Léon Korsten and Sophie Gilliam discuss recent competition damages claims brought in the Netherlands, provide an insight into the examination of witnesses, and suggest potential improvements for this area of practice
1 Are there any particular sectors in your jurisdiction which tend to be a focus for competition damages actions? Why do you think this is the case?
Damages claims can be brought before Dutch civil courts for any infringement of competition law in any sector under the general procedural rules. There is no particular sector which tends to be a focus for competition damages actions in the Netherlands.
The Netherlands is seen as an attractive jurisdiction to bring competition damages actions. Competition damages actions brought before civil courts in the Netherlands include damages actions following the finding of a competition law infringement by the European Commission or a national competition law authority (so-called "follow-on" damages actions) in the following markets: bitumen (road construction), elevators and escalators (buildings); gas-insulated switchgear (energy); air cargo (transport); sodium chlorate (paper bleaching); paraffin wax (candles); pre-stressed steel (construction), beer and cathode ray tubes (televisions), sugar and shrimp. Stand-alone damages actions for infringement of competition law (cartel prohibition and/or abuse of dominance) have been brought in various sectors including payment services, real estate brokerage and age-viewers.
2 Who do damages claims tend to be brought by in your jurisdiction? (e.g. direct purchasers, indirect purchasers, end consumers?) If claims are not currently being brought by indirect purchasers and/or end consumers, why do you think this is?
Any person or legal entity that has sufficient interest has standing to bring a claim. Competition damages actions may be brought by (or on behalf of) direct purchasers, indirect purchasers and end consumers. In practice, we see both individual actions and different forms of collective redress.
With regard to collective redress, we note there are several mechanisms available. Multiple claimants may first of all decide to bring an action jointly in their own name, or grant power of attorney to a party to represent them in legal proceedings. Non-profit organisations representing the interests of injured parties can bring actions in their own name (305a of the Dutch Code of Civil Procedure ("DCCP")). A method more widely used in competition damages claims is the 'assignment model'. Under Dutch law it is possible to assign claims based on tort to a third party, e.g. to a special purpose vehicle company which will then claim all damages in its own name. Claims may be supported by third-party funders.
Most individual claims tend to be brought by direct purchasers that are medium-sized or large companies. Examples of these are the follow-on damages actions brought by Tennet (national grid) in relation to a gas-insulated switchgear cartel, the case brought by Deutsche Bahn in relation to a pre-stressed steel cartel and the case brought by road constructor MNO Vervat in relation to a bitumen cartel. In the case brought by Deutsche Bahn, the German government (an important indirect customer) assigned its claim to Deutsche Bahn. With this move, Deutsche Bahn apparently seeks to prevent a discussion on the so-called ‘passing-on defence’.
Most collective claims are brought by special purpose vehicle companies, often backed by third-party funders. Examples are Cartel Damage Claims (“CDC”) Project 13 SA (a paraffin wax follow-on action) and CDC Project 14 SA (a sodium chlorate follow-on action), Equilib's claims in air cargo follow-on cases, and the Stichting Elevator Cartel Claim (“SECC”) in a follow-on action in relation to elevator and escalator cartel(s). These entities brought claims of tens of millions of euros based on the assignment of claims to them by a large number of medium to (very) large companies on a 'no win, no fee' basis for these companies. A few special purpose vehicles search to collect claims by end consumers. An example is ConsumentenClaim, which collects claims by end consumers with regard to a cartel infringement by producers of cathode ray tubes used in televisions.
Collective actions by representative organisations, e.g. those brought under Article 3:305 of the Dutch Civil Code ("DCC"), are also possible. Such claims should be instigated by foundations or associations that have a clearly defined and actually pursued interest stated in their statutes. At present, a limitation is that the representative organisation may not claim for monetary damages. It can, however, obtain a declaratory judgment that the defendant is liable for the damage it causes, which can be of use in subsequent individual damages claims or settlements, including settlements of ‘mass damages’ as described under question 6. An example of a representative action brought on the basis of 3:305a DCC is the competition damages claim of the Dutch trade association for the hotel and catering industry (“KHN”).
