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Jamieson v Wurttemburgische Versicherung AG & Anor [2021] EWHC 178 (QB) has been in my draft folder for a while – Master Davison refused an application for a stay on the basis of A29 Brussels I’a’s lis alibi pendens rule, holding that the issue of which court was being seized first, was properly sub judice in the German courts, as is the issue whether litigation subject to the protected categories, should rule out a stay in cases where the weaker party is being disadvantaged.

James Beeton has the background to the case here. Claimant was injured in a road traffic accident in Munich. He was working as a commodities broker for the second defendant. He was attending the Oktoberfest with clients, whom he was entertaining. He was walking from the beer hall to his hotel. He crossed a busy highway and was struck by a taxi, sustaining very severe injuries. The precise circumstances of the collision are in dispute. The taxi was insured by the first defendant, against whom the claimant has a direct right of action.

I tell students and pupils alike that too strong a hint of judicial action in pre-litigation action may trigger a torpedo suit in a court not preferred by client. That is exactly what happened in this case. In pre-action correspondence the insurers for the taxi were asked to confirm that they would not issue proceedings in another jurisdiction – to which they never replied other than by issuing proceedings in Germany for a negative declaration, i.e. a declaration that they were not liable for the accident. Those proceedings had been issued on 18 July 2017. Claimants then issued protectively in England on 10 May 2018. The to and fro in the German proceedings revealed that the correct address for the English claimant was not properly given to the German courts until after the English courts had been seized. 

Hence two substantive issues are before the German courts: when were they properly seized (a discussion in which the English courts could formally interfere using A29(2) BIa); and if they were seized first, is A29 subordinate to the protected categories’ regime: for if the German torpedo goes ahead, claimant in the English proceedings will be bereft of his right to sue in England.

The suggestion for the second issue is that either in Brussels Ia, a rule needs to be found to this effect (I do not think it is there); or in an abuse of EU law (per ia Lord Briggs in Vedanta) argument (CJEU authority on and enthusiasm for same is lukewarm at best).  Despite Master Davison clear disapproval of the insurer’s actions at what seems to be an ethical level, he rules out a stay on the basis of comity and of course CJEU C-159/02 Turner v Grovit: the English High Court must not remove a claim from the jurisdiction of the German courts on the basis of abuse of EU law before those courts.

A most interesting case on which we may yet see referral to the CJEU – by the German courts perhaps.

Geert.

EU Private International Law, 3rd ed 2021, Heading 2.2.9.4, 2.2.15.1.

Lis alibi pendens, Articles 29 &32 Brussels Ia.
Application for stay refused. https://t.co/rIyTL62nPa

— Geert Van Calster (@GAVClaw) February 5, 2021

More information will follow soon. Please click here for a link to the registration page. The Facebook page of the events is available here.

The author of this post is Olivera Boskovic, who is Professor of Private Law at the Université de Paris.

Background

On 12 February 2021, the Supreme Court of the United Kingdom delivered its judgement in Okpabi and others v. Royal Dutch shell and another. The action was brought by two Nigerian communities against Royal Dutch Shell, the UK-domiciled parent company of a multi-national group of companies and its Nigerian subsidiary. The appellants claimed that numerous oil spills in the vicinity of their communities had caused environmental harm leading to damage to health and property.

The first question was a jurisdictional one. Could the UK courts hear the case? This depended, among other questions, on “whether the claimants had an arguable case that a UK domiciled parent company owed them a common law duty of care so as to properly found jurisdiction against a foreign subsidiary company as a necessary and proper party to the proceedings”.

As underlined by Eva-Maria Kieninger, contrary to the decision in Vedanta, the Supreme Court did not clearly distinguish in Okpabi, as it should have, jurisdiction over the parent company and jurisdiction over the subsidiary. Having said that, at first instance and on appeal, it was held that “there was no arguable case that RDS owed the appellants a common law duty of care to protect them against foreseeable harm caused by the operations of SPDC”. On the contrary, the Supreme Court answered this question affirmatively and allowed the appeal.

A very important part of the jurisdictional question is thus solved in favour of the appellants. However, the final result is uncertain since the High court after remitting may still have to address some jurisdictional issues, at least concerning the subsidiary, such as forum non conveniens and/or access to justice in Nigeria which were not addressed in these proceedings.

The decision is in line with the landmark case Vedanta Resources PLC and another (Appellants) v Lungowe and others (Respondents), decided in 2019.

