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European Commission

Avenue de Bourget 1-3

B-1140 Brussels (Evere)

Belgium

“Consultation on collective redress”

General remarks submitted by:

VEB NCVB

(Vereniging van Effectenbezitters)

(Dutch Investors’ Association)

Contacts: Paul Coenen

Adam Pasaribu

Postal address: Amaliastraat 7

2514 JC The Hague

The Netherlands

Telephone: +31 (0)70 313 00 00

Fax: +31 (0)70 313 00 99

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Introduction

VEB NCVB (hereinafter: VEB), the Dutch Investors’ Association, was founded in 1924, and is

nowadays the largest independent association of both retail and commercial investors within the

Benelux. Its role is to represent the interests of these investors, in and out of court. In its past, VEB

has resolved several large disputes with large companies. To name a few recently reached

settlements:

Company involved Settled for

Ahold USD 1.100.000.000

Dexia EUR 1.000.000.000

Royal Dutch Shell USD 389.000.000

Unilever EUR 300.000.000

WorldOnline EUR 110.000.000

KPNQwest

Numico

EUR

EUR

19.000.000

17.000.000

The above shows that VEB has experience in the field of collective redress, at least in the

Netherlands.

In light of the above, it comes to no surprise that VEB has read the Commission Staff Working

Document “Towards a Coherent European Approach to Collective Redress” of 4 February 20111

(hereinafter: the ‘Consultation Document’) with much interest. VEB welcomes and applauds the

initiative of the Commission. VEB wishes to submit its contribution herewith. VEB will thereby adhere

to the structure of the Consultation Document.

Before doing so, however, VEB will summarise its findings.

1 SEC(2011)173 final.

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Summary

It is said that a legal system is incomplete when it does not offer any possibility to seek redress. It

therefore is no surprise that every modern legal system offers ways to seek compensation. Such is

not the case when it comes to financial services laws in the European Union.

In the last two decades more and more investor protection rules have been introduced, and

subsequently harmonised, on a European level. With regard to the regulation of financial services we

went from no rules with an European origin to the minimum rules of the Investment Services

Directive and, finally, to the fully harmonised rules of the MiFID, nowadays. The latter rules have – in

combination with, amongst others, the rules set out in the Prospectus Directive and the Market

Abuse Directive – led to the creation of a genuine single European market for financial services.

Although these rules seek to protect European investors on many levels, these rules do not offer

citizens and businesses the possibility to seek redress in case of infringements thereof.

It is, of course, true that citizens and businesses can seek compensation on a Member State level, but

such a statement neglects to take into account that when cross-border infringements have taken

place, seeking redress becomes more complicated. Seeking redress when cross-border infringements

are involved is often very costly for citizens and businesses, a reason frequently cited to not ‘bother’

with starting proceedings: the costs may not outweigh the benefits.

Some may point – representatives of the financial services industry often do – to the system of

European regulators we have in place. With organisations like ESMA, EBA and EUIOPA in existence,

there would be no need for a private redress system in Europe. This is a false argument. Although

these regulators engage in supervision on the financial markets, they do so with the general interest

in mind. These regulators do not seek, and they do not offer the possibility to seek, compensation for

individuals or collectives. They can, however, issue a fine to investment firms whenever an

infringement takes place. Fines issued, however, are of a limited nature. Even after having paid a

fine, investment firms are still left with ill-gotten gains. And citizens and businesses are still left with

their losses. There is a need for a private law redress system, but this is not to say that public law

supervision should be abolished. Both systems can coexist, and do so in legal systems of many

Member States.

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Some may point out, and the industry often does, that it is possible to engage in alternative dispute

resolution (hereinafter: ADR) proceedings. Whilst this is true, the industry leaves unacknowledged

that to engage in ADR proceedings, consent of the parties involved is necessary. Although some

investment firms are prepared to consent to ADR proceedings, many others are not. When consent is

not given, ADR proceedings cannot proceed. ADR proceedings are therefore not (always) an effective

way to seek (and to receive) compensation. Does this mean that the possibility to engage in ADR

proceedings should be abolished? No, the possibility to engage in ADR proceedings has its uses,

certainly when taking into account the costs involved of other types of proceedings. ADR proceedings

and judicial proceedings can coexist, and they do in legal systems of many Member States.

The above leads to the following conclusions:

1. Citizens and businesses do not often seek compensation when it comes to small damages in

cross-border situations.

2. On a Member State level judicial proceedings to seek compensation can be complicated

when cross-border infringements are involved.

3. Having European supervision in place is not an adequate replacement of collective redress

proceedings.

4. The possibility to engage in ADR proceedings is not an adequate replacement, only (as the

definition already states) an alternative.

Therefore, a collective redress system on a European level is needed. Such a system would entail

setting European-wide common standards, not only for the way the proceedings are structured, but

also with regard to who (which organisations) may engage in collective redress proceedings.