In July 2014, a legislative proposal was published which proposed the possibility to claim damages in a collective action (e.g. under 3:305a DCC). The new legislation may encourage more consumer damages claims. The main advantage of a collective action is that only one procedure has to be initiated, instead of multiple (individual) procedures, and it will in principle be more attractive once monetary damages can be claimed. Further, it can still serve – sometimes more so – as a step toward a settlement of mass damages.
3 What approach are the courts taking to claims that originate from investigations or infringements arising out of the jurisdiction?
Foreign entities can be summoned to appear before a court in the Netherlands, including with regard to claims that originate from investigations or infringements arising outside the Netherlands, provided that it is the court of the place of domicile of the defendants and “provided the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings […]”. With regard to defendants domiciled in the European Union (“EU”), this is based on the Brussels-I Regulation (recast), and with regard to non-EU defendants, it is based on the jurisdiction rules laid down in the DCCP.
Dutch courts have been shown to readily accept jurisdiction on this basis, including with regard to claims that originate from investigations or infringements arising outside the Netherlands. This is most clearly illustrated by the judgments in the CDC/Sodium Chlorate case. The District Court of Amsterdam and the Amsterdam Court of Appeal accepted jurisdiction in this matter with no other nexus with the Netherlands than the holding company Akzo Nobel (the ‘anchor defendant’), which was held liable by the European Commission for the involvement of one of its subsidiaries in cartel arrangements in the sodium chlorate market. None of the other parties (neither the claimant nor the other defendants) was domiciled in the Netherlands and the facts did not specifically relate to the Netherlands.
If the claim has no factual link with the Netherlands, the district court will most likely have to apply the laws of another jurisdiction. For example, in the CDC/Paraffin Waxes case, the District Court of The Hague ruled that the claim of each of the eight purchasers who assigned their claim to CDC is to be decided under the laws of the State where the production location of that purchaser is located (in that case leading to the application of Italian, German, Norwegian, Swedish and Finnish law).
Both Commission decisions as well as decisions on (foreign) national competition have probative value in cases before Dutch civil courts. The basic rule is that the court will make its own assessment of all evidence submitted in a case. Only infringement decisions by the European Commission are binding.
4 Do claimants favour your jurisdiction when they have a choice as to where to lodge a claim? Why?
The Netherlands is regarded as one of the more favourable jurisdictions in which to bring follow-on damages claims. Perceived advantages of the Dutch civil courts include the following:
5 In practice, are the courts generous to claimants when awarding disclosure, including pre-action disclosure?
Dutch law provides that, both before and after proceedings are commenced, documentary evidence can be obtained from the adverse party or a third party. A party may also request the preliminary examination of witnesses or experts. Further, it is possible to seize documentary evidence which may be used at a later stage. In civil proceedings, the judge may also request that (one of) certain documents be submitted.
On the basis of Article 843a DCCP the court may, at a party’s request, order disclosure of documents by the other party if certain conditions are met. It is, in principle, also possible to obtain access to documents held by third parties, including competition authorities. Under this provision, ‘documents’ does not only refer to copies of agreements or deeds, but also digital files.
The cumulative criteria are the following: the requesting party has a legitimate interest in the documents; it views ‘certain documents’ (there is no ‘fishing expedition’); and the documents relate to a ‘legal relationship’ to which the requestor is a party (including claims based on tort). Normally, the courts apply a strict test if the criteria are met. A request may also be denied if there are important reasons to prevent access to the evidence or if proper administration of justice can be guaranteed without granting access to the evidence. Following the implementation of the EU Damages Directive (as yet foreseen), this last criterion will no longer apply.
In practice, this provision has been invoked by both claimants and defendants in competition law damages claims. One case, in which the claimant had sought access to the confidential version of the Commission Decision and certain specified documents from the Commission's file, was withdrawn prior to the court making its judgment on the request. Defendants have made requests to obtain documents that could be useful to substantiate a passing-on defence. Such requests have been denied by the court based on the view that the requests were made at a (too) early stage of the proceedings. Judgment on a similar request made at a later stage in the proceedings is currently pending.