Key Findings

Concerning the duty of care, at the jurisdictional stage, the key points to remember are the following :

• When determining the arguability of the claim at the interlocutory stage, the court should focus on the particulars of the claim, rather than the weight of the evidential case. Factual assertions on which the claim is based should be accepted by the court unless, exceptionally, they are demonstrably untrue and unsupportable and this will be the case only in very exceptional cases. Mini-trials should be avoided. On the documentary evidence it is particularly important to note that the preferred test is “are there reasonable grounds for believing that disclosure may materially add to or alter the evidence relevant to whether the claim has a real prospect of success » (§128)? (For the purpose of comparison, on the difficulties of access to documents which could establish the exact way of functioning of the group of companies in the French context see an interesting example Paris Court of Appeal, 17 September 2020, no. 19/20669)
• The existence of duty of care depends on the circumstances. There is no limiting principle such as the one the Court of Appeal relied on when deciding that the issuance of group wide policies can never give rise to a duty of care. Secondly the Court of Appeal focused inappropriately on the issue of control which in fact should only be the starting point. A duty of care may arise regardless of the issue of control as in the situation where the parent holds itself out as exercising that degree of supervision and control over its subsidiaries even if it does not in fact do so.
• As already stated in Vedanta, “the liability of parent companies in relation to the activities of their subsidiaries is, not of itself a distinct category of liability in common law negligence”. The general principles which determine such liability are “not novel” and hence do not require “an added level of rigorous analysis”

Jurisdiction: A Comparative Perspective

After Vedanta and Okpabi one can now say that English courts seem more prepared to hear cases brought at the same time against UK based companies and their over-seas subsidiaries. This is a very important step. Under the Brussels regime, no longer applicable in the UK, jurisdiction for an action brought against a UK domiciled company was easy to establish, but it was associated with the extreme difficulty of establishing liability (However, it is worth noting that the future is unclear; will the UK join the Lugano Convention or will it go back to common law rules on jurisdiction ?).

On the other hand, jurisdiction for an action brought against over-seas subsidiaries was very uncertain. Indeed, jurisdiction against foreign companies for damage sustained in a foreign country by foreign claimants was considered as problematic not only in the UK but in many countries.

In France, before the 2017 Duty of vigilance Act was adopted the main rules for jurisdiction based on the domicile of the defendants, the place of the harmful event or the nationality of the claimant did not allow French courts to assert their jurisdiction in such cases. Two possible grounds for jurisdiction, co-defendants and the risk of denial of justice, did exist, but both were very uncertain.

In 2017 the French Parliament adopted the Duty of Vigilance Act requiring certain large companies to identify risks that their business creates for human rights and the environment and prevent violations. Under certain conditions these companies can be liable for damage caused by their subsidiaries or companies in their supply chain. This means that, since 2017, mother companies can be considered as proper defendants. Hence, within the limited scope of the Duty of vigilance Act the co-defendants rule should be able to found the jurisdiction of the French courts over foreign subsidiaries. Outside of its scope, the situation remains uncertain.

At EU level, a recent proposal was made to introduce a forum necessitatis in the Brussels I recast which would, under certain conditions, give jurisdiction to Member States’ courts  to decide on business-related civil claims on human rights violations brought against undertakings located in third-countries, but within the supply chain of an EU undertaking. It was also proposed to amend the Rome II Regulation (see the posts of Geert Van Calster, Giesela Rühl, Jan von Hein, Chris Thomale, Eduardo Álvarez-Armas). Both of these proposals were rejected last week.

Choice of Law

Accepting jurisdiction is only the beginning.  The next step, which will be more difficult, is establishing liability. The liability of the subsidiary will, no doubt, be governed by the law of the place of the damage, which is also the law of the place of the causal event and the law of the place of the domicile of the subsidiary.

However, concerning the liability of the mother company one can hesitate. In Okpabi, the court considered that liability was governed by Nigerian law, which was identical to English law.

For environmental torts, Article 7 of the Rome II Regulation gives the claimant a choice between the law of the place of the damage and the law of the place of the causal event. Although this rule seems favourable to the claimants, the definition of the terms “causal event” gives rise to many questions. Is the causal event necessarily the material act that triggered the environmental damage or could one consider that decisions and environmental policy can constitute the causal event?

For other types of damage, the general rule in Article 4, and therefore the law of the place of the damage, applies. This means that in situations where one cannot consider that the local law is identical to the law of the domicile of the mother company, the choice of law question might be problematic.

In the light of these considerations, it appears that the discussion about the modification of the Rome II regulation proposed by the Committee on legal affairs of the European Parliament and rejected last week was a very important one (Although, the suggested rule was far from perfect, the idea of introducing such a rule was, to say the least, worth considering. On this modification see among others O. Boskovic, ‘La loi applicable aux «actions pour violations des droits de l’homme en matière commerciale»’, Recueil Dalloz 2021, p. 252).

