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Are the doors being opened (even more) for class action lawsuits?

Are the doors being opened (even more) for class action lawsuits?

In 2010 there was an explosion on the Deepwater Horizon oil platform. British Petroleum (‘BP’) leases the platform, which is situated in the Gulf of Mexico. Global investment is BP’s target audience and the company communicated about the disaster via its website and the press, among other channels. On the face of it, this issue had little to do with the Netherlands. Is the Dutch court competent to rule on a class action instituted by the Dutch Association of Stockholders (‘the Association’) pursuant to Book 3, Article 305a of the Dutch Civil Code on behalf of a group of BP shareholders? This is where the doctrines on large-scale loss and international private law meet.

The claim

In brief, the Association is demanding that the court rules that BP acted unlawfully towards its shareholders by making incorrect, incomplete or misleading statements about the disaster, resulting in a fall in the market price of BP shares. The Association brought the action on behalf of BP shareholders who purchased, held or sold shares from around 2007 to 2010 through an investment account in the Netherlands or through an investment account from a bank based in the Netherlands.
Before the merits of the claim can be ruled on, it must first be determined whether the Dutch court has international jurisdiction. Brussels Ia Regulation 1215/2012 regulates inter alia the international jurisdiction of the court in international civil and commercial matters. Given that the Association’s claim relates to an obligation arising from a wrongful act, Article 7(2) of the Brussels Ia Regulation is relevant. On the grounds of this regulation, the court in the place where the damage occurred (Erfolgsort or place of impact) or in the place where the event that caused the damage took place is competent. In this case, the question is whether the Dutch court has jurisdiction under Article 7(2) of the Brussels Ia Regulation, because the purely financial damages (via an investment account) did occur in the Netherlands (Erfolgsort).

The district court and the appeal court

Both the district court and the court of appeal declared that they lacked the jurisdiction to rule on the claims. In this respect, the court of appeal reasoned as follows.

From European case law (including the Kolassa judgment of 28 January 2015 (C-375/13, EU:C:2015:37) and the Universal Music judgment of 16 June 2016 (C-12/15, EU:C:2016:449)), it is evident that the occurrence of damages to investment accounts held in the Netherlands is not in itself a sufficient connecting factor for the Dutch court to consider itself competent under Article 7(2) of the Brussels Ia Regulation. This requires other special circumstances.

The fact that the Association of Stockholders represents the interests of many investors living in the Netherlands is not a special circumstance, nor is the fact that BP reached a settlement with other shareholders in the United States of America that has not been offered to the Association’s investors. The court also held that the fact that the claim concerns a class action is irrelevant to the question of jurisdiction.

Requests for preliminary ruling: Supreme Court

Following the Advocate General’s example, the Supreme Court (14 June 2019, ECLI:NL:HR:2019:925) decided to refer the following requests for a preliminary ruling to the CJEU:

  1. Is Article 7(2) of the Brussels I Regulation to be interpreted in such a way that only the occurrence of purely financial damages as a result of incorrect, incomplete or misleading information on an investment account held in the Netherlands is a sufficient connecting factor for the Dutch court to have international jurisdiction as the Erfolgsort? If not, are concomitant circumstances required? Which concomitant circumstances will suffice?
  2. Would the answer to question 1 be different if it concerned a class action?
  3. If the Dutch court has international jurisdiction to rule on a claim for a declaratory decision, is the Dutch court seized also competent to then rule on all individual claims for damages? If not, how is the territorial jurisdiction determined?

The rationale underlying the Erfolgsort for purely financial damages

In its introduction to the requests for a preliminary ruling, the Supreme Court sets out European case law on determining the Erfolgsort for cases involving purely financial damages.

According to European case law cited by the Supreme Court, Article 7(2) of the Brussels I Regulation must be interpreted strictly. The article is based on the particularly close link between the claim and the court in the place where the damaging fact occurred. So, of all the possible European courts, objectively speaking the court must be the one best placed to hear the claim. In that respect, case law refers to, for instance, the applicant’s place of residence, the bank’s place of business and the place where the (misleading) prospectus was disseminated.

Thus it seems to be a question of whether the CJEU will judge that many of the BP investors living in the Netherlands can prove a particularly close link with the Netherlands, or at least that the class action in itself – given the number of underlying claims – constitutes a particularly close link.

In that context, it is worth noting that, according to the adopted Dutch bill ‘Settlement of Large-Scale Losses or Damage (Class Actions) Act’ (Wet afwikkeling massaschade in een collectieve actie), a legal person has a cause of action if the Netherlands is the habitual residence of the majority of the interested parties.

Practical implications

This matter concerns an oil spill, in the Gulf of Mexico, suffered by a British company with a global investment audience. Should the CJEU rule that the Dutch court has jurisdiction to rule on the class action, it could have far-reaching consequences for the Netherlands as a forum for class action lawsuits (and vice versa). This applies to shareholder claims, but potentially also to other international cases that ostensibly seem to have little to do with the Netherlands.

Author: Pauline Janssen (Attorney Liability, losses and insurance).

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