Both before and during proceedings the court may, at the request of a party, order the examination of witnesses. Everyone duly summoned as a witness is obliged to appear in court to testify (Article 165 (1) DCCP). Witnesses can be forced to appear (even held in custody), but in general this is not needed. Professionals entitled to privilege, such as lawyers, may decline to give evidence. Witness hearings are led by the judge. The judge will start with the examination of the witness, after which a cross-examination by the parties follows. The judge monitors the process of examination of the witnesses by the parties and can intervene whenever it deems fit. Preliminary witness hearings have been ordered in follow-on damages claims in the Netherlands. The threshold for preliminary witness hearings is relatively low.
In practice, the (preliminary) examination of witnesses has been ordered in competition damages actions. Preliminary witness hearings were, for example, held in the stand-alone damages action for abuse of a dominant position brought by a credit card acquirer against the largest payment network service provider in the Netherlands. Also, in the follow-on damages action brought by SECC in relation to the elevator and escalator cartel, (former) board members and managers who had possibly participated in illegal meetings or could have been involved in the implementation of cartel agreements were summoned to appear before the court as witnesses. In the follow-on competition damages claim brought by SCC in relation to an air cargo cartel, a request to hear witnesses was denied because SCC did not sufficiently argue what the added value would be at that stage.
6 How do the dynamics of a settlement really work in your jurisdiction? Is there a mechanism by which a "global settlement" can be approved/enforced?
We will first address the dynamics of a settlement in individual cases. Second, we will go into the mechanism to have a ‘global settlement’ declared binding. The Netherlands is a jurisdiction that provides for a unique mechanism by which a global settlement can be approved on an opt-out basis.
In general, claimants will try to settle their dispute prior to commencing litigation, which attempt may be reinforced by actually issuing a writ of summons. Section 3:305a paragraph 2 DCC requires a representative organisation to attempt a settlement prior to filing an action. Failure to adhere to this requirement might result in the inadmissibility of the claim. In many cases the judge will, during a court session in which both parties are represented, encourage an out-of-court settlement sometimes reinforced by providing a preliminary view on arguments raised by the parties. If the court case continues, settlement negotiations may be resumed or started at any time. A settlement offer can be made without fear that it will influence the outcome of the case. The Rules of Professional Conduct prohibit Dutch lawyers from submitting a settlement offer presented by the lawyer of the other party or from informing the court of what has been discussed during settlement negotiations without permission. A settlement offer should thus not impact the outcome of the case and it will also not influence a cost award. If a settlement is reached, parties can withdraw the case and there is also the possibility to have this settlement declared binding by the court, which may be helpful in the execution of the settlement.
The mechanism by which a ‘global settlement’ of mass damages (so-called “WCAM settlements”) can be declared binding, is laid down in Articles 7:907–910 DCC and 1013–1018 DCCP. Representatives of victims and a party or parties that caused mass damages that reached an (out-of-court) settlement can submit a joint request to the Amsterdam Court of Appeal for approval of this settlement.
Several criteria must be fulfilled in order for the Amsterdam Court of Appeal to be able to declare the settlement binding, including the following. The representative entity must be a sufficiently representative of the interests of those for whose benefit the agreement was concluded. The amount of the damages awarded should be fair, taking into account the extent of the damages, the simplicity and speed with which compensation can be obtained and the possible cause of the damages. The settlement agreement should provide for an independent determination of the compensations awarded by it, and adequate security should have been provided for the payment of the claims of those on whose behalf the settlement agreement has been concluded.
The settlement is declared binding on all persons that suffered damages as covered by the settlement, unless such person uses the possibility to opt out within a time period – to be determined by the court – of at least three months between the petition being granted and the judgment being published in the prescribed manner (Section 7:908 DCC). This applies to Dutch residents as well as non-Dutch residents. In an important precedent (not a competition damages action), the court held that it had jurisdiction even though the majority of the victims were not domiciled in the Netherlands.
This mechanism is also perceived as advantageous by persons responsible for mass damages and their insurers, as it prevents litigation in multiple parallel cases, possibly in a number of jurisdictions, and increases certainty about financial liability.
