Congress ‘Access to Justice in European Mass Disputes’ (English)
Opening speech by Mr Hirsch Ballin, Minister of Justice, at the congress on ‘Access to Justice in European Mass Disputes’, Tilburg University, 3 October 2008.
Ladies and gentlemen,
I am very pleased to welcome you here today at the congress on ‘Access to Justice in European Mass Disputes’. I speak also on behalf of Tilburg University, with whom the Ministry of Justice enjoys a close relationship. Together we have organised this congress in response to the dramatic developments in the field of collective redress both at national and at European level. It is with great pride that we extend a special welcome to such an eminent and international company of class action experts, who will address the congress today.
The timing of this congress is perfect. On 3 April this year the Commission published a White Paper on ‘Damages Actions for Breach of Antitrust Rules’. It presents two proposals for collective actions for damages. The Dutch government recently published its position on these proposals, but on this occasion I would like to address the subject in greater detail..
I will base my considerations on two topics that will be dealt with today and that I believe are of great interest for the discussion that has arisen following the publication of the White Paper. These topics are ‘opt in versus opt out' and ‘collective settlement versus collective action'. I will also address the new Dutch system of collective settlement on an opt out basis which first came into effect in 2005. This system has already been used for the settlement of the DES and DEXIA cases, two major mass damage disputes, and there are three more awaiting settlement, including the Shell case. I will return to this later.
The Commission proposes two collective actions for damages in its White Paper. The first proposal puts forward ‘a representative action for damages brought by qualified entities’, such as consumer or business organisations, and the second proposal concerns an ‘opt in collective action’. ‘Opt in’ refers to a procedure where damages are claimed only for those victims who have given their consent to the procedure. The proposed 'representative action' is actually quite similar to this option. Although it is true that, in the case of a ‘representative action’ , the victim does not necessarily have to give consent to the procedure, damages may be claimed only for victims that have been identified. Exceptions are possible, but both types of collective actions for damages require identification of the victims on whose behalf the claim is made. I wonder if this is an effective mechanism, particularly if the damages claimed are of low value. The costs involved in identifying victims, obtaining their permission and establishing damages individually, often bear no relation to the damage suffered.
I would therefore like to draw your attention to the Dutch system which is based on a collective settlement on an opt out basis. I believe that this system provides solutions to counteract two objections that may be raised against the proposed collective actions for damages. First of all, there is no need to identify each victim’s damages individually. Secondly, claims are made in the interest of all victims, not just the ones who have been identified and who may have given their permission.
The advantage of a settlement of the damage is that it is done using categories of loss. The settlement agreement contains parameters for allocating a victim to one of these categories. The victim then receives the corresponding payment, and only has to demonstrate which category he falls into. This method of settlement is significantly simpler, because it no longer necessitates answering all of the individual legal questions pertaining to a particular victim.
Dutch law provides for an opt out system, not an opt in system. Claims are made for all victims, not just for the ones who have been identified and have given their permission. The Dutch mechanism only requires identification of the victims if they are actually paid damages. It is up to the victims, however, to report in and identify themselves, after they have been alerted by seeing their case published in newspaper articles or on websites. Victims may then indicate whether or not they wish to be bound by the settlement decision.
This opt out system has been received with criticism by some and was even rejected in the White Paper. The main objection to this mechanism is the so-called risk of abuse. The opt out system may lead to payment of immense damages, putting defendants under pressure to settle just to get the case over and done with. They may even do so in cases where they have little or no blame. An opt out system will therefore certainly not be de preferential choice of (potential) defendants.
However, when mass damages are settled by means of a collective settlement rather than collective action, there is no objection whatsoever to an opt out mechanism. On the contrary! In a collective action, defendants usually prefer an opt in mechanism in view of the risk of abuse I just spoke about. Once a settlement has been reached, this preference changes to an opt out, enabling them, in one move, to quickly bring an unfortunate matter from the past to a close.
