News Update Class Actions

14 May 2021

The residence of the shareholders that suffered financial loss on their investment accounts due to the issuing company's misleading information is not a decisive factor in establishing the location where the loss occurred (Erfolgsort) within the meaning of Article 7(2) Brussels-I recast regulation. Only the courts in Member States in which a listed company must fulfil its statutory reporting obligations have international jurisdiction on that ground. These are the key findings in the recent CJEU judgment in the case of the Dutch Investors' Association (VEB) against BP regarding the Deepwater Horizon oil spill in 2010. As those findings will already result in a lack of jurisdiction, the CJEU did not answer the remaining questions that the Dutch Supreme Court asked about possible differences between collective and individual claims, and about territorial jurisdiction.

The CJEU's judgment of 12 May 2021 (Case C-709/19, ECLI:EU:C:2021:377) is the latest decision in the Dutch collective action that VEB has started against London-based BP on behalf of investors who bought, held or sold BP shares – listed on the London, Frankfurt and New York stock exchanges – from 16 January 2007 to 25 June 2010 through a Dutch investment account or Dutch broker. VEB alleged that BP acted unlawfully towards these shareholders by making misleading statements before and after the Deepwater Horizon oil spill in the Gulf of Mexico, which allegedly caused a fall in BP's share price. The Amsterdam District Court and the Amsterdam Court of Appeal denied jurisdiction over the claim because the loss did not occur in the Netherlands within the meaning of Article 7(2) Brussels-I recast. VEB therefore lodged an appeal before the Supreme Court, which asked the CJEU preliminary questions about the interpretation of this provision.

The CJEU stresses that as a main rule, the courts of the Member States in which the defendant is domiciled have jurisdiction. The defendant can only be summoned in another Member State by way of exception, such as Article 7(2) Brussels-I recast. VEB had argued that the Netherlands was the location where the damage occurred because the shareholders suffered financial loss directly on their Dutch investment accounts.

The CJEU emphasises that defendants must be able to reasonably foresee in which court they may be sued. In a prospectus liability case, the CJEU found that a bank that notifies a prospectus on certificates in Member States other than where the certificates are issued can anticipate that those states' residents might invest in the certificates and suffer loss in the case of the bank's breach of information obligations. Therefore, the court of the Member State where the investor lives and holds the bank account where the loss directly occurred has jurisdiction (CJEU 28 January 2015, C-375/13, ECLI:EU:C:2015:37 (Kolassa); see also CJEU 12 September 2018, C-304/17, ECLI:EU:C:2018:701 (Löber)).

However, the issuing company cannot anticipate international jurisdiction if it does not have any statutory reporting obligations in the Member State in which the investor holds the account that is used to buy securities that are listed in another state. Therefore, the court of that Member State cannot assume jurisdiction under Article 7(2) Brussels-I recast by virtue of the location where the loss occurs. This decision almost certainly ends VEB's collective action against BP.

The CJEU does not answer two of the Dutch Supreme Court's hypothetical questions. One of those unanswered questions concerns possible jurisdiction differences between collective and individual claims. However, A-G Campos Sánchez-Bordona already mentioned in his opinion in this VEB vs BP case, par. 95, that there is currently a lack of specific jurisdiction provisions for collective proceedings, and that they cannot be introduced by the courts nor the CJEU (cf. CJEU 25 January 2018, C-498/16, ECLI:EU:C:2018:37 (Schrems vs Facebook) and CJEU 21 May 2015, C-352/13, ECLI:EU:C:2015:335 (CDC vs Akzo)).

The other unanswered question concerns territorial jurisdiction: how is the specific local national court determined under Article 7(2) Brussels-I recast, in particular in collective actions? The pending RH vs Volvo case touches this issue, but more questions on these topics will likely follow in future cases (cf. the A-G opinion in RH vs Volvo, C-30/20, ECLI:EU:C:2021:322, par. 39-47).

Houthoff's large Class Action Team has in-depth and broad experience advising and representing companies and financial institutions and defending and settling class actions. Most of those class actions have a cross-border reach, which requires thorough private international law and jurisdiction strategies. We will keep you informed about the latest developments in Dutch class action law and related private international law topics. Please feel free to contact Albert and/or Paul if you have any questions.

For more information on Dutch class actions, please see our News Updates about One year of WAMCA, the EU Directive on representative actions and the Act on collective damages claims. For experts' opinions on class actions in eight key jurisdictions, please see our Class Actions survey.