an opt-in basis. This domestic scope rule did not exist under WCAM and indeed, under WCAM the represented class could and often did consists of members from a global background.
  3. The fact that damages can be claimed under WAMCA brings into play the issue of damages assessment on a group level whilst properly including individual circumstances, and the principle that the defendant should be found liable to compensate the actual damage (proven by the claimant or estimated by the court), and nothing more.

To date, approx. 30 cases have been filed under WAMCA, not all of which are aimed at seeking damages, but none of which have come to a resolution in first instance. Nevertheless, the Dutch court has ruled on the ‘sufficiently similar’ requirement under WAMCA in one instance, which will be discussed below.

At the same time, several WCAM cases were still pending in the courts after introduction of WAMCA, and indeed: some cases can only be tried under WCAM as the relevant facts predate the temporal scope of WAMCA. Over the past six months or so, the courts have ruled in a handful of cases on the similarity test under WCAM. All of these will be discussed below, in respect of the similarity test.

The applicable standard of similarity under Dutch law.

Art. 3:305 of the Dutch Civil Code (DCC) holds that a foundation or association can file a claim in the interest of protecting similar interests of other persons, if this is in furtherance of the statutory purpose of such foundation or association and to the extent the interests of those persons are sufficiently protected[5].

A landmark decision for the definition of the similarity test, is the Baas in Eigen Huis v. Plazacasa case[6]. In this case, it was set out that the similarity test holds that the interest which are meant to be protected by the collective action, must lend themselves for bundling, such that efficient and effective protection of the interested persons is promoted. If this is the case, the issues can be resolved in one case, without having to involve the specific circumstances relating to the individual interested parties. A sufficient similarity of interests does not necessarily imply that the positions, backgrounds and interests of those on whose behalf a collective action is brought are identical or even essentially the same. In a collective action, therefore, a certain abstract test is appropriate. Whether or not (a substantial part of the) interested persons agrees with the collective action, or even takes an adverse position, in itself is not an obstacle for finding that the case does serve the protection of similar interests. A sufficient level of similarity in position, background and interest of the group members suffices. These do not need to be identical or even predominantly the same. The norm is whether an abstract assessment of the issues a stake and the claims, is possible.

Similarly, and only just preceding the Baas in Eigen Huis case, in the World Online case, the Dutch Supreme Court confirmed[7] the finding of the court of appeals that ‘even if there are great differences between the investors in terms of, amongst other, level of professionalism, level of information, care that was applied when taking the investment decision and the amount of the loss, and the fact that some are not a natural person but a corporation’ this does not stand in the way of finding that the interests are sufficiently similar. The court held that these circumstances can be taken into account if and when damages are assessed for each of the individual investors, in follow on proceedings.

The similarity test applied over the past six months.

Stichting Volkswagen Car Claim v. Volkswagen AG et al. (WCAM)

On 14 July 2021, the Amsterdam District court ruled in respect of the ‘diesel fraud’ case against a group of Volkswagen dealers, largely in favor of the claimant. The foundation in this case is seeking compensation for a class of persons who have bought new and second hand cars from several Volkswagen dealers.

The court held that the fact that the case was filed on behalf of several classes of interested parties, against several groups of defendants, did not mean that the case did not lend itself for bundling, as these distinctions were made sufficiently clear in the claim, and the common denominator for the claimants was that all possessed or had leased a Volkswagen car, and that all defendants had either sold or procured Volkswagen cars.

In the preceding interim decision from 2019[8], the court had also ruled that the claim for nullification of the contracts with the car dealers on grounds or error, lent itself for bundling: although the decision on the merits would require an assessment of all facts and circumstances which may have had an influence on the decision-taking process of the members of the represented class, the case deals with in essence the same issue, being the presence of software which manipulates the outcome of emissions tests, which was not known to any of the class members. The court said it did not want to rule out in advance that this circumstance would be so relevant, that irrespective of other facts and circumstances, this can be decisive for the outcome of the case and the possible awarding of the declaration of law.

The court in this case had previously also ruled that the claim on the basis of unfair businesses lent itself to bundling in respect of the installation of the software mentioned above. The court did not find this to be so in respect of the information provided by the defendants, as this may vary from case to case.