Even though courts are starting to address these questions with existing tools (It is worth noting that the first appeals decision resulting in a victory on the merits for the victims in a foreign direct liability case was rendered on 29 January 2021 by the Hague Court of Appeal in the case of Four Nigerian Farmers and Milieudefensie v. Shell), a well drafted European choice of law rule would be very welcome. The same could be said of a European approach of mass tort litigation, the risk of which is raised by this decision. But this is yet another story.

Bien qu’une question prioritaire de constitutionnalité (QPC) ait été renvoyée au Conseil constitutionnel sur la notification du droit de se taire au cours des débats sur la détention provisoire, la chambre criminelle a donné son propre point de vue dans l’arrêt du 24 février 2021.

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Based on the priorities defined for the Portuguese Presidency of the Council of the European Union in the area of Justice, the Ministry of Justice of Portugal will host on 30 March 2021 a conference under the title Protecting Vulnerable Adults Across Europe – The Way Forward.

The relevance of private international law – and, specifically, the Hague Convention on the International Protection of adults – to the realisation of the fundamental rights of adults with disabilities features among the key topics of the conference.

Speakers include Salla Saastamoinen (Directorate-General for Justice and Consumers, European Commission), Zampia Vernadaki (Secretariat of the JURI Committee, European Parliament), Philippe Lortie (First Secretary, Hague Conference on Private International Law), and Jean-François de Montgolfier (Ministry of Justice, France).

Older persons, people with physical, intellectual, sensory or psychosocial impairments, and victims of hate crime or gender-based violence are among those adults who may face particular challenges in exercising their rights, defending their interests and accessing justice in civil and criminal proceedings.

Cross-border situations may further exacerbate these issues by creating additional obstacles with respect to language, representation and differences in national legal systems. This can particularly affect ‘vulnerable’ adults wishing to exercise their right of freedom of movement within the Union. In addition, the COVID-19 pandemic has increased the difficulties that this population faces.

These challenges affect a significant proportion of the European Union’s population. European societies are ageing and Eurostat expects that, by 2050, one-fifth people in the EU will have some form of impairment. This is likely to result in an increase in the numbers of people who may need support to protect their interests and participate on an equal basis with others in civil and criminal proceedings.

Since 2008, initiatives in the area of civil law have promoted the ratification of the 2000 Convention on the International Protection of Adults and discussed how to improve its application. Yet the overall situation in the EU remains far from satisfactory.

In the area of criminal law, the new EU Strategy on Victims’ Rights 2020-25 recognises the need to explore how to enhance the protection of adults in vulnerable situations.

In addition, since 2018, all EU Member States – and the EU itself – are States Parties to the UN Convention on the Rights of Persons with Disabilities.

As the protection of ‘vulnerable’ adults is one of the priorities of the Portuguese Presidency of the Council of the EU in the area of Justice, the Portuguese Ministry of Justice, the European Commission and the European Union Agency for Fundamental Rights (FRA) are organising a virtual High-Level Conference on 30 March 2021.

This event provides an opportunity to reflect on the current situation and look ahead to what steps are necessary to ensure that all members of our diverse societies can enjoy their fundamental rights, including equal access to justice, in practice.

Attendance is free. The practical information to attend may be found here. See here for general information on the event, including the detailed programme.

EFFORTS (Towards more EFfective enFORcemenT of claimS in civil and commercial matters within the EU) is an EU-funded Project conducted by the University of Milan (coord.), the Max Planck Institute Luxembourg for Procedural Law, the University of Heidelberg, the Free University of Brussels, the University of Zagreb, and the University of Vilnius.

The EFFORTS Project tackles, notably, the Brussels Ibis Regulation and the Regulations on the European Enforcement Order, the European Small Claims Procedure, the European Payment Order, and the European Account Preservation Order. By investigating the implementation of these Regulations in the national procedural law of, respectively, Belgium, Croatia, France, Germany, Italy, Lithuania, and Luxembourg, the Project aims at enhancing the enforcement of claims through more efficient procedures, case management, and cooperation in cross-border disputes.

The first edition of the EFFORTS Newsletter was just issued and is available here.

 

 

 

 

 

Project JUST-JCOO-AG-2019-881802

With financial support from the Civil Justice Programme of the European Union

Gustavo Cerqueira and Nicolas Nord have edited a collection of essays, mostly in French, on the ascertainment of foreign law, titled La connaissance du droit étranger: à la recherche d’instruments de coopération adaptés. The book was published by the Société de législation comparée in late 2020.

The editors have kindly provided the following presentation in English.

