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Posts Tagged ‘netherlands class action’

NOTE: The following is a copy of a post that I did for the recently-released Baker Hostetler Class Action Lawsuit Defense Blog. Be sure to check out the new blog for other fantastic class-action-related content!

Globalization has brought with it the growing problem of how to deal with mass disputes that transcend jurisdictional boundaries, as well as ever-increasing creativity among the members of the plaintiffs’ bar in bringing ever-larger class and mass actions. There is no single global court or other forum for bringing international or cross-border civil disputes, let alone disputes that involve allegations of mass harm. One of the key challenges for lawyers, policymakers, consumers, and businesses in the 21st century is how to efficiently resolve international mass disputes given the realities of globalization and the lack of any clear forum.

From the late 1990s through the first decade of this century, there were several trends favoring the U.S. courts as a global forum for litigating international disputes. However, recently, that trend has reversed, and the U.S. courts are becoming increasingly reluctant to entertain international class action litigation.

One of the hottest trends in securities litigation in the latter part of the last decade was what became known as foreign-cubed (or “f-cubed”) class actions, securities fraud class actions filed on behalf of foreign investors against foreign companies involving securities traded on a foreign exchange. The trend came to an abrupt halt, however, when the U.S. Supreme Court issued its decision in Morrison v. National Australia Bank Ltd., 130 S. Ct. 2869 (2010), holding that section 10(b) of the Securities and Exchange Act does not have an extraterritorial reach and only applies to securities traded on a U.S. exchange or other transactions that occurs within a U.S. state or territory. Although lower court decisions following Morrison, including a recent Second Circuit Court of Appeals decision, may breathe some life back into the idea of litigating a small subset of primarily foreign securities disputes in the U.S. federal courts, Morrison has generally closed the U.S. courts to foreign-cubed class actions.

Another promising avenue for litigating global mass disputes was international arbitration. A developing strategy was for plaintiffs who had signed form arbitration agreements to seek to compel arbitration on behalf of both themselves and others who had signed the same form of agreement. (Several arbitration associations have implemented specific rules for how class arbitrations should be conducted. Here is a link to the AAA Supplemental Rules for Class Arbitration). The Supreme Court put an end to this strategy when it decided the international price-fixing case, Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758 (2010). In Stolt-Nielsen, the Court held that a party to an arbitration agreement could not compel class-wide arbitration unless the parties had expressly agreed to allow class, rather than individual, arbitration.

In the human rights area, the U.S. Alien Tort Claims Act has increasingly been used as a tool to litigate international disputes involving alleged violations of international law over the past two decades. Several circuit courts of Appeals have even allowed actions under the ATCA to be brought against private corporations, under the theory that those corporations aided and abetted a foreign government or foreign official in committing human rights abuses. However, the Circuits split on the issue, and the Supreme Court accepted certiorari to resolve the split in the case of Kiobel v. Royal Dutch Petroleum, No. 10-1491. Following an oral argument held last month, the Supreme Court issued an order directing the parties to submit supplemental briefing to address the extent to which the ATCA should permit the exercise of extraterritorial jurisdiction at all over acts that took place within a sovereign jurisdiction other than the United States. Questions posed during oral argument, especially by the conservative wing of the Court, suggest skepticism about the allowing U.S. Courts to adjudicate human rights disputes that have nothing to do with the United States.

At the same time that avenues for global mass redress in the U.S. Courts have been closing, doors have been opening in other parts of the world. Class action law continues to develop in Canada and Australia. Israel has a class action procedure that closely mirrors U.S. law. Dozens of other countries in all corners of the world now have procedures allowing at least some form of mass redress. A very recent example is a class action law enacted in Mexico that permits a form of collective litigation that, while quite different from class actions in the United States, provides express mechanisms for seeking collective redress. In 2006, the Netherlands passed a law that allows mass settlements of claims (although it does not provide a procedure for litigating contested class claims), and arguably allows residents of other EU countries to be included. In other countries, the lack of a specific class or collective action procedure has not kept courts from fashioning remedies for mass redress.

The continuing lack of a single global forum for litigating mass disputes and the proliferation of new procedures permitting collective litigation abroad, are likely to have at least one near term practical impact. That is, the development of areas of law dealing with the enforcement of foreign class or collective action judgments. This has already become a reality in a huge environmental contamination case involving the drilling operations of a formal Chevron subsidiary in Ecuador. In 2010, a court in Ecuador entered an $18 million judgment in the case, and proceedings are ongoing in both the U.S. courts and in international arbitration proceedings relating to the enforceability of the judgment.

In a related vein, U.S. courts increasingly find themselves adjudicating disputes under 28 U.S.C. § 1782, which allows litigants discovery in the United States for use in connection with foreign proceedings (see this recent Second Circuit Court of Appeals decision interpreting the statute).

What does this all mean for potential litigants in global disputes? For any company or even small business that does business internationally, these developments highlight the necessity of keeping up with the constant changes in local laws as well as international trends. The procedures that might have been applicable, and arguments that might have been persuasive a year before, may no longer be viable, but new avenues and theories will have almost certainly taken their place.

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As reported by various news sources today and summarized in this entry from Ben Hallman at The Am Law Litigation Daily, a Dutch court has approved a settlement of claims of a class of institutional investors against Royal Dutch Shell.  The settlement was approved under a 2005 Dutch law that allows collective settlements on an opt-out basis, although it doesn’t allow class action suits outside the settlement context. For more detail on the law, the Dutch Act on Collective Settlement of Mass Damages, see this 2008 American Lawyer article by Michael Goldhaber, also cited in Hallman’s post.  The settlement resolved claims of European investors who originally had been included in a would-be international class of investors in a New Jersey federal court in a “foreign cubed” class action–a class action filed on behalf of foreign investors who bought a foreign company’s stock on a foreign exchange.  Rather than settle with the plaintiffs’ attorneys who had filed the U.S. case, however, the company agreed with a separate firm to settle the European investor’s claims in a European forum.

Goldhaber’s article describes the facts and history of the case and legislation in a fair amount of detail, so I will simply refer anyone interested in the details to that article.  As described in the article, however, the Dutch settlement came about as a result of a series of events that may or may not continue to be repeated into the future: 1) a class action filed in the U.S. that included European investors; 2) the Dutch company’s agreement to settle in Dutch court with attorneys representing non-U.S. investors; 3) a decision by the U.S. court to decline to exercise jurisdiction over the claims of the non-U.S. investors; and, finally, 4) approval of the European settlement by the Dutch courts.

It would seem that whether the Dutch Act on Collective Settlement of Mass Damages becomes a common vehicle for resolving potential liability for European companies is contingent, at least in part, on how long the viability of “foreign cubed” class actions remains unsettled in the U.S.  The Second Circuit Court of Appeals’ recent Morrison decision (discussed in this October 2008 ClassActionBlawg entry) was a setback for plaintiffs seeking to pursue foreign-cubed claims in U.S. courts, but did not foreclose the possibility of foreign-cubed claims entirely.  If it became widely established that foreign-cubed cases have little or no likelihood of success in U.S. courts, then plaintiffs’ lawyers would be less likely to pursue those claims in the U.S. in the first place and defendants would presumably face less pressure to settle under the Dutch law, which does not support class liability in a contested case.  However, until the law surrounding U.S. federal court jurisdiction in foreign-cubed cases does become more well-defined, Royal Dutch Shell’s strategy could signify a trend.

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