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Q&A

1. What added value would the introduction of new mechanisms of collective redress

(injunctive and/or compensatory) have for the enforcement of EU law?

As the Commission rightly states “rights which cannot be enforced in practice are worthless.

Where substantive EU rights are infringed, citizens and business must be able to enforce the

rights granted to them by EU legislation.”2 In our view, when infringements of investor

protection rules occur, investors should have the option to stop further infringements of

these rights, and where infringements have taken place, the possibility to claim

compensation for losses should be made available. VEB therefore supports the initiative to

make both injunctive as well as compensatory relief possible within the European Union.

The power to seek injunctive relief should be granted to the European financial regulators,

ESMA, EBA and EUIOPA. The possibility to seek compensatory relief should be given to

citizens and businesses within the European Union. The power to seek compensatory relief

should also be granted to representative bodies, as individual citizens and companies are

often reluctant to initiate lawsuits, due to the high costs of litigation involved.

VEB stresses that only offering ADR proceedings, is not sufficient. To engage in ADR

proceedings, consent of parties involved is required. If the counterparty of a consumer

refuses to consent, ADR proceedings cannot be engaged.

2. Should private collective redress be independent of, complementary to, or subsidiary to

enforcement by public bodies? Is there need for coordination between private collective

redress and public enforcement? If yes, how can this coordination be achieved? In your

view, are there examples in the Member States or in third countries that you consider

particularly instructive for any possible EU initiative?

2 Consultation Document, page 2.

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Private collective redress should be complementary to enforcement by public bodies, as the

latter category of bodies seek enforcement of applicable laws (read: compliance or

adherence to rules). European financial markets regulators are not involved in seeking

compensatory relief for victims of infringements. In general, neither are Member State

regulators. Finally, although some regulators can issue a fine to investment firms, these fines

do not cover/are not equal to the whole amount of the received ill-gotten gains. In other

words, after having paid a fine, investment firms are left with a remainder of these ill-gotten

gains.

VEB does not believe coordination between public and private law efforts to be necessary to

function.

3. Should the EU strengthen the role of national public bodies and/or private representative

organisations in the enforcement of EU law? If so, how and in which areas should this be

done?

VEB believes that the EU should strengthen the role of private representative organisations

in the enforcement of, at the very least, EU financial services law. This is possible by offering

private bodies the possibility to seek collective redress. As noted above, individual citizens

and businesses are often reluctant to seek (injunctive and/or compensatory) relief, even

when faced with infringements of their rights. An often cited reasons for this reluctance is

the high costs involved with litigation.

The role of public authorities should also be strengthened. VEB strongly suggests to grant

public authorities (regulators) the option to fine investment firms whenever they are in

breach of EU laws and/or regulations.

4. What in your opinion is required for an action at European level on collective redress

(injunctive and/or compensatory) to conform with the principles of EU law, e.g. those of

subsidiarity, proportionality and effectiveness? Would your answer vary depending on the

area in which action is taken?

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In our view, the possibility for private representative organisations to seek collective redress

in the EU should only be made possible in cases where infringements of EU legislation occurs.

Where infringement of Member State legislation is involved, the principle of subsidiarity

should be applied. In the latter case, relief should be sought on a Member State level.

5. Would it be sufficient to extend the scope of the existing EU rules on collective injunctive

relief to other areas; or would it be appropriate to introduce mechanisms of collective

compensatory redress at EU level?

When infringements of EU laws occur, injunctive relief should be made available. After all, it

should be possible to stop further infringements of rights. VEB wonders whether these

powers should be given to private law organisations. In our view, it makes more sense to give

(public) regulators these powers. For comparison VEB points at the powers granted to Dutch

financial markets regulators.

It also makes sense to offer compensatory relief at EU level, as well. Granting citizens and

businesses and/or their representative organisations the option to seek compensation for

losses incurred, is common to all Member States.

6. Would possible EU action require a legally binding approach or a non-binding approach

(such as a set of good practices guidance)? How do you see the respective benefits or risks

of each approach? Would your answer vary depending on the area in which action is

taken?

Whether possible EU action requires a legally binding approach or a non-binding approach

depends on the question how possibilities to seek collective redress are construed. To clarify,

it depends, amongst others, on whether it is possible to seek relief in or out of court. VEB

imagines that seeking relief in court results in a legally binding approach, and that seeking

relief out of court results in a legally non-binding approach.

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7. Do you agree that any possible EU initiative on collective redress (injunctive and/or

compensatory) should comply with a set of common principles established at EU level?

What should these principles be? To which principle would you attach special significance?

