Collective actions in the Netherlands: transnational trouble?

01st Mar 2017

By: Mary H. Terzino

As further evidence that the Netherlands is becoming a magnet for international class actions, news broke earlier this year that a claim foundation filed a massive securities collective action in the Netherlands on behalf of institutional investors against the Brazilian oil giant Petrobras. The claim is being made to recoup non-U.S. investor losses and stems from a bribery and corruption scandal involving the oil company. This case has attracted players from all over the world, including law firms and third party litigation funders.

The claim foundation, “Stichting Petrobras Compensation Foundation”, was created by litigation funder ISAF Management, whose principal offices are in the United States. ISAF’s web page notes that its business is to evaluate and initiate securities litigation outside of the United States, hiring the local lawyers and experts and financing case costs on a contingency fee basis. The funding firm is also backing an EUR 800 million German lawsuit against Volkswagen on behalf of institutional investors in the United States, Canada and Europe.

Filip Wijers, who represents the claim foundation, stated in the Dutch Financial Times that the fee of the funder in the Petrobras case could be “up to 25%” of the total pay-out. While the size of the claim is still unknown, the claim states that a third of the value of Petrobras, some USD 56.5 billion, is “contaminated” by the bribery scandal. The claim foundation has stated that they have the support of dozens of investors, which together invested EUR 1.5 billion in Petrobras.

The law firms involved in this case are headquartered in the Netherlands, Brazil, and London and also include two well-known law firms from the United States. One of those firms, Motley Rice, also represents some of the individual plaintiffs in the related litigation against Petrobras in the United States. ISAF and the law firms have also launched a similar claim in Spain. Claim foundation spokesperson Filip Wijers said that it is logical that the case was launched in the Netherlands, where he claims Petrobras structured its activities. The claim foundation has tried to negotiate an out-of-court settlement, but without success. In the U.S., in contrast, Petrobras has already reached settlements with some of the affected institutional investors.

What is interesting is how many entities from outside the Netherlands – particularly from the United States – have hopped on board this case. U.S. law firms and funding organisations bring with them the tactics, culture and expectations of the United States civil litigation system – a system that many in Europe have decried as rife with baggage that does not belong in European courts. These include hardball, “blackmail settlement” tactics that muddy the delivery of justice; strategies driven by the lawyers and funders to enrich their coffers, even if those strategies are not in the best interests of the clients; and huge fees – including the contingency fees of the funder – that drive up settlement costs and take compensation away from the claimants.

“All the fields have been plowed in the United States”, said Brian Murray, a partner in New York’s Murray, Frank & Sailer LLP. “If you want to enter new markets, you have to go outside the United States”. He made that observation almost a dozen years ago. Since that time, we have seen a tremendous incursion of U.S. law firms and third party litigation funders into Europe, and some of these interlopers advocate for changes to the legal systems in Europe to make them more like the U.S. system. Is this what Europe wants?