On 17 January 2012, the Amsterdam Court of Appeal rendered a landmark decision on the collective redress of international mass damages in the Converium case. The Amsterdam Court of Appeal declared an international collective settlement agreement binding in a case were there was no, or only a tenuous, link with the Netherlands. A binding declaration of a collective settlement (and the legal effects thereof) should in principle be recognized in other member states of the European Union and states party to the Lugano Convention (Switzerland, Norway and Iceland). The decision confirms that the Netherlands is an attractive venue for settling international (European) mass damages.

Converium case
The Converium case concerns a Swiss re-insurance company, Converium, of which common shares were listed on the SWX Swiss Exchange and American depositary shares on the New York Stock Exchange. The market price of the shares declined substantially following disclosures by Converium with respect to its (anticipated) financial results and the provisions to be made for this. These announcements led to securities class actions in the United States. In line with the U.S. Supreme Court’s decision in the Morrison case, the U.S. District Court for the Southern District of New York declared it lacked jurisdiction to hear the claims of the non-U.S. investors. The securities class action in the United States was ultimately settled and approved by the U.S. District Court. Converium then settled the potential claims of the non-U.S. investors with two Dutch representative organizations, one of which  was established for this sole purpose. Subsequently, a petition was filed with the Amsterdam Court of Appeal to have the settlement agreements declared binding based on the Dutch Collective Settlement Act.

Decision
In its decision of 17 January 2012 the Amsterdam Court of Appeal confirmed its provisional ruling of 12 November 2010 on its jurisdiction to hear the petition. In its provisional ruling the Amsterdam Court citing the Morrison case indicated its awareness of the need for global resolutions of international securities class actions and assumed jurisdiction. The Amsterdam Court of Appeal specifically positioned its provisional ruling in the context of the fact that no other European jurisdiction offers a procedure to declare a collective settlement binding on all class members (except those opting out).

The Amsterdam Court of Appeal further confirmed the reasonableness of the settlement amount in its ruling. A number of defendants argued that the settlement amount was unreasonable since (i) the total sum of the settlement amount of USD 58,400,000 available for the non-U.S. investors was proportionally considerably lower than the settlement amount of USD 84,600,000 for (the smaller group of) U.S. investors in a comparable position as regards their loss and (ii) the 20% fees for the lead counsel to be deducted from the total settlement amount were too high. In response to these arguments, the Amsterdam Court of Appeal ruled that the legal position of the non-U.S. investors was essentially different compared to the U.S. investors because the non-U.S. investors had been excluded from the class by the U.S. District Court and no litigation had been brought outside the U.S. to obtain compensation. In this respect the Amsterdam Court of Appeal underlined that the non-U.S. investors have the opportunity to ‘opt out’ of the binding settlement so that they are at liberty to bring individual litigation. As to the fees for the lead counsel the Amsterdam Court of Appeal ruled that in assessing the reasonableness thereof, that which is customary and reasonable in the U.S. settlement practice may be taken into account (under Dutch law) because the work was performed to a large extent within the U.S. legal system by U.S. law firms. All in all, the Amsterdam Court of Appeal ruled that the level of compensation is reasonable.

Concluding remark
The Netherlands is the only European jurisdiction that offers a procedure to declare a collective settlement binding on all class members (except those opting out). From the Converium decisions it may be inferred that the Amsterdam Court of Appeal has set itself up as a convenient point of service and makes the Netherlands an attractive venue for settling international (European) mass damages. Especially in light of the fact that a decision by the Amsterdam Court of Appeal will in principle have to be recognized throughout Europe.

For more information, please contact Atti Kok, Mijke Sinninghe Damsté or Sidney Berendsen.