Foreign law occupies an increasing place in practice not only for the judge, but also for other legal professions: notary, civil registrar, lawyer in particular. The most apparent causes for this increase are the proliferation of European Union regulations in private international law and the development of jurisdictions or specialized chambers in international litigation and the application of foreign law. A real competition has appeared in this regard for several years. Beyond the only aspect of litigation conventionally considered, the taking into account and the application of foreign law becomes essential for other perspectives: obligation of advice, non-contentious matters, drafting of acts, asset optimization, planning of international corporate transactions, among others.
The stakes are therefore crucial and the search for suitable cooperation instruments for a good knowledge of foreign law is essential.
This book contributes to the reflections on this subject. It thus includes an important inventory which makes it possible to update the diversity of regimes in the legal orders studied and the heterogeneity of professional practices. Concrete solutions are also proposed. They are the result of cross-discussions and round tables during the conference held at the French Cour de cassation on 28 November 2019.
While the apparent objective may be to achieve the adoption of a general instrument with the widest possible geographical scope, it quickly appeared vain to try to favor such an approach at present. On the one hand, each profession has different needs, on the other hand, the level of development of the different systems compared is not the same. While some are lagging behind and are struggling to adopt satisfactory rules in this area, others are at the forefront and therefore are really in demand for a cooperation instrument whose usefulness does not seem obvious to them. The various contributions and debates made it possible to consider paths for reflection as numerous as diverse, ranging from the revitalization of old instruments to the creation of specialized institutions at internal, international or European level, including the establishment of specific mechanisms or the use of artificial intelligence. Such an abundance shows the crucial nature of the issue and the vitality of the reflections carried out on it, but also the relevance of having debated it and the need to continue to do so.
In this sense, the next stage of this debate could be that of the opportunity of adopting a European regulation on the matter.

The book comes with a preface by Hélène Gaudemet-Tallon. The authors include, in addition to the editors themselves: Cyril Nourissat, François Ancel, Cyril Roth, Dominique Foussard, Olivier Berg, Nicolas Nord, Jochen Bauerreis, Guillermo Palao Moreno, Lukas Heckendorn Urscheler, Gustavo Ferraz De Campos Monaco, Patrick Kinsch, Maria Rosa Loula, Jean-Noël Acquaviva, Jean-Louis Van Boxstael, Marie Vautravers, Rodrigo Rodriguez, Wolfgang Rosch, and Françoise Monéger.

For more information, including the table of contents, see here.

Au nom de la liberté d’aider autrui dans un but humanitaire, le juge du référé liberté s du TA de Nice enjoint au préfet des Alpes-Maritimes de laisser les associations accéder ponctuellement aux locaux attenants à ceux de la police des frontières de Menton afin de porter assistance aux étrangers présents. 

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La Cour condamne l’Espagne pour non-transposition de la directive (UE) 2016/680 dite « Police-Justice ». Elle rejette tout argument tiré de la situation institutionnelle troublée de l’Espagne pour privilégier une lourde sanction dissuadant les États membres de ne pas exécuter les mesures garantissant un espace de liberté, de sécurité et de justice au sein de l’Union.

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Applications are now open for three- to six-month legal internships at our Permanent Bureau in The Hague, for the period from July to December 2021.

Interns work with our legal teams in the areas of Family and Child Protection Law, Legal Cooperation, Dispute Resolution, Commercial and Financial Law. It’s a great way to gain practical experience, deepen your knowledge of private international law, and to understand how the HCCH functions.

Due to the current global situation and the associated travel limitations and restrictions, the Permanent Bureau of the HCCH may consider the possibility that internships be carried out remotely. Interns may also be eligible for a monthly stipend.

We encourage you to share this opportunity with law students and graduates within your networks.

Applications should be submitted by 2 April 2021. For more information, please visit the Internships section of the HCCH website.

This post is published by the Permanent Bureau of the Hague Conference of Private International Law (HCCH). 

The transdisciplinary research project on  gender and private international law, which held its kickoff meeting in November 2019 followed by a reading group in Hamburg, will now hold its (postponed) big workshop on May 6-7, 2021. Over the past two years we have worked to create a transdisciplinary field of study at the intersection of feminist and gender studies and private international law. The workshop will establish cross-teaching between disciplines. It will consist of discussion groups covering the pressing topics of transnational surrogacy, the interaction between Western and Islamic family law, and the transnational regulation of queer families. Cyra Choudhury (Florida International University), Susanne Gössl (Kiel), Vanja Hamzi? (SOAS London), Elisabeth Holzleithner (Vienna), and Nadjma Yassari (MPI Hamburg) have agreed to be the convenors.

If you are interested in joining us in May, please send your application by April 2, 2021 at gender@mpipriv.de. You can find the full Call for Applications here:.  For more information about the project, please visithttps://www.mpipriv.de/gender.https://www.mpipriv.de/michaels

Please don’t hesitate to contact us at gender@mpipriv.de if you have any further questions.

We look forward to seeing you at the workshop!