7 How long do damages actions take? What is the likely range of costs required to defend a claim?
Competition law claims can be brought in preliminary relief proceedings (kort geding) as well as proceedings on the merits (bodemprocedure). A preliminary relief procedure (for which it is required that the matter is urgent) in general takes no more than a few weeks from the issuing of the writ to the judgment. Appeal and cassation may follow, but the judgment at first instance will – in general – be immediately enforceable.
The duration of adversarial proceedings on the merits depends on the complexity of the matter, the workload of the court and the parties’ procedural attitude. Broadly speaking, it might take three to five years before a district court has rendered a final judgment in a large follow-on damages claim involving numerous individual claims and several defendants from multiple jurisdictions. In other, less complex competition cases, proceedings on the merits at first instance may take one to two years. Future damages claims brought before courts in the Netherlands may be less complex, as judgments issued in recent years provide precedents for several legal matters, and also because several substantive issues of foreign law will be harmonised through the implementation of the Damages Directive, making claims which are subject to a number of national laws less complex.
In follow-on damages, the final judgment may be put on hold pending appeals against the Commission’s decision before the European Court in Luxembourg. In recent case law, the so-called ‘Masterfoods defence’ was decided in favour of claimants, i.e. the court allowed the civil proceedings to proceed (at least for a part of the subject matter), pending appeal in Luxembourg.
8 What funding options are available for (i) claimants and, (ii) defendants, in your jurisdiction?
In the Netherlands, there is no after-the-event insurance, as is common for example in the United Kingdom. Parties to the proceedings will generally have to pay court registration fees and their lawyers’ fees out-of-pocket on the basis of hourly rates. Own and adverse party costs may be covered by third-party funders.
The basic rule is that Dutch lawyers are not allowed to agree on a ‘no win, no fee’ arrangement. Equally, members of the Dutch Bar are not permitted to agree on a fee calculated as a percentage of any damages awarded or of costs recovered (result-related remuneration). There are a few exceptions to this rule, but these do not apply to competition damages claims.
However, the prohibition on contingency fees only applies to members of the Dutch Bar (Section 25 paragraph 2 of the Bar rules). Lawyers who are not (or no longer) members of the Dutch Bar may run special purpose vehicles and offer clients legal services on a ‘no win, no fee’ basis. The special purpose vehicle subsequently instructing a Bar-admitted lawyer for litigation, will have to do so under a traditional (hourly) fee arrangement.
Dutch lawyers are entitled to agree on a minimum fee in conjunction with a higher 'success fee', which is applied retroactively in the event of a successful claim. The minimum fee agreed upon may not be lower than commonly used collection rates. In this case, a claimant will thus still have to pay (minimum) fees out of pocket.
There is no formal prohibition on third-party financing of procedures as long as the independence of the claimant is not in any way limited. Third-party funding is used in damages claims brought in the Netherlands for breaches of competition law.
9 Do you anticipate any significant increase in damages actions in your jurisdiction over the next year or two? If so, where and why do you anticipate these increases coming?
We do not anticipate a significant increase in damages actions in the next year or two. The implementation of the EU Damages Directive and new legislation on collective redress, including the possibility to claim monetary damages in a representative action, will not give rise to a significant increase, as current procedural law already provides for the possibility to bring damages claims, as is shown by the number of cases that have already been brought in the Netherlands. As most cases are follow-on damages cases, of more importance are the number of decisions published by competition authorities and the level of detail of such decisions.
10 In your opinion, what are the key changes (if any) required in your jurisdiction to improve the effectiveness of private enforcement of competition law?
We believe the effectiveness of private enforcement will increase hand in hand with the increased experience of the Dutch civil courts in dealing with competition actions, including complex competition damages claims combining numerous claims against multiple foreign defendants. District courts in the Netherlands have the potential to take an active role in case management and the gathering of evidence, further use of which could lead to efficient and fair proceedings that are less burdensome for claimants and defendants. Further, a good mechanism to conclude final settlements would be welcome.