In January 2017 the Dutch claim foundation “Stichting Petrobras Compensation Foundation” initiated civil proceedings in Rotterdam, the Netherlands against the Brazilian company Petrobras (Petróleo Brasileiro S.A. – Petrobras), certain Dutch (financial) corporations within the Petrobras group and certain other defendants.
The foundation claims to represent the interests of Petrobras investors who traded Petrobras shares and other instruments on a non-US exchange before 28 July 2015. Its goal is to obtain compensation for the losses suffered by such investors as a result of the irregularities committed by Petrobras, its executives and its employees. Such irregularities include bribery of officers, illegal inflation of assets and other issues currently being investigated by the relevant authorities.
Two complimentary class actions
As early as December 2014, a US class action was initiated on similar grounds. This class action however only aimed to compensate Petrobras-investors that purchased Petrobras shares and other instruments on US (NY) exchanges. In that sense the two actions (the US class action and the action of the foundation) can be considered to be complimentary: one covers the US market, and the other covers all non-US markets. In January 2018 the class action resulted in a class settlement of USD 2.95 billion.
In response to the proceedings of the Dutch foundation, Petrobras filed an incident (a motion to dismiss), asserting that the Dutch court had no jurisdiction to hear the foundation’s claims. The court was also requested to stay the proceedings until other, similar, foreign proceedings had come to an end. In its 19 September 2018 decision, the district court however dismissed the defendants’ motions and ruled in favour of the foundation. The court accepted jurisdiction to hear the majority of the foundation’s allegations and also decided that the proceedings will not be stayed.
Given that Petrobras is domiciled outside of the EU, the court first concluded that the European rules for determining jurisdiction do not apply.
Based on Dutch law the court then determined that, due to the strong connectivity between the claims asserted by the foundation against the Dutch entities and the claims asserted against the Dutch Petrobras group entities, the claims must be dealt with together by the same court. This prevents contradictory judgments for cases with the same or a highly similar factual background and legal basis, as well as increasing procedural efficiency.
Since the Rotterdam district court has jurisdiction for the claims against the Dutch Petrobras group entities, it could also accept jurisdiction for the claims against Petrobras based on the aforementioned reasoning.
Major legal implications
This recent decision illustrates that under certain circumstances, a foreign, non-Dutch, (holding) company with a (financial) subsidiary in the Netherlands, is at risk of being sued in the Netherlands if the factual and legal background of the asserted claims against the holding company and the subsidiary are more or less similar. Companies with Dutch subsidiaries to attract capital and with a strategy of being present on the Dutch market, can therefore suffer major legal implications.
Written on November 15, 2018 by
Co-responsible for the Dutch market regarding Damage. Head of research for Dutch collective proceedings and settlements. Co-responsible for Deminor distressed trading.
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