Ivana Isailovi? (University of Amsterdam) & Ralf Michaels (MPI Hamburg)

L’avocat général Hogan propose à la Cour de déclarer que, même si l’Union a signé la convention d’Istanbul, le Conseil peut attendre, sans toutefois y être obligé, le commun accord de tous les États membres à être liés par cette convention avant de décider si l’Union conclura la convention et quelle sera la portée de cette conclusion

On 5 February 2021, a seminar entitled ‘The Netherlands, a forum conveniens for collective redress?’ was organised by the Amsterdam, Maastricht and Tilburg Universities, together with the Open University. A brief account of the seminar will appear in the Dutch Journal on PIL, NIPR. Experts addressed procedural and private international law features in European and particularly Dutch mass claims.

One panel discussed PIL instruments needing rules on collective actions and settlements as featured in an earlier post on this blog. Another panel reviewed legal standing under the Directive on representative actions in the cross-border context (Directive 2020/1828) and was moderated by Ianika Tzankova (hereinafter, IT).

Paulien van den Grinten (PG) from the Dutch Ministry of Security and Justice, Axel Halfmeier (AH) from Leuphana University and Vincent Smith (VS) from BIICL participated in the panel discussion. Below follows a shortened record of their exchange.

Introduction

IT: The Dutch approach to certification or admissibility in collective redress comprises two distinct questions:

1. Who has standing to sue? The answer is: In general, designated and ad hoc entities that meet strict criteria (stricter perhaps than some of the criteria that the designated entities need to meet under the Directive in terms of governance, conflict of interest and financial capabilities); and
2. Is the entity admissible? Note that both ad hoc established and designated entities are subject to the test that relates to their ‘admissibility’ in relation to the particular matter.

Since ad hoc entities play an important role in collective redress in the Netherlands also in the international context the question is, how the new Directive will impact the activities of these entities. One could think of several points that arise:

– When could Dutch ad hoc established and certified organisations be acknowledged before the courts of other Member State (MS)?

– The Dutch admissibility test seems to be more onerous than the Directive’s requirements. Will that impact the admissibility of foreign designated entities in the Netherlands?

– Will judgments in collective redress obtained by Dutch ad hoc established and court approved entities be recognised abroad?

Ad hoc Entities

IT: A central role in the Directive is given to so-called ‘qualified entities’. Perhaps we should first explain what ‘cross border’ and ‘designated entities’ mean in the context of the Directive…What is a ‘cross border action’ under the Directive? And what is a ‘designated entity’?

PG: Designated entity in the Directive refers both to entities designated in advance to be placed on the list and to the entities designated via acceptance by the court in a specific collective action.

AH: Cross-border action is defined in Article 3(7) Directive 2020/1828 and has nothing to do with other facts of the case. It is defined as a situation where a qualified entity sues in a MS that is not the MS in which that entity has been designated. For example, if a German entity files in the Netherlands against a Dutch company in the interest of Dutch consumers, this is a ‘cross-border action’.

IT: Apparently there was little support at EU level to incorporate the Dutch model of collective redress, where ad hoc entities play an important role, including in collective matters with an international dimension (Trafigura, Petrobras, VW, Salesforce, Shell, Fortis, Converium etc). The philosophy was to follow in that respect the Injunctions Directive, where only ‘designated entities’ placed on a list were given a role in cross border matters. What do you think of that approach?

VS: One of the major issues with this would be under the Brussels Ibis Regulation. If a national court (e.g. in Amsterdam) appoints an ad hoc entity then, under Brussels Ibis, although the judgment of the Dutch court is supposed to be recognised in all other MSs (and if there is no equivalent procedure, a MS has to provide one), judgments can be refused recognition on public policy grounds. So, a foreign judge could refuse to give full effect to the Dutch judgment, because the ad hoc entity (stichting) was not properly representative of the (international) class, and thus limit recognition (for example), for only Dutch residents were bound by the action, and not those in his forum State. The Directive avoids this by requiring recognition, but only for prequalified entities and only (outside the entity’s home State) on an opt-in basis.

PG: If the concept of recognition and enforcement under Brussels Ibis would be changed and become stricter due to the concept of a cross-border action under the Directive, that would have wide implications. This was surely not envisaged by the European legislator. The aim of limiting cross-border representative actions to actions started by entities placed on a list designated in advance was to prevent so-called ad hoc entities starting a representative action in another MS. The majority in the Council saw this as a way of protecting their courts. It had, however, nothing to do with a rejection of the Dutch national system with ad hoc entities as such. On the contrary, recital 28 of the Directive makes it clear that at a national level ad hoc organisations for a specific representative action designated by way of acceptance are allowed under Article 4 of the Directive. I do not see that courts in another MS could refuse the recognition and enforcement of a judgment resulting from such action based on public policy.

IT: How often (to your knowledge) have the ‘designated entities’ under the Injunction directive in your respective jurisdictions made use of their powers to file actions in cross-border matters? And do you think we should be optimistic about the role of these entities under the Directive?

