News Update Class Actions

The Rotterdam District Court (the "Court") recently issued a judgment on the standing of a Brazilian association to bring claims in relation to alleged environmental pollution in Brazil and on the prescription of those claims under Brazilian law. The decision seems to allow very easy circumvention of the Dutch class action admissibility rules under the Act on Collective Damages Claims (Wet afwikkeling massaschade in collectieve actie, WAMCA). Consequently, it could also affect other cases if it is not overturned on appeal.

Factual background of the case

A Brazilian association founded by members of traditional, Indigenous communities in and around Barcarena in the Brazilian Amazon region (the "Association") and nine individual members of those communities sued Norwegian holding company Norsk Hydro ASA and its Dutch subsidiaries ("Norsk Hydro et al."). Norsk Hydro et al. are (indirect) shareholders in two Brazilian subsidiaries that operate an aluminium refinery in Barcarena. Those Brazilian operational subsidiaries are not parties to these proceedings. However, the claimants argue that their activities caused environmental pollution, as a result of which many residents of Barcarena have become ill and can no longer earn a living in their traditional way. The claimants therefore seek a declaratory decision to the effect that Norsk Hydro et al. are jointly and/or severally liable to the Association's members and the individual claimants that suffered or will suffer damage as a result of the Brazilian subsidiaries' activities. The individual claimants also seek compensation.

In this interim judgment, the Court ruled on various formal aspects of the case (other than jurisdiction, which had already been accepted). Two of these aspects are the standing of the Association to bring its claims and the prescription of the claims, which we will discuss further below.

Standing of the Brazilian association

According to the Court, the question whether the Association had standing to litigate had to be assessed under Brazilian incorporation law. The question whether the Association could bring the claims in the manner that it had done was assessed under Dutch procedural law. The Court ruled that the Association had standing under Brazilian law and its articles of association. In this light and given the Association's explanation at the hearing, the Court considered that the Association intended to initiate the claims in its own name, to achieve its own statutory objectives as an independent party to the proceedings. Therefore, according to the Court, the Association had not brought claims involving the individual circumstances of its members. Further to this, the Court ruled that the Association had a sufficient, direct interest in the proceedings and claims brought as required under Article 3:303 of the Dutch Civil Code ("DCC"). The Association's claims were therefore admissible.

Since the Association did not start the proceedings as a class action under Article 3:305a DCC (WAMCA), the admissibility requirements of this provision did not – in principle – apply, the Court found. That might have been different if the proceedings materially fell under the scope of Article 3:305a DCC, but even if this were the case, the Court would not apply the requirements because, in its view, the Association had not abused the law by bringing the proceedings in the way it had done.

These findings are striking and inconsistent, given the fact that the Association acts in the interests of its constituency and claims declaratory relief for its members and not for itself. In such a case the Association only had two choices. It could:

• either have brought a claim on behalf of the Association's members, with a mandate or other kind of authority, in which case the individual circumstances of each member would matter and each member should have sufficient individual interest in the case (Article 3:303 DCC);
• or have brought a claim on behalf of the unnamed constituency of the Indigenous people living around Barcarena affected by the alleged environmental damage, in which case it would be a class action that should meet the stricter Dutch procedural law admissibility requirements of Article 3:305a DCC. These requirements include the similarity of the class members' interests, sufficient safeguards with regard to these interests, the absence of a direct or indirect profit motive on the part of the Association's directors and the presence of a sufficiently close connection of the class action with the Dutch jurisdiction. In this context it is worth noting that, as far as we know, the question of whether a non-Dutch foundation or association can have standing in Dutch class action proceedings has not yet been decided other than in summary proceedings.

However, this current decision seems to let the Association have its cake and eat it: the Court facilitates the Association to circumvent the admissibility requirements and bring a collective action in the interest of other persons who are not a party to the litigation and without applying the admissibility requirements for this type of action, which under Dutch law clearly falls under Article 3:305a of the Civil Code.

Prescription of the claims under Brazilian law

Under Brazilian Law, claims for compensation for environmental damage are in principle subject to a five-year prescription period, which begins to run when the damaging acts have ended and the damage has been undone. In the case of a continuous damaging act, the prescription period only begins to run when the damaging act has ended and the damage from all acts has been undone.

The Court found that the claimants' contentions with respect to most of the alleged damaging acts related to a systematic, continuous violation of Brazilian environmental law. These acts are inherent to aluminium mining in Barcarena, with ongoing and long-term harmful effects. As it had not been contested, or at least not with sufficient substantiation, it was established that the damage resulting from this allegedly continuous unlawful conduct had not yet been undone. The Court therefore ruled that the prescription period for the claims relating to those events had not yet started, so the claims based on these events and, more generally, on the continuous presence of polluting reservoirs, were not time-barred. However, the Court ruled that two other claims were time-barred, since they related to stand-alone events that were not inherent to aluminium mining in Barcarena.

As the Court did not make an interim appeal available, the proceedings will in principle continue on the merits, although the parties could still request leave for interim appeal.

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