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Rotterdam District Court rules on jurisdiction in Petrobras collective action

Rotterdam District Court rules on jurisdiction in Petrobras collectiv

Rotterdam District Court rules on jurisdiction in Petrobras collective action

17.12.2018 NL law

On 19 September 2018, Rotterdam District Court ruled (ECLI:NL:RBROT:2018:7852) that it has jurisdiction to hear claims against Petrobras and others in a collective action concerning an alleged bribery scheme. However, the Court decided that it did not have jurisdiction for a number of claims against non-Dutch defendants. The Court also denied a request to stay the proceedings until a decision in related Brazilian and US proceedings had been reached.

This judgment is part of a more general trend in recent case law showing claim entities bringing collective actions against non-Dutch defendants before Dutch courts in matters that substantively almost exclusively relate to a foreign jurisdiction. In the Petrobras case the alleged bribes were paid to Petrobras officials and politicians in Brazil, after which Petrobras and others were sued in Brazil and the US. Petrobras' securities were listed in both jurisdictions.

Facts

The Petrobras Compensation Foundation was set up in the Netherlands (the Foundation) to represent investors who had been trading in Petrobras securities outside of the US before 28 July 2015. The Foundation initiated a collective action for Petrobras investors against certain Petrobras companies and other defendants (the Defendants). The Foundation requested a declaratory judgment holding that Defendants had acted unlawfully against investors by, among other things, participating in an alleged bribery scheme involving payments to senior officials of Petrobras and political parties, and publishing misleading information.

The Defendants argued that the Court lacked international jurisdiction and that the Foundation should have filed its claim in arbitration proceedings instead of before the national courts. The Defendants also requested a stay of proceedings until a decision in related Brazilian and US proceedings had been reached.

International jurisdiction

The Court held that it has international jurisdiction to hear all claims against Dutch Defendants. In respect of non-Dutch Defendants, the Court held that it lacked international jurisdiction with respect to claims relating to participation in the alleged bribery scheme and the violation of certain (internal) regulations because the Foundation had failed to demonstrate (i) that the claims against non-Dutch Defendants were sufficiently connected with the claims against Dutch Defendants or (ii) that harmful acts or harm itself had occurred in the Netherlands.

More precisely, the Foundation had failed to explain that the Dutch Defendants were involved in the alleged fraud or in the violation of certain (internal) regulations. The Foundation also failed to explain that non-Dutch Defendants committed any harmful acts in the Netherlands or that any harm incurred in the Netherlands. In respect of the latter, the Court held that it is not sufficient if investors suffered harm through Dutch bank accounts (see also an earlier Stibbe Blog on this issue). The fact that no Petrobras debentures were listed in the Netherlands and that the Dutch Defendants were not involved in the alleged fraud or in the violation of certain (internal) regulations weighed against establishing jurisdiction on the basis of harm suffered in the Netherlands.

All of the other claims against non-Dutch Defendants were sufficiently connected to claims against Dutch Defendants and therefore the Court exercised jurisdiction in relation to those claims. It reasoned that one of the Dutch Defendants had issued Petrobras debentures so that the other claims against non-Dutch Defendants, which predominantly related to the publication of misleading information regarding the alleged bribery scheme in connection with issuing financial instruments, were sufficiently connected with the claims against this Dutch Defendant. For purposes of establishing its jurisdiction, the Court did therefore not have to assess whether these other claims were based on the existence of harm or harmful acts in the Netherlands.

The Foundation argued that owing to fair trail concerns it was unacceptable to require its claims to be filed with the Brazilian courts and therefore the Dutch courts should exercise jurisdiction. According to the Foundation, it would not receive a fair trial before Brazilian courts because (i) Brazil is the majority shareholder of Petrobras, (ii) the alleged bribery scheme involved payments to the largest political party in Brazil, (iii) some Brazilian judges who had been appointed by the former president would be biased in favour of participants in the alleged bribery scheme and (iv) in general, Brazil should be regarded as a corrupt state. In response, however, the Court decided that it was not unacceptable for the Foundation to file its claims with the Brazilian courts given that the former president of Brazil and various directors of Petrobras had since stepped down as a result of the alleged bribery scheme, and that various participants in the alleged bribery scheme had already been prosecuted and sentenced.

Arbitration or national courts?

The arbitration clause in Petrobras' articles of association did not prevent the Court from exercising jurisdiction. The Court reviewed the English language version of the alleged arbitration clause in Petrobras' articles of association since that version was considered to be readily accessible for international investors. According to the Court, the relevant provision did neither under Brazilian nor under Dutch law constitute a valid arbitration agreement because the provision does not clearly mention that disputes must be settled through arbitration or that arbitrators or an arbitral tribunal should be appointed. For a provision to constitute an arbitration agreement, according to the Court, it is not sufficient to indirectly refer to arbitration. The Court did not look into US and Brazilian judgments ruling on the validity of the arbitration clause in Petrobras' articles of association because these judgements apparently (also) concerned a Portuguese language version – and potentially a different version - of the arbitration clause which was not readily accessible for international investors and the Court did not know whether there were any other relevant factual differences in the various proceedings that had been referred to by the parties.

Stay of proceedings

The Court denied the requests from the Defendants’ to stay the proceedings until a decision had been reached in related US proceedings. At the time of its judgment, it was unclear when a US judgment would be rendered. Similarly, the Court refused to stay the proceedings until related proceedings in Brazil had ended. A judgment in proceedings in Brazil was not expected at the time of the Court's judgment and it was unlikely that any Brazilian arbitral award would be relevant for Dutch proceedings since its enforcement or recognition in the Netherlands would be problematic due to a lack of clarity of the arbitration clause in Petrobras' articles of association.

Jurisdictional limits to Dutch collective actions against non-Dutch defendants

This judgment shows that Dutch courts will critically assess whether they have jurisdiction in collective actions brought against non-Dutch defendants that relate to a dispute of which the facts are predominantly situated in a foreign jurisdiction. Other recent examples in Dutch case law include proceedings against Trafigura Limited and Trafigura Beheer B.V. (ECLI:NL:RBAMS:2018:2476) and proceedings against BP P.L.C. (ECLI:NL:GHAMS:2017:4588). In the case against Trafigura Limited and Trafigura Beheer B.V., which related to the dumping of waste in Ivory Coast, the District Court of Amsterdam held that it did not have jurisdiction with respect to Trafigura Limited because the claimant had failed to demonstrate that claims against Trafigura Beheer B.V. were sufficiently connected with claims against Trafigura Limited. In the case against BP P.L.C. regarding the leakage of oil in the Gulf of Mexico the Amsterdam Court of Appeal held that the claimant had not demonstrated that the harmful acts or harm itself occurred in the Netherlands or that the case was otherwise sufficiently connected with the Netherlands. More specifically, the fact that investors suffered losses on a Dutch bank account did not imply that harm occurred in the Netherlands.

A difference between the BP and Petrobras case is that in the Petrobras case the Foundation could rely on a Dutch anchor defendant and that a Dutch Defendant had issued debentures. In the BP case there was no such connection with the Netherlands. These cases again show that Dutch courts will only accept jurisdiction in collective actions against non-Dutch defendants if the claimant can demonstrate that the claims are sufficiently related to the Netherlands or other specific circumstances apply.

Petrobras and others have submitted a skeleton overview of their defences to the Court on 17 and 24 October 2018. The Foundation filed a reply to this skeleton overview on 21 November 2018. The court has scheduled an oral hearing on 18 December 2018.

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