PG: Not aware of any. We do not know whether claiming monetary damages in a representative action under the Directive will lead to more cross-border cases.

 VS: (1) Not aware. In UK there are few designated entities; most consumer associations are campaigning bodies not equipped to litigate. The competition collective actions regime was amended in 2015 so that representative bodies no longer had to be pre-approved by the Minister before they could bring collective competition claims. Before then, only one organization (Which) had applied for designation under the previous (2002) regime, and had only brought one claim (unsuccessfully).

(2) One issue is the body’s objects (purpose). The likely candidates are mostly charities, the UK charities regulator requires them to adhere to their objects and many of them are limited to UK actions. In UK competition ‘class actions’ so far all the representatives have been individuals (with litigation funding). In contrast to other common law ‘class action’ jurisdictions, however, they have generally been individuals with significant practical/professional experience related to consumer protection. For example, the current Mastercard collective action is headed by a Chief Financial Services ombudsman.

AH: Cross-border actions are rare in Germany. A remarkable recent exception was the action brought by an Italian consumer association (Verbraucherzentrale Südtirol) against Volkswagen in the interest of Italian buyers of cars in the Diesel emissions scandal. However, this is not an injunctions action, but one brought under the German ‘model declaratory action.’ The German consumer association (VZBV) had used this instrument in their own action on behalf of German consumers but had explicitly refused to represent foreign consumers.

Pre-approved (Designated) Entities

IT: So, what you are all saying is that there is no reason to believe that the designated entities will be active in practice. That is not a cheerful news for consumers. However, there must be good reasons why the EU has done this. Let us explore the advantages and disadvantages of granting standing in collective redress in cross-border actions only to pre-approved (designated) entities.

Advantages:

PG: MS courts know that every entity from another MS starting a procedure before its courts meets the harmonised requirements for designated entities, thus making mutual recognition of such entities less problematic.

PG: MS of origin is best placed to test whether an entity meets the harmonized requirements.

Disadvantages:

PG: Some requirements are difficult to test in theory without a collective claim.

PG: It might lead to circumvention of national requirements, as they are stricter.

VS: Many such entities will need to amend their objects.

IT: The Dutch experiences with collective actions (25 years) show that there may not always be such pre-existing entities, when needed, willing to fund such actions in which case the ad hoc established ones fill in that gap. Absent such entities there might be an access to justice deficit.

Funding

IT: And what about funding of designated entities and of collective redress? Articles 10 and 20 of the Directive deal with that, the first one dealing with TPF and the second one with lifting financial restrictions for designated entities.

IT @ PG: You assisted the Dutch government with the Directive and must have some insight. Why are there two separate articles on a related topic? How are non-profit organisations supposed to file this type of (costly) action in their jurisdictions?

PG: The original Commission proposal contained an Article 7 on funding and an Article 15 on assistance of qualified entities. Even though Article 7 was deleted and Article 15 was redrafted, a new provision on funding was reinstated as Article 7, but became Article 10 (and Article 15 became Article 20) in the final text. The importance of Article 10 is twofold: for those in favour of allowing third party litigation funding for representative actions, Article 10 makes it clear that funding is allowed under the Directive on strict conditions. For those against allowing third party litigation funding for representative actions, the wording of Article 7 serves to restrict the conditions under which such funding is allowed. Still, the wording is opaque for those who did not participated in the negotiations. Especially the reference made to in Article 10(2)(b) that a third party funder may not fund a representative action against a defendant which is a competitor of the funder or against a defendant on whom the funder is dependent, gives rise to interpretation questions. What is the rationale behind these provisions? Recital 52 gives clues about the rule prohibiting the funding against a competitor. A trader acting in the same market is considered to have a conflict of interest “since the competitor could have an economic interest in the outcome of the representative action, which would not be the same as the consumers’ interest”. The concern of the European legislator was that the representative action might become an instrument to harm a competitor rather than serve the interests of the consumers. As regards the funder, who is dependent on the defendant the concern of the European legislator is the reverse: such funder might be so dependent on the defendant that its actions are based on the interests of the defendant rather than the interest of the affected consumers.

IT @ AH: what is the view and position on funding of designated entities in Germany?

AH: In Germany, the “Verbraucherzentralen” are maybe the most active designated entities, including their federal association, the VZBV. These are mainly government-funded. In particular, the VZBV received extra money and extra funding of staff to specifically bring the new ‘model declaratory actions.’ So, we are looking at entities that are formally private law associations, which are more like outsourced parts of the government administration. We will see whether this will create future conflicts of interests. Hitherto government financing has not stopped them from bringing cases against (partly) State-owned companies such as VW, but this action was politically supported. There are close ties between the VZBV and the German government.

