Clifford Chance

The Dutch Act on redress of mass damages in collective action (WAMCA) came into effect on 1 January 2020 and structurally changed the Dutch system for mass litigation and collective redress. After five years, we consider the first experiences with this legislation, and we look forward to the (expedited) evaluation initiated by the Dutch government.

1.  Introduction

On 1 January 2020, the Dutch Act on redress of mass damages in collective action (Wet afwikkeling massaschade in collectieve actie or "WAMCA") came into force, aiming to enhance the efficiency and effectiveness of mass damage procedures. With the entry into force of the WAMCA, collective liability law underwent significant changes. Specifically, the requirements for standing of the claim vehicle became much stricter. The legislator sought to balance the interests of claimants to effectuate their rights with the interests of defendants in being protected against unfounded or frivolous mass claims. Furthermore, it was the intention to create a clear framework for mass litigation, to prevent chaos from numerous individual claims and enhance the appeal of settlements. After 5 years of WAMCA, the experience is that although the body of case law is steadily growing, there are still practical issues such as procedural delays due to ambiguities regarding the requirement of claim vehicles having to be sufficiently representative. This necessitates further clarification by courts or the legislator to enhance the WAMCA's effectiveness.

The WAMCA was scheduled to be evaluated in 2025, five years after its enactment. However, the Minister for Legal Protection has decided to commence the evaluation early, in 2024. The results are expected in the spring of 2025. The reason to expedite the evaluation were concerns regarding the requirement of claim vehicles having to be sufficiently representative.

2.  Legislative amendments

• The principal legislative amendments enacted with the implementation of the WAMCA are:
• Claimants have been granted the ability to seek monetary compensation in mass proceedings;
• Rulings are generally binding for parties who have not utilised their opt-out options;
• The admissibility requirements have been amended;
• The court can establish a collective settlement of damages; and
• An exclusive representative is appointed if more than one representative is admissible to bring a similar claim against a defendant.

Since the entry into force of the WAMCA, according to the central register for collective claims, 75 collective claims have been filed and 24 collective claims have been resolved.

3.  Expedited evaluation

The WAMCA changed the admissibility requirements for mass damage procedures. Article 3:305a, paragraph 1 of the Dutch Civil Code ("DCC") states that only: "A foundation or association with full legal capacity can institute an action intended to protect similar interests of other persons to the extent that its articles promote such interests and these interests are sufficiently safeguarded". According to Article 3:305a, paragraph 2 DCC, these interests are adequately safeguarded if the foundation or association is sufficiently representative, considering its supporters and the volume of the claims it represents. This criterion is designed to prevent foundations from making undue profits through collective procedures where the interests of the affected parties are subordinate to the commercial interests of third parties.

In 2023, members of the Dutch House of Representatives expressed concerns that legal actions initiated by interest organisations under Article 3:305a DCC could significantly affect the public interest, even if these organisations represent only a limited amount of people. They urged the government to explore methods for implementing a more stringent evaluation of whether such interest groups are sufficiently representative within the existing framework of Article 3:305a DCC. The Minister for Legal Protection decided to expedite the evaluation of the WAMCA. The Dutch Scientific Research and Documentation Centre (Wetenschappelijk Onderzoek- en datacentrum or WODC) has been commissioned to evaluate the WAMCA, with results expected in the spring of 2025.

4.  First experiences with the WAMCA

4.1  Admissibility requirements / Standing

Under Dutch law, class actions may be initiated by organisations with legal personality on behalf of a group it represents. The WAMCA has introduced the requirement that this organisation must be "sufficiently representative". This entails that the claim must safeguard the interests of the group of persons the claim vehicle represents. Furthermore, in the new system the courts first test whether the claim vehicle has standing (including an assessment of being sufficiently representative), prior to the assessment of the merits of the case.

The requirement that the claim vehicle is sufficiently representative was already a point of discussion prior to the enactment of the WAMCA. There were concerns that the stricter admissibility requirements would make it more difficult to protect the rights of consumers and investors, as well as to advocate for environmental and health interests.

Now the WAMCA is in force, if courts assess at all whether the claim vehicle is sufficiently representative, it is evaluated quantitatively. Both supporters and critics of the stricter admissibility requirement have expressed concerns about this interpretation of the requirement. However, according to the central register for collective actions, there has been no significant change in the number of WAMCA proceedings where claimants are declared inadmissible. Therefore, the stricter admissibility requirements do not seem to bring about any substantial change in practice.^[1] Nonetheless, it is perceived that the stricter admissibility requirements, particularly the requirement of being sufficiently representative, result in increased procedural delays due to existing ambiguities that have to be assessed by the courts first before proceedings on the merits start.

4.2  Practical functioning of the scope rule

An interest group is only admissible if the claim maintains a sufficiently close connection with the Dutch legal sphere. In case law concerning the scope rule, Article 3:305a paragraph 3 sub b DCC has been the primary source of contention. In a ruling by the Midden-Nederland District Court, the court expressed serious doubts about whether this provision conflicts with Articles 4 and 18 of the Treaty on the Functioning of the European Union (TFEU).^[2] The legislator has only investigated the potential conflict with Article 4 (and not Article 18) of the TFEU and concluded there was no conflict. Furthermore, the court rightly concludes that it is the prerogative of the Court of Justice of the EU to adjudicate this matter. However, recent parliamentary documents do not clarify whether EU law will be included in the evaluation of the WAMCA.

4.3  Financing of procedures

To initiate a WAMCA procedure, it is required that a foundation or association has sufficient means to bear the costs of pursuing the right of action. Claim organisations often rely on funding from third party litigation funding. Such parties may have interests that diverge from those of the aggrieved parties. This requirement provides the court with a tool to exclude cases where the interests of the aggrieved parties are potentially negatively affected by the funder. The phenomenon of third party litigation funding was not yet widespread in the Netherlands at the time of the legislative process for the WAMCA. Therefore, the legislator stated in the Explanatory Memorandum of the WAMCA that further research into this phenomenon would be desirable as it became more prominent.

According to case law, it is required that a funding agreement is sufficiently compatible with the requirement that control over the legal action remains adequately with the interest organisation. In cases where there is uncertainty about compliance with Article 3:305a paragraph 2 sub c DCC, courts have requested access to the funding agreement. However, the assessment of the funding structure is a marginal review. We have seen several instances where courts are critical of the profit margin for funders and have denied standing to the claim vehicle as a result thereof.

4.4  Exclusive Representative

Finally, if multiple interest groups are declared admissible, the court must appoint the most representative organisation as the Exclusive Representative, who will then become the only party authorised to undertake legal actions. In several WAMCA cases, it has been necessary to appoint an exclusive representative because multiple interest groups had issued summonses.

Footnotes:

[1] An exception to this trend involves cases concerning potential human rights violations. In these cases, interest groups are indeed sometimes declared inadmissible.

[2] Rb. Midden-Nederland 2 juni 2021, ECLI:NL:RBMNE:2021:2142, r.o. 2.17-2.18 (see: Rb. Midden-Nederland).