Claim Code 2019

The Claim Code 2019, an updated and amended version of the original Claim Code 2011, was published in early March. The Claim Code is a code of conduct for foundations and associations ("claim vehicles") that bring collective actions or negotiate collective settlement agreements. The Claim Code 2011 has been recognised by the legislature as a body of soft law that provides guidelines for the courts on how to assess the standing of claim vehicles. In recent years the courts have given increasing weight to the Claim Code 2011 when assessing whether a claim vehicle can be deemed to safeguard the interests it represents. Several of the Claim Code 2011's guidelines are incorporated in the bill on collective damages claims.

The Claim Code 2019 consists of seven comply or explain principles, each with a further explanation of the principle. They deal with the governance of the claim vehicle and third party funding.

Governance

The Claim Code 2019 contains a number of guidelines on the governance of claim vehicles. For example: a claim vehicle must have a capable and balanced board and, if the claim vehicle is a foundation, a supervisory board, each consisting of at least three natural persons. Both the board and the supervisory board must have at least one member with legal expertise and one member with financial expertise. The board members and supervisory board members must be able to act independently from each other, from a third party funder and from the persons whose interests are represented by the claim vehicle.  

The claim vehicle and the legal and natural persons related to the claim vehicle cannot be motivated by profit. However, the claim vehicle is entitled to compensation on market terms for costs and services, including a reasonable margin for other or future collective actions and costs for the use of equity or debt capital. The board members and the supervisory board members are also entitled to reasonable remuneration and attendance fees respectively, as well as a reasonable expense allowance. Information about the claim vehicle's governance, as well as some other information, must be outlined on its website and be accessible to the public.

Several of the Claim Code 2011's governance guidelines are incorporated in the bill on collective damages claims. The Claim Code 2019 contains additional governance guidelines and an explanation of the statutory requirements.

Third party funding

The Claim Code 2019 includes a new principle on the relationship between a claim vehicle and a third party funder. The claim vehicle can enter into an agreement with a solid third party funder. However, the funding conditions cannot conflict with the collective interest of the persons the claim vehicle aims to protect. The claim vehicle should have exclusive control over the procedural strategy and the settlement negotiations. The board members, supervisory board members, the claim vehicle's lawyer and the other party in a collective action must be independent of the third party funder and its related legal and natural persons. That said, a funder is allowed to nominate one member of the supervisory board, which has to be published on the claim vehicle's website. Furthermore, the confidentiality of the claim vehicle's information must be safeguarded and in principle, the funder cannot terminate the funding agreement before a final judgment in the first instance has been obtained.

On its website, the claim vehicle must publish the fact that it has arranged third party funding, the identity and residence of the funder and a general scheme of the fees and services agreed with the funder. If the funder has agreed a fee based on a percentage of the collective damages, this percentage must be published as well. The claim vehicle does not have to publish other sensitive information about the funding arrangement on its website. However, the claim vehicle must be able to hand over this information to a court if the court orders it to do so. The claim vehicle may seek to prevent the other party to have access to this information.

Commercial and legal developments around third party funding are moving fast, so it remains to be seen to what extent the courts will give weight to this principle and its explanation.