IT: This is interesting, but this potential issue was apparently not addressed in the Directive. It looks like the focus on potential conflicts of interest in the Directive is entirely on actions that are TPF-ed. Correct?

PG: yes, this seems to be the case. The Directive is limited to actions by consumers for infringements of EU-instruments placed on the list of Annex 1. Representative actions under the Directive will be between a qualified entity as claimant and a trader as the defendant. With the exception of the GDPR, the government is not a likely party in such actions. Conflicts of interest regarding the government were not seen as a point of concern in the negotiations for most MS or the Commission/EP. However, for the Netherlands it was in fact, a point of concern both regarding the designation of qualified entities and financial support to qualified entities. This concerned the broad scope of the Dutch mechanism for collective redress which is not limited to consumer actions. In the Netherlands around 40 % of all representative actions are against the Dutch government as defendant.

Insight into the Negotiations

IT @ PG: What considerations brought us to where we are and what were the most controversial issues during these negotiations? I am puzzled by the fact that actual experience does not seem to count for much in such negotiations: the MS have on the one hand no or disappointing experiences with the system of ‘designated entities’ under the Injunctions Directive and there are better experiences under the Dutch regime, that allows both type of entities (for over 25 years). Did this play any role in the negotiations? What evidence was produced?

PG: At the start of the negotiations in 2018, some MS had a collective redress system in place, others were working on it and some MS did not have any mechanism for collective redress. Throughout the negotiations more MS started legislative projects on collective redress in various shapes and forms. The Netherlands had pending legislation when the negotiations started. In the preparation for Parliamentary process we unearthed many issues relevant to the Directive. Real experience was largely irrelevant in the negotiations – it was easier for us with a collective redress mechanism to indicate difficulties in the Directive. By the late 2019, the Dutch WAMCA had become law. The result of this was that the Directive and the Dutch WAMCA are compatible. The Directive leaves enough room to accommodate MS’s national systems, e.g. designating ad hoc entities as qualified entities and the possibility for both opt out and opt in mechanisms. For some other aspects the provisions of the Directive match those of the WAMCA perfectly, e.g. the court can reject a claim at inception if it is manifestly unfounded, can be found both in Article 7(7), of the Directive and in Article 1018c, par. 5 (c). Therefore, the WAMCA will be the Dutch collective redress mechanism under the Directive without having to change. However, we do have to provide for a procedure for entities to be placed on the list predesignated for cross border actions. The Article 10 funding provisions seem to be more detailed than the WAMCA. We may have to exclude competitors or someone dependent on the defendant to acts as funder.

 AH:  Little of the discussion about collective actions is evidence-based. ‘Abusive’ litigation seems unlikely. On the contrary, the experience in Germany shows that almost all such actions are well-founded and not frivolous. Even if we look at the empirical data in the U.S., we clearly do not find the ‘abuse’ scenario that is often painted on the wall.

IT @ PG: What were you most proud of in the negotiations? What were you most frustrated by, also in view of the fact that Dutch ad hoc spv’s seem to need to meet much stricter criteria than the EU ‘designated entities’ in terms of governance, conflict of interest and funding capabilities and yet they are being perceived as somehow of a ‘lower rank’ in cross-border matters? Who will be in charge in the Netherlands in appointing designated entities?

PG: The biggest achievement was European legislative result on collective redress at all, obliging every MS in Europe to have a collective redress mechanism for consumers. Making a distinction between national collective and cross-border collective redress brought a breakthrough in the negotiations. Accepting that for cross border cases we have to work with a list of entities designated in advance with harmonised criteria, meant that the Netherlands – and others, like Germany – could preserve their national system. Even though the harmonised criteria may look different or less strict than the criteria under the WAMCA, the rationale behind the criteria are very similar. There are practically no criteria in the WAMCA which do not meet one of the criteria in Article 4 of the Directive. E.g. the obligation in Article 3:305a (2) of the WAMCA to have a governance structure with a supervisory board can be seen as the implementation of the obligation in Article 4, par. 3, (e) to be independent and to prevent a conflict of interest. We intend to make the Dutch ministry of Justice and Security responsible for the list of entities designated in advance for cross border actions. One of the more difficult issues in the negotiations in the Council was that of the concept of standing of a qualified entity on the one hand and the civil procedural concept of the admissibility of a specific representative action on the other. To underline that distinction the Directive contains several references to the procedural autonomy of MS and the room for courts to perform an admissibility test in accordance with their national law, e.g. in Recital 12 and Article 7(3).

Non-Dutch Perspectives on the Directive – And on Dutch Collective Redress

IT: Apparently one can speak of ‘Dutch exceptionalism’ in the context of EU collective redress. Let us hear non-Dutch perspectives on the EU Directive and on Dutch collective redress.