VEB agrees that any possible EU initiative on collective redress should comply with a set of

common principles established at EU level. These principles should, as suggested by the

Commission Staff on page 6 of the Consultation Document, at the very least be (i) the need

for effectiveness and efficiency of redress, (ii) the importance of information and of the role

of representative bodies, (iii) the need to take account of collective consensual resolution as

a means of alternative dispute resolution, (iv) the need for strong safeguards to avoid

abusive litigations, (v) the availability of appropriate financing mechanisms and (vi) the

importance of effective enforcement across the EU.

8. As cited above, a number of Member States have adopted initiatives in the area of

collective redress. Could the experience gained so far by the Member States contribute to

formulating a European set of principles?

In the Netherlands, collective redress proceedings are known as either 305a-proceedings

and/or “WCAM”-proceedings. Art. 3:305a of the Dutch Civil Code allows for associations to

proceed in collective claims. It should be noted that 3:305a-organisations cannot seek

compensation. They can, however, seek ‘statements of law’.

WCAM stands for “Wet collectieve afwikkeling massaschade” (the Dutch Collective

Settlements Act). Parties who reach a settlement can create a legally binding general

settlement. Individuals who do not wish to adhere to such a general settlement can choose

to opt-out (within a certain amount of time, as set out in the general settlement).

VEB has extensive and positive experience with both types of proceedings. VEB is the main

user of the Dutch Collective Settlements Act in the Netherlands. VEB believes that similar

proceedings should be made available on a EU level.

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9. Are there specific features of any possible EU initiative that, in your opinion, are necessary

to ensure effective access to justice while taking due account of the EU legal tradition and

the legal orders of the 27 Member States?

VEB recommends to fully harmonise EU rules concerning collective proceedings on a EU

level. Any EU initiative should be efficient.

10. Are you aware of specific good practices in the area of collective redress in one or more

Member States that could serve as inspiration from which the EU/other Member States

could learn? Please explain why you consider these practices as particular valuable. Are

there on the other hand national practices that have posed problems and how have/could

these problems be overcome?

At the moment, a set of principles (or good practices) for those organisations who claim to

be representative for the respective group of claimants, is being developed in the

Netherlands. Although still under discussion, please find attached the draft Dutch Claim

Code.

11. In your view, what would be the defining features of an efficient and effective system of

collective redress? Are there specific features that need to be present if the collective

redress mechanism would be open for SMEs?

In our view, an European collective proceedings arrangement could be modelled after a

combination of a collective redress system which gives the opportunity to claim damages by

a representative organisation on behalf of (unknown) claimants; and a settlement

arrangement such as the Dutch Collective Settlements Act.

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12. How can effective redress be obtained, while avoiding lengthy and costly litigation?

Effective redress can be obtained by incorporating time limits in judicial proceedings.

13. How, when and by whom should victims of EU law infringements be informed about the

possibilities to bring a collective (injunctive and/or compensatory) claim or to join an

existing lawsuit? What would be the most efficient means to make sure that a maximum of

victims are informed, in particular when victims are domiciled in several Member States?

VEB proposes to make use of a website where all collective proceedings are announced,

registered and/or documented, and which is freely accessible for citizens or businesses. On

this website, citizens or businesses should also be able to learn how to participate in

collective proceedings.

14. How the efficient representation of victims could be best achieved, in particular in cross-

border situations? How could cooperation between different representative entities be

facilitated, in particular in cross-border cases?

Keeping in mind that financial services laws are harmonised across the EU and as in our view

collective proceedings on a EU level are only permissible when they involve infringements of

EU legislation, we see no issues related to cross-border situations, whereby VEB assumes

that legislation regarding collective proceedings will be harmonised fully as well.

15. Apart from a judicial mechanism, which other incentives would be necessary to promote

recourse to ADR in situations of multiple claims?

It should be pointed out that engaging in ADR proceedings can be more cost efficient in

comparison to engaging in judicial proceedings.

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16. Should an attempt to resolve a dispute via collective consensual dispute resolution be a

mandatory step in connection with a collective court case for compensation?

Yes. VEB urges, however, to add time limits for trying to resolve a dispute via collective

consensual dispute resolution. In the Netherlands, representative organisations who wish to

make use of the possibilities the Dutch Collective Settlements Act offers, should offer their

counterparties the possibility to initiate settlement talks as well as to reach a settlement in a

time frame of two weeks.3 VEB recommends to use a similar time frame in EU level-

proceedings.

17. How can the fairness of the outcome of a collective consensual dispute resolution best be

guaranteed? Should the courts exercise such fairness control?

VEB recommends to use an approach similar to the Dutch Collective Settlements Act: a

settlement can be declared generally binding by a judge, who also checks the fairness of a

reached settlement.

18. Should it be possible to make the outcome of a collective consensual dispute resolution

binding on the participating parties also in cases which are currently not covered by

Directive 2008/52/EC on certain aspects of mediation in civil and commercial matters?