In the recent 2021 decision, the court contemplates that one of the defendants argued that the claims against it had not been tolled by the claiming foundation, and that they had become time barred under applicable German law. The court finds that indeed, claims of individual car owners have become time barred, and that therefore the claims do not serve to protect ‘similar interests which lend themselves for bundling’. It seems, however, that the court could have sufficed by stating that there simply is no interest whatsoever, and that similarity of the (lacking) interests was not the issue.

FNV v. Wibra Supermarkt BV (WCAM)

On 5 July 2021, the Amsterdam district court ruled in the matter brought before it by the labor union FNV against Wibra supermarkets.

FNV is an association which can bring claims on the basis of art. 3:305a DCC. It filed a claim against Wibra for making workers compensate certain working hours, during which the shops had not been able to retain their services due to Covid-19 related restrictions.

The court ruled that the interest of the workers represented by FNV were sufficiently similar, in the way that the collective labor agreement had been applied in respect of the matter at stake, regardless of how this played out in practice for individual workers.

Data Privacy Stichting v. Facebook (WCAM)

On 30 June 2021, the Amsterdam district court issued an interim decision in the case brought by the Data Privacy Stichting against Facebook on the matter of (amongst other) admissibility of the case. The case relates to facts which only to a limited extent fall within the temporal scope of WAMCA. However, in view of Section 119a Transition Act New Civil Code in conjunction with Section III paragraph 2 WAMCA, the WAMCA does not apply to this case, because the legal actions in this case were instituted before the date of entry into force of the WAMCA (1 January 2020). The case is therefore covered (largely) by WCAM.

The Foundation is seeking a declaration that Facebook acted unlawfully against the class represented by the Foundation by, amongst other:

  1. not complying with the information obligations of art. 12, 13 and 14 GDPR and its equivalents under the national law that preceded the GDPR;
  2. By giving third parties access to personal data of the class members without properly and timely informing them thereof;

and several other breaches, including the Unfair Business Practises Act.

The represented class constitutes of all natural persons who, in a non-commercial capacity, are or were on Facebook in the period 1 April 2010 through 1 January 2020, whilst residing in the Netherlands.

According to Facebook, the claims of the Foundation do not lend themselves to collective proceedings, because the factual and legal questions are not the same, or at least not sufficiently similar, and the interests of the individual interested parties differ. Facebook contends that there are various factual allegations that cover almost a decade; there are different groups of users and different legal provisions apply; the use of the Facebook service involves a considerable amount of fine-tuning at individual level, as different user agreements, policies and information provisions apply to users, depending on the time period during which each of them used the Facebook service.

The court considered that the question of whether the interests involved in the claims lend themselves to bundling also depends on the nature of the claims made. The claims of the Foundation are limited to declarations for law that there is unlawful act, unfair trade practices and unjustified enrichment. Unlike in, for instance the Elco Foundation v. Rabobank et al. case (see below) the Foundation does not claim a declaratory judgment relating to error, in the assessment of which individual circumstances are rather important. The court finds that the claims of the Foundation relate to various sufficiently narrowly defined actions of Facebook. These claims are essentially based on the fact that Facebook has violated the privacy of its users by processing personal data without the necessary consent. With the claims, the Foundation seeks a judgment on the question of whether the personal data of (certain) users of the Facebook service have been processed in accordance with the applicable regulations. Such a judgment on the lawfulness or otherwise of the actions of Facebook et al. with regard to the processing of personal data lends itself to a collective action. This is not altered by the fact that over time there have been different terms of use and different statutory regulations.

Milieudefensie et al. v. Royal Dutch Shell (WCAM)

On 26 May 2021, the district court of The Hague ruled in the case of environmental NGO Milieudefensie and various other Dutch and foreign environmental NGO’s and individuals, against Royal Dutch Shell (‘RDS’e). Milieudefensie filed claims on a collective basis against RDS, seeking an order for it to bring its CO2 emissions policies in line with Paris Climate Agreement.