The settlement, as mechanism for resolving mass damages, has also met with criticism, however. After all, it is based on the principle that parties must first reach an agreement. The question is whether or not parties are prepared to do so without some form of pressure. The pressure inherent in collective actions for damages is generally felt to be necessary, in order to get the other party to the negotiating table. From what we have seen so far in practice, however, this does not really seem to be the case.
In the three years since the law came into effect, settlements have been reached in quite a few major mass damages cases. The DES case involved a settlement of 37 million Euros, the Dexia case concerned a settlement of 1 billion Euros, the Shell case involved 350 million US dollars, the Vedior case a settlement of 4.25 million Euros and the Vie d’Or case one of 45 million Euros. Since the introduction of the new law, a total of almost 1.5 billion Euros have been settled.
Recent news reports spoke of a large Dutch insurer that had agreed to a sizeable settlement in the so-called ‘woekerpolis- or exorbitant policy affair’. This will not be declared binding under the new law, so that victims themselves must indicate if they wish to make use of the settlement. This means that parties have opted for an opt-in mechanism. It is interesting to see exactly to what extent this settlement will bring finality for this insurer, which is surely what it must have envisioned. After all, there may well be victims that will not make use of the settlement in order to subsequently try to make the most of their claim by taking civil action. If they are successful, this will inspire other victims s to reject participation in the settlement. In this context, we must note that because in this case no use will be made of the new law, there will also be no assessment by the court as to whether the settlement is reasonable. This means that the policy holders, as injured parties, face a difficult choice between accepting or rejecting the settlement.
But let us now return to a consideration of cases where the new law has indeed been used. The amounts I just mentioned are huge for a small country like the Netherlands. It is therefore with some pride that I read somewhere that an American author of a comparative law study qualified the Dutch mechanism as ‘the most powerful mechanism in Europe with the highest levels of recovery’.
The combination of a collective settlement with an opt out mechanism therefore seems a happy one. In addition to finality for defendant, it offers access to justice for the victims, in the sense that they will actually receive compensation. This is not the case for collective action with an opt in system. Research has shown that in such cases a small percentage of victims makes use of their opt in right. This percentage will be smaller for minor damages. I believe that such a mechanism is certainly not ideal to settle competition cases and other mass damage cases. It leads to relatively small payments and therefore offers little incentive to compel obedience to the rules. In order to achieve the targets of the White Paper, the implementation of an opt out mechanism seems inevitable, with an average of 97% of all victims eventually taking part in the settlement.
I do not mean to say that the Dutch mechanism is perfect in every way. For instance, I am considering the introduction of a number of additional measures that are primarily aimed at enhancing the willingness of the parties to negotiate and settle.
One such measure that I am considering is to create the authority to enable parties in mass damage cases to go to court at an early stage, so as to arrange a collective settlement. In such a preliminary hearing, the judge can assist parties in formulating the key points of the dispute. Subsequently, the judge can encourage parties to come to an agreement, for instance by calling in the services of a mediator. The underlying idea is that an ‘unwilling’ party will be more likely to discuss a settlement if a court is involved.
We will also try to establish how the court may, in cases involving mass damages, refer requests for a preliminary ruling to the Supreme Court, enabling lower courts to submit questions on points of law directly to the Supreme Court. If the request for a preliminary ruling is referred in connection with a preliminary hearing, the court may relay the response from the Supreme Court to parties to consider in their negotiations. The underlying idea is that if parties know where they stand, they will find it easier to start negotiations - and possibly reach a settlement - at an early stage.
Ladies and gentlemen,
You have a whole day ahead of you, so I won’t keep you here any longer. I would like to conclude by with the statement that in the Netherlands, recent experience has shown that a system of ‘collective settlement on an opt out basis’ offers more access to justice for consumers and other victims than any other mechanism. In addition, it offers defendants more finality than an opt in mechanism. Both topics, collective settlement and opt in versus opt out, will be discussed in detail today. I am very curious to learn about the experiences gained in the home countries of our speakers, and am looking forward to the further activities on today’s programme.
Thank you for your attention.