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JONES DAY TALKS®: Private Antitrust Litigation in the Netherlands

In the third installment in our series of programs on the private enforcement of competition law in European jurisdictions, partner Gerjanne te Winkel and associate Sophie van de Graaff discuss developments in the Netherlands, with particular attention to the effects of the 2014 EU Damages Directive, the actions available to victims of cartel activities, the passing-on defense, and other issues relevant to parties to these matters.

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Dave Dalton:

Regulatory changes have led to an acceleration in private antitrust litigation activities across Europe. This includes follow-on damages claims from governmental enforcement actions or standalone competition claims, pursuit and litigation and arbitration among private parties. Our continuing series on private antitrust litigation activity shifts its focus today to the Netherlands. And this is an important jurisdiction, especially in light of recent developments.

Stay right here. I'm Dave Dalton, you're listening to Jones Day Talks. Amsterdam based partner, Gerjanne te Winkel, has more than 30 years experience in civil litigation and arbitration. She is widely recognized as one of the leading corporate litigation lawyers in the Netherlands and frequently acts as lead counsel in international commercial arbitration cases. And Sophie van de Graaff, a Jones Day associate also based in Amsterdam practices in all areas of dispute resolution and commercial contracting.

Her practice focuses on complex and cross border commercial and corporate litigation. And pertinent to today's discussion, Sophie has significant experience with matters relating to cartel damages claims. Sophie and Gerjanne, thanks so much for being with us today.

Gerjanne te Winkel:

Thank you, Dave.

Sophie van de Graaff:

Thanks, Dave.

Dave Dalton:

All right, let's kick it off here. Gerjanne, after our podcast about private enforcement of competition law in the EU and Germany, today we're going to talk about private enforcement in the Netherlands. Give us a little bit of background about the developments and private enforcement throughout the years in the Netherlands please.

Gerjanne te Winkel:

Thanks, Dave. Also in the Netherlands for a long time, civil damages claims were rather a rare phenomenon in antitrust cases, but that has changed significantly. This is partly the doing of the European Commission who started encouraging the private markets to contribute to the enforcement of antitrust rules as well. And that way, the developmental anti-trust private enforcement cases started.

And in the Netherlands, it also took about until 2010 when the first cases were brought before the courts. And the first court decision we have now in 2017. So, which also gives an indication of how long it takes. And this was a matter in the so-called gas insulated switch gears, SIG cartel. But now there are a considerable number of antitrust damages cases pending before the Dutch courts.

And they include cases in the elevator cartel, the vitamin, air fright cartel, kerosene wax, sodium chloride, and as I said, the GIS cartel. And almost all of these cases are so called follow-on cases. So, they have been brought to the courts after the European Commission or the National Competition Authority have established a cartel infringement. And throughout the years, the Netherlands became a popular jurisdiction for antitrust damages claim.

And that is because of its relatively informal and efficient court system that we have, which makes it easier here than in a lot of other European countries. And also because important principles such as the presumption of infringement, presumption of causation, acceptance of passing on defense, certain disclosure obligations, all of that already existed in our law or has been accepted in case law.

And so now in 2017, the European Damages Directive was implemented too in the Netherlands. But as I said, because our system was already quite close to the directive, that required only limited amendments of the rules. And so, we expect much more cases to be coming up in the future.

Dave Dalton:

In a sense then, Gerjanne, then the Netherlands were a bit ahead of the curve in terms of the developments that were wider spread across the EU, would you say?

Gerjanne te Winkel:

Yes. I think in some respects it was. Of course, there are other European countries who also had some of the elements, but I think the Netherlands system is pretty liberal and informal. And therefore the principles such as the presumptions and also the development of disclosure obligations, which is rare in continental European countries, I think we were ahead on those issues.

Dave Dalton:

Interesting. Had not heard that before and it's certainly a great insight. Let's go over Sophie for a second. Sophie, talk about the types of actions that a victim could consider to claim its damaged is vis-a-vis the cartels. How does that work in the Netherlands?