The court held that the interests of ‘current and future generations of the world’s population’, as served principally with the class actions, is not suitable for bundling. It held that although the entire world population is served by curbing dangerous climate change, there are huge differences in the time and manner in which the global population at various locations will be affected by global warming caused by CO2 emissions. Therefore, this principal interest does not meet the requirement of ‘similar interest’.

The court held, however, ‘that interests of current and future generations of Dutch residents and [with respect to one of the Dutch NGO’s the Waddenvereniging, aimed at protecting the interests of (those living on) the Dutch group of Wadden-islands, FMP] of the inhabitants of the Wadden Sea area, a part of which is located in the Netherlands, as served in the alternative with the class actions, are suitable for bundling, even though in the Netherlands and in the Wadden region there are differences in time, extent and intensity to which the inhabitants will be affected by climate change caused by CO2 emissions. However, these differences are much smaller and of a different nature than the mutual differences when it concerns the entire global population and do not stand in the way of bundling in a class action.

The court therefore declared not admissible the claims insofar as they serve the interest of the world’s population, except for the interest of Dutch residents and the inhabitants of the Wadden region.

It is interesting to see that the court finds that the interests of anyone outside the Netherlands, is not sufficiently similar to the interests of those living within. The court does not explain why this is so, other than that it finds that the differences within the Netherlands are ‘much smaller and of a different nature’. Considering that the merits of the case have been decided on a global scale, and on the basis of an abstract reasoning (impact of CO2 emissions on global warming, statistical models, activities of RDS all over the world), and if anything: the interests of those living in countries which are less well-off than those in the Netherlands are even more affected by global warming, it seems that the interests of all would benefit from this case. At the same time, the fact that the case has formally been decided for the benefit of Dutch nationals only, does not seem to have had any bearing on the actual decision, in the sense that it is not apparent in what way the decision would have been different if the court would have allowed the case to be heard for the wider class.

Stichting Elco Foundation v. Rabobank et al. (WCAM)

The Stichting Elco v. Rabobank et al. case[9] related to the scandal of manipulation by a group of panel banks of the interbank interest rates LIBOR and EURIBOR. The foundation, according to its articles of association, represented all financial institutions in the EU, to the extent they had had exposure to LIBOR or EURIBOR in non US transactions, excluding from the class those parties which participated in the LIBOR and EURIBOR determination process, such as the defendants themselves. Defendants included the Dutch anchor defendant Rabobank, and four other, foreign panel banks.

The court held that the interests of the represented group, met the similarity test:

The represented class, according to the articles of association, is a wide group of persons who have in common – briefly put – that they have a place of establishment or office in the EU and who have engaged in transactions outside the US which in one way or the other are related to the interest benchmarks. The fact that a multitude of laws may apply to the claims of the foundation, in itself does not stand in the way of giving a judgement on the issues raised by the foundation, considering that the foundation has asked for declaratory relief only. These issues are, as the foundation rightly argued, in general separate from the specific circumstances relevant to the interested persons. That means that, [the claims] lend themselves for bundling.

This seems to be in line with existing case law under WCAM. As damages assessment is a matter for the court to deal with after certification, it seems that the outcome would not have been different under WAMCA.

The court finds, however, that in this case, to the extent the claims are based on the legal theory of unjust enrichment, these are not suitable for collective redress, as an individual assessment is required of both enrichment and impoverishment.

Considering that declaratory relief was sought, it is understandable that the court finds that it cannot give a relevant declaration for each of the individual situations imaginable for this very wide group of both interested parties, but also defendants.

However, the court declines to allow the case as a whole to proceed, on the basis in particular that the claim relates to such a variety of facts over a very long period of time, that it will not be able to give a meaningful declaration in the end, meaning that the interests of the interested persons are not served by proceeding on a collective basis. The facts of the LIBOR and EURIBOR case, as presented to the court, related to a pattern of behavior covering a period of 10 years. For individual parties to claim damages, however, they would need to show individual transactions and the specific effects of individual manipulations of these interbank rates, for them to be able to prove they suffered a loss. The court expressly considers that the facts of this case deviate from the World Online situation discussed above, where the legal matters could be decided abstract of the specific circumstances of individual investors.

In addition, the court deemed relevant that the interested parties were all professional parties, who, if substantial financial interests are at stake, are capable of filing individual claims, meaning that collective redress is not necessary to allow access to an effective remedy.

