New Dutch class action pay-out could lead investors to chase US claims in the Netherlands

Lawyers exploit Dutch Court of Appeals to get shareholder damages.

European institutions could increasingly start bringing US-type class action lawsuits via the Dutch courts following a ruling this month by the Amsterdam Court of Appeals to award investors $58m in damages against Converium, a Swiss reinsurance company formerly owned by Zürich Financial Services, over share price losses linked to a restatement of its reserves required for big ticket insurance claims. Observers say the ruling, which came after lawyers sought a European resolution to an existing $85m settlement in a New York court for US investors, may circumvent the ban on foreign investors suing non-US companies in the US if they bought the shares overseas: a decision known informally as the Morrison ruling. On January 17, the Amsterdam court approved a $58m settlement to mostly Swiss and UK shareholders acting via a specially created Dutch foundation and supported by the VEB retail shareholders lobby group. Lawyers from US legal firms, Bernstein Litowitz Berger & Grossmann, Cohen Milstein, and Spector Roseman Kodroff & Willis, along with Dutch lawyer, Lemstra van der Korst, took the investors’ case to the Dutch courts after a US court excluded non-US investors who purchased Converium stock outside the United States from the original settlement.The US lawsuit was lead by The Public Employees’ Retirement System of Mississippi (PERS). While Dutch law does not permit class action lawsuits, a legal statute allows the proposing of class-wide settlements via the Amsterdam Court of Appeals using the special purpose foundation, irrespective of whether litigation has taken place in the Netherlands or whether the investors involved are predominantly Dutch. The statute was used most notably in a $450m settlement reached in 2007 between Royal Dutch Shell and more than 50 European pension funds after the company re-stated oil and gas reserve levels leading to a share price loss. At the time it was thought that the particulars of the Shell case would make the settlement a one-off.
In the latest judgement, the Amsterdam court said $40m of the European settlement should be paid by SCOR, Converium’s current parent and $18.4m by Zurich, its former owner. The US action, which was settled in December 2008, saw SCOR pay $75m and Zurich $9.6m. The 2010 Morrison v. National Australia Bank ruling by the US Supreme Court prevents foreign investors bringing lawsuits in the US against a foreign company in relation to shares bought on a foreign exchange, known as “f cubed” claims.