Sophie van de Graaff:

There are basically three types of action that a claimant could pursue. And first of all, that's an individual action. Then there's an option of a group action. And it's also possible to start a collective action. What you see is, an individual actions are usually started if there's one or a very limited number of victims of the cartel. And one of the examples that we have here is a gas insulated switchgear cartel, which Gerjanne already mentioned.

And the market for GIS switchgear is very small with only a limited number of suppliers and customers. And so, in the Netherlands, there's just one party that alleged being a victim of this cartel, and this party successfully started legal proceedings against the cartels. And then there's the group action. And this type of action is most usually used in the Netherlands for cartel damages claims. In a group action, the injured parties transferred a claim to a special claims vehicle, and that vehicle starts the proceedings on their behalf. And up until the beginning of this year, this was actually the most suitable form to start a damages claim, cartel damages cases because it was not yet possible to claim monetary damages in a collective action.

The data has changed since the beginning of this year, which makes a collective action for cartel damages a more attractive venue than it was in the past. Before this new law collective actions came into effect, a representative entity could ask the court for a declaratory, just only recording the liability of the defendant. And that judgment could then be used as a basis for claiming damages in individual proceedings or for collective settlement.

But the new regulations on collective action enable your parties to recover their damages in one and the same proceedings. And that makes it, of course, much easier to actually recover damages in one go. In those proceedings, the court will first assess whether the defendant is liable. And if the court reaches that conclusion, both the representative entity and the defendant, they both have to submit a proposal to the court for the settlement of claims. And then, the court will determine a settlement plan, and that marks you end the proceedings in the first instance.

Dave Dalton:

What kind of increase in volume are you seeing in terms of collective action? Is it a huge increase in volume of cases, or is it trickling in, or what kind of changes are you seeing?

Sophie van de Graaff:

Actually, not too many cases I've been brought to the court yet, and that has everything to do with uncertainties about this new law. So, a lot of parties are actually observing those first few cases and see whether those matters can and those issues can satisfactorily be resolved in those first court cases. And actually, there's a register in which those collective actions has to be registered. And none of these cases include cartel damages cases yet, but we expect that, that will change in the future.

Dave Dalton:

Interesting. Let's go back to Gerjanne for a minute. If the matter moves on to court, how do these proceedings generally play out, from your observations?

Gerjanne te Winkel:

As Sophie set out, I think the type of court case that we see most is the collective action. So, the bundling of claims through an SPV. And that has been widely accepted in the Dutch courts. And the largest private enforcements cases that are currently pending in the Netherlands are those regarding the truck cartel. They are pending before the Amsterdam district court.

And this gives you a good idea of how the proceedings play out, because quite a number of those cases have been brought by SPV. So, special purpose vehicles on the basis of bundling of claims. Well, the first question is, do they have standing at all? Well, in the air freight cartel case, the Amsterdam court had already ruled that such SPVs indeed do have standings so that their claims can be accepted.

And that also was the ruling of the Amsterdam court in the truck cartel cases. However, the court also ruled that the SPVs have not sufficiently fulfilled their obligation as a plaintiff to state the facts, that underlying that claim of damage. And in particular, they have not sufficiently explained why they or the assignees belonged, or the assigners I should say, belonged to the injured party. So, they had to further specify the claim. They have to specify further how many trucks were bought, when they were bought, whether they were leased, etc.

Well, this is actually quite exceptional, because as a rule in Dutch judicial practice, the plaintiff only has to submit that it's suffered damage to be admissible in its claim. But in this truck cartel cases, the SPV were clearly given some homework by the court to specify that further, which is an indication that the threshold for SPVs to bring collective claims, so claims that are bundled through assignment, that the threshold for them is a bit higher than for the directly injured parties themselves.

And what it also shows, because we're now in 2020 and this homework still hasn't been done while the cases started years ago, that these private enforcement cases of antitrust claims will probably drag on for years because of the huge interests that are involved. But we expect, as Sophie discussed already, that this might change if plaintiffs start to bring clause actions, maybe also consumer actions.

We will come to that later. Because that might turn out to be a more efficient and less burdensome, in this respect for the plaintiff. But again, as Sophie's set out, we still have to see how that develops.