As said, the case was decided under WCAM. The reasoning may also have applied under WAMCA (apart from that the class in that case cannot consist of non-Dutch financial institutions), considering the typical circumstances of this case: an enormous variety of possible individual positions.

Conclusion as to Dutch law

The standard as developed in the Baas in Eigen Huis and World Online cases under WCAM stand and it seems that it will continue to be the standard under WAMCA. The standard is not a high threshold, nor is it meant to be a high threshold.

A quick look at the UK provides a similar picture: Merricks v. Mastercard

On 11 December 2020, the U.K. Supreme Court handed down its ruling in Merricks v Mastercard[10], dismissing Mastercard’s appeal against the English Court of Appeal’s April 2019 decision. Class representative Merricks commenced follow-on damages litigation after the EC’s Decision in respect of breaches of competition law, by commencing a U.K. class action in September 2016 on behalf of approximately 46.2 million U.K. consumers. The action seeks approx. GBP 14 billion in damages for the inflated prices paid by U.K. consumers. Collective competition claims must be certified to be able to continue as a collective action. Certification requires that the claims are brought on behalf of an identifiable class of persons, raise common issues, and are suitable to be brought in collective proceedings.

At first glance, the ‘common issues’ and ‘suitable for collective proceedings’ tests are not unlike the ‘similarity test’ applied by the Dutch courts. The UK Supreme Court’s majority decision was that the applicable test whether or not claims are “suitable” to be brought in collective proceedings is a relative judgement, meaning one needs to determine whether the claims are more appropriately brought as collective proceedings rather than individual proceedings. This is also decisive when contemplating whether the claim is “suitable for an award of aggregate damages”. In essence, what is required is that an aggregate damages award is more suitable than “a multitude of individually assessed claims for damages”. This is much more efficient than going through the burden of thousands of individual claims.

Conclusion

The question as to whether or not claims are suitable for collective redress, because they are sufficiently similar, seems to be approached benevolently by the Dutch courts, be it in labour cases, GDPR damages cases or cartel damages cases, or whatever the nature of the collective action. In the UK this does not appear to be any different. Cases where individual circumstances are decisive for a finding of legal wrongdoing, nevertheless are not suitable for collective action. The distinction becomes blurred in cases where claims are based on grounds of error or unjust enrichment, but in all events: the facts of the particular case will be decisive.

NOTES:

[1] Directive (EU) 2020/1828 of the European Parliament and of the council of 25 November 2020 on representative actions for the protection of the collective interests of consumers and repealing Directive 2009/22/EC.

[2] This may be different of the class action vehicle has charged members of the represented class a fee for signing up to the class action. However, for various reasons, this is no longer common in the Dutch market of collective actions.

[3] Wet Afwikkeling Massaschade in Collectieve Actie, or WAMCA for short.

[4] Wet Collective Afwikkeling Massaschade, or WCAM for short. Under WCAM, it was not possible for a claim vehicle to claim specified damages. In liability cases, this meant that the vehicle would seek a declaration of liability, so that either members of the represented class could commence follow on litigation, to claim specific, individualized damages on the basis of the general finding of liability, or that a collective settlement would be reached between the vehicle and the defendant. The collective settlement can be submitted to the court by the claimant and the defendant jointly, for the court to approve the settlement and declare it binding on the entire represented class, on an opt-out basis.

[5] This last requirement was introduced in the WAMCA, which entered into force on 1 January 2020 and which applies to cases dealing with facts which occurred after 15 November 2016.

[6] HR 26 februari 2010, ECLI:NL:HR:2010:BK5756 (Baas in Eigen Huis/Plazacasa).

[7] Hoge Raad 27 november 2009, ECLI:NL:HR:2009:BH2162, NJ 2014/201.

[8] 20 November 2019, Amsterdam district court, C/13/647072 / HA ZA 18-432.

[9] District Court of Amsterdam, 9 December 2020, ECLI:NL:RBAMS:2020:6122.

[10] Mastercard Incorporated and others (Appellants) v Walter Hugh Merricks CBE (Respondent) [2020] UKSC 51

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