Netherlands, from consensus country to conflict country
Ingrid Thijssen
The Wamca makes the Netherlands a paradise for class actions, writes Ingrid Thijssen (VNO-NCW). This is unnecessary because it is due to three national provisions that we put on top of the European directive.
An evaluation of the Class Action Mass Claims Settlement Act (Wamca) was recently published. A shortcoming of this evaluation was that it did not look at the broader social and economic effects. While that is precisely where the effects of the Wamca are greatest.
The Dutch elaboration of the European directive has three national headlines – stricter legislation than necessary. As a result, our country grew into a paradise for lawsuits – with serious consequences for our investment climate.
Rhineland consultation model
The Netherlands has traditionally had a Rhineland governance culture. No rigid legal formalism, but consultation and the search for consensus between government, business and civil society organizations. This approach has brought us much. Dutch (corporate) law is flexible and practice-oriented in part because of this: rules are not rigid in detail, but tailored to reality.
Instead of going directly to court, parties resolved their disputes among themselves. Our Rhineland model thus created stability, predictability and room for customization. This approach was an important reason why many companies chose the Netherlands in particular to invest.
Unfortunately, in recent years we have seen the rise of the Anglo-Saxon conflict model.
Whereas the Rhineland model focuses on trust and cooperation, the Anglo-Saxon model emphasizes juridification and the enforcement of rights. The courts must resolve the conflict.
One of the main drivers of this development is the Wamca. One hundred class actions are currently ongoing in the Netherlands, with a total claimed damages of €88 bln. This is about 30% of all collective cases in the European Union.
Three national choices
The purpose of the Wamca is good: to help injured parties through collective claims so that they can more easily obtain compensation. It also allows the targeted company to efficiently handle a justifiable claim. But in elaborating the European directive, the Netherlands added three important national provisions.
First, who can bring a collective action. In most EU countries, only (certified) consumer organizations can file a claim. In the Netherlands, almost anyone can start a collective action through a foundation. The requirements for the representativeness and democratic legitimacy of such a foundation are thereby minimal: if you have any constituency at all, you can litigate collectively.
Second, what sanction the court can impose. Besides damages, this can be a collective injunction or prohibition for a company to do or not do something. In most European countries, this is possible only in the area of consumer law – think of a requirement to amend general terms and conditions. In the Netherlands, it is a possible injunction or prohibition in all areas of law. All kinds of parties, with minimal representativeness, can thereby try to force interventions in business operations.
‘Netherlands has no limit to the compensation a commercial party receives in a mass claim’
Third, Dutch law has an “outboard motor” for bringing lawsuits. Unlike in other EU countries, the Netherlands has no limit on the compensation a commercial party receives when they organize a mass claim and are successful. The Wamca is thus increasingly used by commercial parties who use litigation as a revenue model. American law firms have seen the Netherlands as a lucrative litigation country since the Wamca.
Collective actions are almost always funded by litigation funders or specialized claims organizations. These funders charge from 20% to 25% for a successful outcome – for example, a settlement or damages.
In Germany, it is at a maximum of 10%.
This means that companies in the Netherlands are at higher risk of lawsuits against their business.
VNO-NCW is getting signals that the Wamca is a reason why companies are avoiding – or leaving – our country.
Impact on establishment climate
Because of the Wamca, the Netherlands grew into a paradise for lawsuits against companies. This has serious implications for the business climate and our earning power, which is already under pressure.
It is time for a broad rethink. This does not mean that we should go back to a situation without opportunities for collective legal protection. That is and remains of great importance. But we do need to look seriously at the impact.
A broader evaluation of the Wamca – including social and economic (cost) effects – is urgently needed. To test whether the law meets its objective of being a ‘stick’ for victims, and to prevent the Netherlands from slipping from a consensus country to a conflict country.
Conflict and litigation are never free. Not for companies, not for society, and not for Dutch competitiveness. We are known for our open economy, reliable institutions and pragmatic legal culture. Let us guard these values, especially in times of hardening and juridification. Therefore, fully map the costs of the (commercial) conflict model by the Wamca.
About this opinion piece
Ingrid Thijssen is president of employers’ organization VNO-NCW.