Will American opportunism reign supreme in the Netherlands in the future?

The number of mass damage claims in the Netherlands is increasing. Since an amendment to the law in 2020, the possibilities for this have increased considerably. It is already big business, demanding billions. Will the Netherlands claim itself destroyed?

Is the Netherlands going after the United States, where companies are being sued in apparently senseless and hopeless lawsuits? Now that large litigation financiers have also discovered the Netherlands as a promising claim area, the specter of mosquito sifting and exorbitant claims for damages is looming among large Dutch companies and their lawyers.

In the US, Subway was sued because the footlong sandwiches were too short, Red Bull because the energy drink did not give wings, and Starbucks because the cold drinks contained too much ice – and therefore too little drink. We should not want such ‘American situations’ in the Netherlands, so it sounds from the corner of lawyers who often defend defendants in these kinds of cases in the Netherlands.

Nevertheless, the number of mass damage cases is expected to increase in the coming years. Since 2020, the Act on the Settlement of Mass Damages in Collective Action (see box) has made it possible to collectively claim compensation on behalf of a group of victims. And that is what happens, complete with money from investors, for example in a mass case against Apple and Google.

Headquarters in New York

“The third-party funder is owned by funds and managed accounts that are ultimately managed by companies associated with Fortress Investment Group LLC. The Fortress group is headquartered in New York.’ It takes a lot of words, but it’s there, at the very bottom of the Big Tech Fair Play Foundation’s FAQ webpage. With this foundation, internet entrepreneur Alexander Klöpping wants to claim compensation from the tech giants Apple and Google on behalf of millions of Dutch people, because they would charge too high commissions in their app stores. Klöpping is not alone. In late March, he faced competition from another aspiring Apple customer advocate.

If there were a desk where everyone with a collective claim should report, it would be crowded there lately. Airbnb, Tiktok, the NS and Airbus have also been subjected to such a mass claim in the past two years. Even the Dutch state is not safe: victims of the data breach in the GGD systems demand no less than 3.2 billion euros from the Ministry of Health.

So is the number of collective action cases in the Netherlands increasing sharply? ‘They have become more visible, above all, because all cases are now entered in a register,’ says Ianika Tzankova, lawyer and professor of mass damage at Tilburg University. But the possibilities of such cases have been increased with the Act on the Settlement of Mass Damage in Collective Action (Wamca). In addition, at the end of April, the European Court of Justice ruled that consumer organizations can also use the GDPR privacy legislation to initiate collective actions.

According to Adriaan De Gier, who has been involved in this type of business for fifteen years in various positions, there are more and more situations in which mass damage occurs. ‘Claims are not invented: companies cause damage and that leads to a claim. The only question is who will pick him up. There are people who think that large companies act correctly in principle, but in many cases that is not the case at all. Large companies in particular are knowingly violating the rules.’

Opportunism and the big money

But because of lawsuit financiers such as Fortress, critics of mass damage cases see a hint of opportunism and big money. In exchange for a part of the possible compensation, these investors advance the peppery lawyer’s bill. The idea comes from the Anglo-Saxon world, the first Dutch companies followed more than ten years ago. According to the activities of Fortress and others, foreign financiers are also interested in Dutch claims.

This is not only because the Dutch legal system works well and the lawyer’s fees are relatively low, but also because the Netherlands is a frontrunner in Europe when it comes to the possibilities surrounding mass damage proceedings.

Still, according to Adriaan de Gier, currently project leader of the claim against the Ministry of Health, it is not so easy to find lenders. ‘The risk for the financier is very high,’ he explains. “You have to spend a few million, lose that money for years, and the burden of proof is on the plaintiffs. Moreover, it is difficult to predict how a case will end, so you only know at the end whether you will get your money back.’

But opportunistic lenders eagerly seize the new possibilities in the law, according to Daniella Strik, which does increase the number of cases. Strik, who often represents defendants as a lawyer: ‘It is fine that justice is being done in the legal system. But you now see that interest groups and lawyers have developed their own business model around this, in which they also start collective actions before there is even a support base.’

Positive sides

Financiers don’t just put their money into a procedure, Sara Liesker of Liesker Proces Financing assures. Her company, market leader in the Netherlands and the lender behind the proceedings against the Ministry of Health, employs former lawyers and judges who assess which claims are promising. It is also in the interest of the financier to weed out hopeless or excessive claims.

In addition, according to Liesker, the winning chances are not the only thing that counts: ‘We also look at who the plaintiff and the defendant are, and whether it is a sympathetic claim. So we don’t finance everything that we can make money from. But we also want to win and get our investment back. The chimney must continue to smoke.’

And smoking will go down the chimney, if the GGD case is won. Then the company can recoup up to five times the costs incurred. Necessary to hedge risks and compensate for lost procedures, says Liesker. In her opinion, lawyers of large companies who express their discomfort about the money that are earned through collective actions should look in the mirror: ‘It is precisely the earnings model of lawyers that makes litigation financing necessary, in addition to the tendency of companies to pay victims as late and as low as possible. to compensate.’

Because of those rates, only organizations with deep pockets can compete against the major damage causes. The financiers therefore guarantee access to justice for victims. ‘It is a compromise between two evils,’ says private law professor Willem van Boom. “Without the financiers, these kinds of claims would never come to court. Moreover: making money on the backs of others happens every day in the legal business. The trick is to keep that within bounds.’

Boardroom discomfort

Still, the claims cause a lot of inconvenience in boardrooms, thinks lawyer Strik. ‘Companies are willing to admit their mistakes, but it is difficult to eat cherries when excessive damages are demanded. Then it seems pointless to enter into a discussion about a settlement and you have to incur costs to defend yourself. The claimants have a huge crowbar in their hands now that they can claim compensation on behalf of all victims.’

But even that crowbar doesn’t open all the doors in the courtroom. Plaintiffs must still prove that they have a following, and must therefore set up extensive records about victims who support the action, the Amsterdam court recently ruled (see box). ‘This is particularly sensitive with regard to privacy matters,’ explains professor of mass damage Tzankova. ‘The idea behind the new law was also that this would not be necessary.’

These and other recent rulings set the bar for plaintiffs even higher. Opportunistic claims and excessive damages do not seem to stand much of a chance in Dutch courts. Most involved parties therefore find claims about ‘American conditions’ and a claim culture that has gotten out of hand.

Speaking of those American situations, the necessary myth-making seems to have taken place in the US as well. In many of the well-known examples, the plaintiffs were not proven right at all. Only Red Bull paid a settlement of 13 million dollars (12 million euros) to users who were disappointed in the operation of the energy drink. The judge dismissed Subway’s settlement as trash, and Starbucks was completely acquitted. Seen from this perspective, things are not that bad with the American situation.