The Dutch Implementation Act
Dutch law already provides a well-established statutory regime for class actions and collective redress, which is not limited to consumer protection claims only. As of 1 January 2020, this statutory regime saw an overhaul with the entry into force of the Act on Collective Damages in Class Actions (Dutch acronym WAMCA), introducing among others the possibility for interest organizations to seek monetary compensation (as opposed to seeking declaratory relief). Because of this existing comprehensive class action regime, the Dutch legislator could fit many requirements under the RAD into the existing Dutch mechanisms for collective redress. Nevertheless, the implementation of the RAD will have a wider impact.
Designated list of Qualified Entities
The RAD provides that representative actions can only be brought by interest organizations that are designated as so-called qualified entities (QEs) by a Member State. To be designated as a QE, an interest organization must submit an application to the competent authority of a given Member State. The designation as QE is then granted if certain quality and admissibility requirements are met. In the Netherlands, the authority to designate QEs lies with the Minister for Legal Protection.
Domestic vs. cross-border representative actions
The RAD distinguishes between ‘domestic’ representative actions, in which a QE initiates representative actions in the Member State that designated it as the QE, and ‘cross-border’ representative actions, in which a QE initiates representative actions in another Member State. The places of domicile of the consumers involved and the relevant trader are not relevant to such qualification.
For domestic representative actions, QEs will need to meet admissibility requirements that already apply under the existing Dutch class action regime. For cross-border representative actions, there are additional requirements for interest organizations in order to be designated as a QE. Among others, for cross-border representative actions the RAD requires QEs to have been publicly active in the field of the protection of consumer interests for at least 12 months. As a result, the 12-month requirement could create challenges for ad hoc interest organizations that are established with the sole purpose of bringing a specific claim.
Litigation funding
When the RAD was created, it was recognized that further rules for, among other things, litigation funding should be developed to prevent abuse of representative actions. The WAMCA already imposes certain criteria with respect to third-party litigation funding. The Dutch implementation of the RAD has expanded upon these criteria for collective actions that fall within its scope.
For all representative actions covered by the RAD funding may not come from a funder who is a competitor of the defendant or from a funder that is dependent on a defendant. This rule is slightly different from the funding requirements that are currently applicable under the WAMCA.
Additionally, and only for cross-border representative actions within the scope of the RAD, the website of the QE should disclose information on its funding sources. Should the Minister have any doubts about the nature of the litigation funding, additional information on the funding sources may be requested. It is noted that disclosure of (for example) funding arrangements between the interest organization and the litigation funder is currently up for debate in various class action cases under the WAMCA, such as the recent Dutch class action against TikTok. We refer to our news flash on this topic.
Opt-in and opt-out
Dutch law already provides for opt-out mechanisms for Dutch interested parties represented by an interest organization and (voluntary) opt-in mechanisms for foreign interested parties. The implementation of the RAD provides for a mandatory opt-in system for foreign consumers (within the scope of the RAD). When opting-in, such foreign consumers must inform the court registry in writing that their interests are not represented in any other similar proceedings.
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Our team has vast experience with class actions and collective settlements. For more information, please contact one of the members of our class actions team.