As EU financial services laws are implemented in Dutch Acts of an administrative nature, VEB

wishes to suggest to make it possible to make the outcome of a collective consensual dispute

resolution binding on the participating parties. VEB notes, however, that the outcome should

also be binding to non-participating parties. The latter should, however, have the right to

opt-out. In this regard, VEB refers to the system employed in the Dutch Collective

Settlements Act.

3 We refer to art. 3:305a (2) of the Dutch Civil Code.

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19. Are there any other issues with regard to collective consensual dispute resolution that

need to be ensured for effective access to justice?

No remarks.

20. How could the legitimate interests of all parties adequately be safeguarded in (injunctive

and/or compensatory) collective redress actions? Which safeguards existing in Member

States or in third countries do you consider as particularly successful in limiting abusive

litigation?

Again, VEB reiterates to make an opt-out option available to non-participating parties and to

involve a judge in collective proceedings.

21. Should the "loser pays" principle apply to (injunctive and/or compensatory) collective

actions in the EU? Are there circumstances which in your view would justify exceptions to

this principle? If so, should those exceptions rigorously be circumscribed by law or should

they be left to case-by-case assessment by the courts, possibly within the framework of a

general legal provision?

Yes, the ‘loser pays’-principle should apply. VEB supports the exception on this rule: to

prohibit that procedures be prohibitively expensive for NGOs. The availability of exceptions

to this rule should be left to a case-by-case assessment by the courts.

22. Who should be allowed to bring a collective redress action? Should the right to bring a

collective redress action be reserved for certain entities? If so, what are the criteria to be

fulfilled by such entities? Please mention if your reply varies depending on the kind of

collective redress mechanism and on the kind of victims (e.g. consumers or SMEs).

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The possibility to initiate collective redress proceedings should only be available for

representative organisations of a certain size (read: a minimum number of victims). There

should also be limits as to the size of the claim(s) involved (read: a minimum size). We refer

to the draft Dutch Claim Code (see attached).

23. What role should be given to the judge in collective redress proceedings? Where

representative entities are entitled to bring a claim, should these entities be recognised as

representative entities by a competent government body or should this issue be left to a

case-by-case assessment by the courts?

As in our opinion collective proceedings should be a variant of normal proceedings, VEB

requests that the judge should be given the same role as usual. As to the question whether

or not representative organisations should be recognised by a competent government body,

VEB finds that this is not a necessary. Whether or not a representative organisation is

allowed to bring collective proceedings should be left on a case-by-case assessment.

24. Which other safeguards should be incorporated in any possible European initiative on

collective redress?

No remarks.

25. How could funding for collective redress actions (injunctive and/or compensatory) be

arranged in an appropriate manner, in particular in view of the need to avoid abusive

litigation?

Abusive litigation can (and should be), in our view, be avoided by setting minimum

requirements with regard to who may initiate collective proceedings. At the moment, VEB

sees no reason to tie this to financial arrangements.

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26. Are non-public solutions of financing (such as third party funding or legal costs insurance)

conceivable which would ensure the right balance between guaranteeing access to justice

and avoiding any abuse of procedure?

See above.

27. Should representative entities bringing collective redress actions be able to recover the

costs of proceedings, including their administrative costs, from the losing party?

Alternatively, are there other means to cover the costs of representative entities?

Yes.

28. Are there any further issues regarding funding of collective redress that should be

considered to ensure effective access to justice?

No remarks.

29. Are there to your knowledge examples of specific cross-border problems in the practical

application of the jurisdiction, recognition or enforcement of judgements? What

consequences did these problems have and what counter-strategies were ultimately

found?

Council Regulation (EC) No 44/2001 should not provide any possibilities for Member States

to exclude the acknowledgement of European judgements on collective redress resulting

either from a collective redress action or generally binding declared settlement by a court.

30. Are special rules on jurisdiction, recognition, enforcement of judgments and /or applicable

law required with regard to collective redress to ensure effective enforcement of EU law

across the EU?

VEB suggests to fully harmonise rules on collective proceedings to ensure the same level of

protection for citizens and businesses across the EU.

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31. Do you see a need for any other special rules with regard to collective redress in cross-

border situations, for example for collective consensual dispute resolution or for

infringements of EU legislation by online providers for goods and services?

No remarks.

32. Are there any other common principles which should be added by the EU?

No remarks.

33. Should the Commission's work on compensatory collective redress be extended to other

areas of EU law besides competition and consumer protection? If so, to which ones? Are

there specificities of these areas that would need to be taken into account?

The possibility to initiate collective proceedings should be made available in the area of EU

financial services laws.

34. Should any possible EU initiative on collective redress be of general scope, or would it be

more appropriate to consider initiatives in specific policy fields?

At the very least, collective redress possibilities should be offered whenever infringements of

financial services law – especially those which aim to protect retail investors – occur.

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