Dave Dalton:

And it's going to be an interesting scenario to watch unfold. That's for certain. Let's go back to Sophie for a second. Talk about, in a situation, is there a specific procedure for consumer actions? And how does that deviate from standard proceedings? How are the two situations different?

Sophie van de Graaff:

No, there is no specific procedure for consumer actions. And I think in the Netherlands, the most suitable action for consumers is the collective action that has to be initiated by a representative entity. And as I stated earlier, as of this year, it's possible to claim damages in a collective action. And that makes this actually the most accessible action for consumers.

And you see that group actions are less suitable for consumer actions because those claims they have, they have to be transferred to the claims vehicle, and the amount of consumers that is or can be the victim of the cartel can be extremely high. However, up until now, no collective actions have been initiated in connection to cartel damages for consumers. And we think that, that is because it's pretty hard to evidence those damages on the part of the consumer.

For instance, in the Netherlands, there was a beer cartel that took place between 1996 and 1999. And you would think that a lot of consumers suffered damages because of that, buying beer for a too high price. However, it's going to be extremely difficult to prove the extent of damages suffered by individual consumers. However, it's possible that this may change and consumers will actually start using the possibility of a collective action more in the future, also in view of the initiatives taken by the European Union in this area.

Dave Dalton:

We're good. Let's go back to Gerjanne for a minute. Gerjanne, I've heard about something called the passing on defense, and this has come up in previous podcasts. How does that play a role in private enforcement proceedings, the passing on defense?

Gerjanne te Winkel:

It plays a big role. You will see that in most of cartel cases, this is one of the arguments that the defendants will raise, the passing on defense. And it means they will argue that to the extent, the cartel has led to increased costs. The companies that are directly affected will charge these calls further on in the chain to their customers. And as a result, these companies themselves will not have suffered damage in the end, as a result.

Well, this passing on defense in the Netherlands was already accepted by the Dutch Supreme Court as a legitimate defense, again, in the GIS cartel case. And it has now also explicitly being recognized in the EU directive. So that may create some difficulties, because you could argue that the increased cost will be passed on throughout the entire chain. And then, it will end up at the level of the consumer.

It's a bit comparable to VAT in that respect. So for the directly injured parties, it means that they will have to prove that despite the fact that they passed on so that they charged increased costs to their customers, they nevertheless suffered damage, for example, because of decreased sales because of the higher prices. So, that creates an extra burden. And it also means, as I said, that there you end up at the level of the consumer who obviously will not be able to pass on the increased cost.

Well, here we have an interesting decision by the District Court, one of the district courts in the Netherlands in that GIS measure that we referred to before. Well, although the passing on defense was accepted as a valid defense, but nevertheless, at the end, the court ruled that the plaintiff was a grid operator. And the court ruled if the plaintiff will be able to successfully claim compensation, they will pass on that benefit as well to their customers which are consumers, by decreasing the energy prices.

And for that reason, although they accepted the passing on defense, it did not lead to a decrease of the damages that were awarded. So, that is an interesting element as well. And so, this is also, we still have to see as the EU directive has only been implemented since three years now, how this will further play out.

Dave Dalton:

Be interesting to watch. Let's go back to Sophie. Sophie, talk about damages awarded and the extent of damages awarded. How's that playing out currently?

Sophie van de Graaff:

Well, what you actually see in these types of cases is that most cases are still pending, or if liability has been established, the case has been settled after that. So, it's very difficult to say something useful about the extent of damages that are awarded in Dutch court cases, in Cartel damages cases. There's one example of our infamous just cartel case. There, the courts ruled that cartellers had to pay damages to the grid operator of €23 million.

And those are actual damages. There is no room in the Dutch law system for punitive damages. But it remains to be seen how this will play out in all those pending cases, as also providing evidence of the damages suffered can be a huge obstacle on actually recovering your damage.

Dave Dalton:

Sure. You said it remains to be seen. What kind of timeline are we looking at when we have a better feel when some of these cases play out or are settled, or however? When do you expect to get some clarity on that?

Sophie van de Graaff:

I think it will take at least a couple of years.

