On 9 December 2020, the Amsterdam District Court (the “Court”) declared a foundation inadmissible in a collective action regarding alleged manipulation of LIBOR, EURIBOR and other interest rate benchmarks. The foundation sought declaratory judgments that Rabobank, UBS, Lloyds Bank and ICAP (the “defendants”) had engaged in wrongful conduct and unjust enrichment vis-à-vis the class members.
The Court ruled that that it had not been shown that effective or efficient legal protection could be achieved through the collective action. In short, the declaratory judgments, if granted, would be too unspecific to be of any real help to the individual class members. The judgment provides useful guidance in determining whether a group of claims can be bundled in a collective action.
The collective action initiated
The collective action was launched under the old Dutch collective action regime that applied until January 2020, under which it was not possible for a representative entity to claim monetary damages. Instead, the foundation sought 24 declaratory judgments that the alleged manipulation by the defendants amounted to wrongful conduct or unjust enrichment to the detriment of the class members. In summary, the class members were a broad group of financial enterprises with a (branch) office in the EU that had carried out transactions outside the US that were in some way related to the relevant interest benchmarks.
Requirements for a collective action
As the parties disagreed on whether the underlying claims could be bundled as a collective action, the Court started by explaining the requirements that apply under the applicable collective action regime.
According to the commonality requirement (het gelijksoortigheidssvereiste) the interests that the collective action intends to protect must be suitable for ‘bundling’, in order to enhance the efficient and effective legal protection of the people whose interests are represented. In addition, a representative entity shall be deemed inadmissible if it has not made sufficient efforts to obtain the claimed result through dialogue and if the interests on whose behalf the claim is launched are not adequately safeguarded. In the context of that second requirement, Dutch courts are expected to examine whether the represented parties will ultimately benefit from the collective action would the claim be successful.
Insufficient benefit for class members
According to the Amsterdam District Court, the claims with regard to unjust enrichment are not suitable for bundling, as the determination of enrichment and impoverishment requires an assessment of the specific circumstances of individual events. By contrast, the claims regarding wrongful conduct are – as such – considered fit for bundling. The fact that different legal regimes may apply to the various claims does not render those claims unsuitable for this purpose.
Nevertheless, the Court ruled that it has not been shown that the collectively claimed declaratory judgments will lead to effective or efficient legal protection. It does not follow from any declaration that benchmarks have been manipulated during a certain period that interest rate benchmarks have been manipulated every day of that period. In addition, the mere fact that a transaction was based on a manipulated benchmark does not automatically imply loss. After all, it is equally possible that the transaction involved a benefit as a result of the manipulation. Even if the declaratory judgments were granted, it would not follow that there had been wrongful conduct towards any individual class member and that that member suffered a loss. Therefore, the collective action is of insufficient benefit to the individual class members. In addition, the Court pointed out that the foundation represents professional financial enterprises with substantial financial interests, that should be capable of defending their interests on an individual basis.
The Amsterdam District Court rejected the argument put forward by the foundation that it only represents class members who have suffered loss, because it is not clear in advance which members of the class have suffered a loss. The Court was also not persuaded by the argument that declaratory judgments could provide the class members with leverage in settlement negotiations with the defendants.
The Court declared the foundation inadmissible with respect to all its claims. The judgment shows that the choice to bundle claims should benefit the individual members of the class. The determination of what groups of claims are suitable for bundling will remain a key issue under the WAMCA, the new Dutch regime for collective redress. See Stibbe’s website on Collective Actions for mass damages for more information about the WAMCA. In addition, it also worth mentioning the UK Supreme Court ruling in Mastercard v Merricks, in which the UK Supreme Court judged upon the suitability of claims to be brought in collective proceedings.
This article was published in the Competition Newsletter of April 2021. Other articles in this newsletter: