The Netherlands continues championing of consumers through implementation of the Representative Actions Directive

As of 25 June 2023, the implementation act (‘the Dutch Implementation Act’) incorporating the Representative Actions Directive (‘Directive’) in the Dutch class action regime entered into force.

As expected, the Netherlands has chosen to maintain its very liberal class action regime and has made only very minor adjustments to ensure compliance with the Directive. This means that commercially driven/third-party funded opt-out class actions will continue to be available in the Netherlands, not just in consumer cases but also in other areas.

In addition, qualified entities from other EU Member States may now also avail themselves of the possibilities the Dutch class action regime offers, albeit that non-Dutch class members will always need to actively opt into the proceedings.

Background

The Directive mandates that all Member States must allow representative actions for damages concerning alleged infringements of EU consumer law. The deadline for Member States to implement the Directive into their national legal systems passed on 25 December 2022. To read more about the Directive as well as the potential litigation risks across Europe, please refer to our previous publications on our Risk and compliance blog. 

Dutch law already provided for a well-established statutory regime for class actions and collective redress. As of 1 January 2020, this statutory regime saw an overhaul with the entry into force of the Dutch Act on redress for mass damages in a Collective Action (‘WAMCA’). The WAMCA introduced the possibility for claimants’ organizations to seek monetary compensation (where previously only declaratory and injunctive relief had been available on a collective basis).

Because of this existing foundation of a comprehensive class action regime, the Dutch legislator has been able to implement many of the Directive’s requirements.  It will be interesting to see whether other Member States, who are starting from scratch, are also able to do this.

Scope

The Directive, and consequently the Dutch Implementation Act, applies to representative actions concerning infringements of EU consumer laws listed in Annex I of the Directive (such as claims related to product liability, unfair terms in consumer contracts and data protection). In the Dutch Implementation Act, the Dutch legislator has chosen to only make the minimum changes needed to ensure compliance with the Directive. It also made clear that the requirements under the Directive will not apply to claims that are not covered by Annex I of the Directive. However, the scope of the WAMCA is much wider as it is not limited to consumer protection claims. Therefore, the combination of the Dutch Implementation Act and WAMCA opens up the options for consumers.

Qualified Entities

The Directive provides that representative actions can only be brought by interest organizations that are designated as so-called ‘qualified entities’ by a Member State. In the Netherlands, the authority to designate qualified entities lies with the Minister for Legal Protection.

The Directive distinguishes between ‘domestic’ representative actions and ‘cross-border’ representative actions.  In a ‘cross-border’ representative action, a qualified entity initiates a representative action in another Member State than the Member State it is designated in. The domiciles of its defendant(s) or the class members involved are not relevant to such qualification. Cross-border representative actions are subject to additional requirements, among others, that qualified entities have been publicly active in the field of the protection of consumer interests for at least 12 months.

Litigation Funding

The WAMCA already imposes certain criteria with respect to third-party litigation funding. The Dutch implementation of the Directive has expanded upon these criteria for collective actions that are within the scope of the Directive.

The representative action cannot be brought against a defendant that is a competitor of the funder or against a defendant on which the funding provider is dependent.

For cross-border representative actions within the scope of the Directive, the website of the qualified entity should disclose information on its funding sources. Should there be any doubts about the nature of the litigation funding, additional information on the funding sources may be requested.

The question whether funding arrangements between the interest organization and the litigation funder must be disclosed is currently being litigated in various class action cases under the WAMCA.

Opt-in and opt-out

Under the WAMCA, the Netherlands has an opt-out regime for Dutch class members and an opt-in regime for class members located outside of the Netherlands. According to the WAMCA, for class actions that are not covered by the Directive, the opt-in regime may also be applied to non-Dutch class members, by way of exception.

The implementation of the Directive provides for a mandatory opt-in system for class members located outside of the Netherlands.

Conclusion

The Netherlands started from a higher base than other Member States in implementing the Directive. Combined with the options available to consumers as a result of WAMCA, we wait to see if there will be an increase in class actions.