Dave Dalton:

We're that far off. Okay.

Sophie van de Graaff:

Yeah. Those first cartel damages cases that are being tried at the moment, there are so many illegal obstacles that still have to be passed before the court can reach a judgment on the damages. And that can take years because of the extent of the claims, and the huge of underlying injured parties in group actions, and also the huge stacks of evidence that has to be submitted in order to actually come to an assessment of the actual damages suffered.

Dave Dalton:

Let's go back to Gerjanne for a second. To what extent is there a connection between the private enforcement directive and the consumer class actions directive?

Gerjanne te Winkel:

Well, at least there is a connection for the European community because it's not a coincidence that both directives have been adopted or are about to be adopted in the same period. Because this has all got to do with the fact that the European Commission wants to promote consumer actions and wants to make it easier for consumers to realize their damages, as Sophie set out.

For example, in the beer cartel, of course the damage is so in terms of money, are small amounts. And that, of course, will make it impossible for a consumer to start an individual action because the cost will probably exceed the awards or the possible awards. So, by making the threshold for consumers lower and to allow them or to make it possible to initiate clause actions, it will become more attractive for the consumers to start an action like that.

And in particular, in cases where the passing on defense will be successful, then it is in the end only the consumers who could successfully claim. So, that's probably also why these two directives in a way go hand in hand, because European Commission clearly had its eyes primarily on those consumer actions. But again, we have to see whether these types of actions will arise.

And that will prove will be dependent partly also on, for example, the education funders who will be interested in those types of actions. Lawyers should promote the possibility of those actions because only collectively, the amount of the claim there'll be worth to actually start a case.

Dave Dalton:

I see. I see. Let's wrap this up with Sophie. Is there anything else clients need to know about private enforcement that has not yet been covered during our conversation?

Sophie van de Graaff:

Maybe two things. Litigation funding. It's good to know if that litigation funding is allowed in the Netherlands and in the new collective action where monetary damages can be claimed. There's a clear rule that the representative body who starts proceeding should have the final say in both the proceedings and the settlement that may take place. But in group actions for cartel damages, there are actually no regulation in place regarding the litigation funding and the relationship between the funder and the special purpose vehicle.

And so, that's one thing that's good to know, I think. And the other thing is the lawyer’s fees. And typically, you see common law countries that if the case is lost, the losing party has to compensate the entire lawyer’s fees that have been incurred on the winning party's hand. And you see that in the Netherlands that's very much different. The court has a discretion to order that costs are payable by one party to another. And it can also determine the amount of the costs, and decide when they are paid.

But all these amounts are fixed amount. And usually, this is only a fraction of the lawyers, actual fees. So, there's a very big difference. And that also makes the financial risk of litigating in the Netherlands smaller. So, that's good to keep in mind. Sure. But that's it basically. Yeah.

Dave Dalton:

Terrific, terrific. Well, Gerjanne and Sophie, this has been terrific. As you know, this is part of a series of podcasts about private antitrust litigation across Europe. And it's been a fine addition to that. Thank you so much. As things develop, we'll talk again. If anything new happens or if there are new developments that come to light, we'd love to talk to you again. But thanks so much today. This has been a terrific podcast, so it's going to be a great part of the series. So, thanks so much for being here today.

Gerjanne te Winkel:

Thank you too, David.

Sophie van de Graaff:

Thanks, David. Bye.

Dave Dalton:

Gerjanne and Sophie, thanks again for being here today. And remember, this is the third in a continuing series of Jones Day Talks podcast, focusing on private antitrust litigation in jurisdictions across Europe. You can find our big picture overview and our program of private antitrust litigation in Germany at jonesday.com. This series will continue through mid-2021, and will conclude with a Round Table discussion with Jones Day lawyers representing multiple jurisdictions.

For contact information on Gerjanne and Sophie, visit jonesday.com. While you're there, check out our insights page where you'll find more podcasts, publications, videos, blogs, and other interesting content. Subscribe to Jones Day Talks at Apple Podcast and wherever else quality podcasts are found. As always, we thank you for listening. I'm Dave Dalton. We'll talk to you next time.

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