IT @ AH and VS: What is your take on the issues? In view of the sectoral approach in your respective countries versus the Dutch horizontal one? Are there any other issues that you identify in that context?

AH: I think there are some open issues regarding the EU Directive’s rules on standing on the one hand and individual Member States’ rules on admissibility of collective actions on the other. For example, if Dutch law would be restrictive in allowing foreign designated entities to sue, this could possibly violate Article 6(1) of the Directive that basically requires Member States to accept cases brought by designated entities from other Member States. For example, if a designated entity from EU Member State X sues a Dutch company before a Dutch court, but with respect to that company’s activities in Member State X and in the interest of consumers in Member State X, I think that the Dutch court would have to hear the case. It is also interesting that the Directive in its Article 5(4) allows the defendant trader to raise objections against the legitimacy of the designated entity with regard to the Directive’s criteria. But the Directive is silent on the procedure in such a case: Should the action be stayed until the home Member State of the designated entity has decided about such concerns? With regard to Germany, the German government worked hard to avoid ad hoc entities in the Directive and has succeeded in this regard. But there may be some more room now for foreign entities to sue in Germany under the Directive.

PG: As regards AH’s example, I think a Dutch court would accept that this foreign entity has standing. Accordingly the new Directive is no different from the current one for actions to obtain injunctions, be it that the foreign authorities at least have had to apply the harmonised criteria in order to place this entity on the list. In that respect it offers a better safeguard than now. Furthermore, accepting legal standing does not mean that the admissibility of the specific claim cannot be tested by the court. E.g. the Dutch court may still check whether the claim brought by the designated entity sufficiently safeguards the interests of the claimants and whether the entity has means to finance the claim.

VS: UK experience with the sectoral regime for collective competition (anti-trust) claims is still young, but developing. However, there are some clearly emerging issues which will also likely arise when implementing and applying the Directive:

It is modelled on the (horizontally applicable) Canadian regime, so we have a model to follow for the tricky questions. Even though there are differences between the EU and Dutch regimes, the Dutch experience will still be valuable for MS courts wanting to find an answer to issues not expressly dealt with in the Directive or national implementing legislation. The Dutch regime has many similarities with what is required under the Directive and, I think is likely to be used as a model by others.

A ‘class’ action doesn’t work so well for non-economic loss (eg injury due to clinical negligence etc) due to widely differing circumstances, whereas the Dutch settlement element was set up to deal with exactly that situation.

A sectoral approach could lead to borderline cases — e.g. claims pretending to be about consumer law, when they are in reality competition law cases, which are not covered by the Directive.

Also, it may be difficult to tell in many cases whether a case is about breach of EU law or national law. For example, in the consumer protection and environmental protection fields, EU law is mostly contained in Directives which are then implemented by the MS. So, the ‘consumer’ (claimant) will only immediately see a breach of legal norms in his national legislation. For many, working out whether their claim is in fact based on EU law may be unnecessarily difficult.

PG: Yes, to me this is a key observation and is why we want the Dutch WAMCA to be our system under the Directive, meaning that there will still be only one system in the Netherlands.

Is the Directive a Threat to Dutch Cross-Border (Consumer) Actions?

IT @ all: To circle back at the beginning of our discussion, do you think that the limitation on standing to pre-approved entities in the new EU Directive is a threat to Dutch cross border (consumer) actions, what is your final word on that?

VS: In my view the ‘threats’ to cross-border actions by qualified entities are mainly that they do not have the experience in doing this and that their purpose may be national rather than international. The EU level umbrella bodies might be better placed (e.g. BEUC) but they would have to be recognized by a national authority (lots of applications for designation to the Belgian authorities in Brussels?). So, the most important aspects I think are willingness of national authorities to recognize the few international ‘entities’ who might want to do this – not specific to the Dutch situation, I think, and a willingness/expertise in acting cross-border.

PG: I agree. Let’s not forget that since the entering into force of the Injunctions Directive not a single cross border action was ever started in the Netherlands or elsewhere until last year’s action against VW. It is cumbersome and might be very expensive having to start a case in another jurisdiction, working with foreign lawyers etc.

AH: One of the areas in which the Directive is really a step forward is third-party funding of litigation. In Germany, there is considerable uncertainty after some court decisions that prohibited this as being immoral in relation to a certain type of consumer associations’ actions. We now have the language in Article 4(3) e of the Directive, which certainly is a compromise, but at least shows that TPF cannot be completely prohibited, but needs to be regulated and looked at in more detail. In general, I think that the Dutch courts will remain an attractive forum for cross-border collective actions, and I expect that the Netherlands will remain the innovation leader in this field.

IT: Thank you very much for sharing your views and insights on this fascinating and challenging topic.