Netherlands: Proposal to Expedite Handling of Bankruptcy Class Actions

(July 25, 2011) According to a press release issued on July 11, 2011, the Dutch Ministry of Security and Justice has drafted a legislative proposal that would enable receivers to settle bankruptcies involving large numbers of debtors more quickly, by means of a procedure in the Act on the Collective Settlement of Mass Damage (Wet collectieve afwikkeling massaschade, WCAM) that would “make it possible to have an agreement concerning the settlement of mass damage declared applicable to an entire group of debtors.” The proposal is to be submitted soon to the Council of State for an opinion. (Press Release, Ministry of Security and Justice, Opstelten: Handle Class Actions Concerning Bankruptcy More Quickly (July 11, 2011).)

Under the new procedure, debtors would be classified into different groups based on their claims for damages. The government believes this measure would simplify settlement; verification of claims would no longer be necessary after an agreement has been declared binding. That is, each debtor’s claim would not have to be individually assessed, as is currently the practice. The press release states that this procedure “is a laborious, costly and time-consuming procedure, especially during the settlement of a bankruptcy with many thousands of claims, which means that the liquidation of the assets progresses slowly and the debtors have to wait a long time for their money.” (Id.)

With a view to the anticipated ten-year bankruptcy process of the DSB Bank NV, the Netherlands Bar Association and the Stichting Afwikkeling Massaschade (Foundation for the Settlement of Collective Damages) both argued in favor of amending the WCAM. (Id.) The DSB was seized on October 12, 2009, after losing more than €600 million (about US$893.9 million) in a run on deposits; sale attempts failed, and it was declared bankrupt a week later. (DSB Bankruptcy Expected to Take up to 10 Years, REUTERS (Nov. 17, 2009).) Because of the bank officials’ alleged violation of their responsibilities, the DSB bankruptcy may involve “tens of thousands” of client claims; verification of the claims could create a “very considerable administrative burden.” In addition, in such instances the costs incurred by debtors can often be disproportionate to the value of their claim. (Press Release, supra.)

The WCAM entered into force on July 27, 2005. Its provisions are incorporated in the Civil Code (arts. 907-910 of Book 7) and the Code of Civil Procedure (arts. 1013-1018). According to one commentator, the purpose of the Act “is to encourage and facilitate the settlement of multiple claims for compensation in connection with the same damage at an early stage.” The power to certify a settlement agreement between the party(ies) responsible for the damage and the organization representing the injured parties rests with the Amsterdam Court of Appeal. Once the agreement has been certified, it “will be binding on the injured parties, unless they opt out.” (Rutger Kalsbeek, Collective Settlement of Mass Damage Claims Act, INTERNATIONAL LAW OFFICE (Jan. 17, 2006) [registration required]; see also The Dutch Act on Collective Settlementof Mass Damage Claims (‘WCAM’), European Consumer Center website (last visited July 20, 2011) [has an English translation of the text of the Act as it appears in the two Codes]; Dutch Court Recognizes American Class Action Settlement, NEWSLETTER (Jan. 2011) [Kennedy Van der Laan law firm] [re a June 23, 2010, judgment by the Amsterdam Court of Appeal, in the Ahold case, recognizing as legally binding on Dutch investors a class action settlement declared to be generally binding by a U.S. court].)

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