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Dutch court allows Securities claims against Brazilian Petrobras and D&O's


On 1 September 2018, a Rotterdam court allowed a Dutch claim vehicle to sue the Brazilian company Petrobras, its Board of Executive Officers and its Dutch subsidiaries Petrobras Global Finance (PGF), Petrobras Oil and Gas (POG) and Petrobras International Braspetro (PIB) in the Netherlands.

After the court dismissed Petrobras's appeal for a stay in proceedings on the basis of lis pendens, and assessed itself competent to rule on five of the original seven claims, the Rotterdam court is proceeding with the case, creating a precedent that could attract similar litigation to the Netherlands.

The Dutch claimant is a Dutch foundation that acts as a special-purpose claims vehicle for Petrobas share and bond investors, and alleges that Petrobras, its Brazilian executive directors and the Dutch subsidiaries did the following:

  1. committed significant fraud between 2004 and 2014;
  2. did not disclose this fraud;
  3. published incomplete, incorrect and misleading financial statements;
  4. issued Petrobras shares and PGF bonds with incomplete, incorrect and misleading information;
  5. issued Petrobras shares and PGF bonds with incomplete, incorrect and misleading information during the period of alleged fraud;
  6. unfairly exploited investor trust during the period of alleged fraud;
  7. violated bidding and procurement rules and procedures.

Dutch standard of "closely connected claims"

To adjudicate these claims, the Dutch court applied Dutch civil procedural law, which is based on article 8 of the Brussels I Recast (regulation EU 1215/2012 of 12 December 2012). Comfortable in its competence to preside over claims against the Dutch subsidiaries PGF, POG and PIB, the court needed to determine its competence to rule on claims against Brazilian Petrobras and its executive officers in the Netherlands.

To determine this competency, the court had to assess whether the claims against Petrobas and its directors were so closely connected to the claims against the Dutch subsidiaries that it was expedient to determine them together.

Ultimately, the Dutch court decided that it was not competent to deal with claim 1, the commission and continuation of significant fraud against Petrobras Brazil and its board of directors, because the claimant failed to allege any significant involvement with the Dutch subsidiaries.

The court then declared itself not competent to deal with claim 7, violation of bidding and procurement rules, because again the claimant had not cited the involvement of the Dutch subsidiaries.

In the end, despite pleas by the claimant, the court deemed itself competent to rule only on claims 2 to 6 against Petrobas, its directors and the Dutch subsidiaries. The court found that the claims are closely related because all claims against all defendants are based on a single set of facts and allegations.

Petrobas's attempted to win a stay in the proceedings by citing upcoming Brazilian and U.S. class action-settlement litigation. The court ultimately dismissed this motion, arguing that it was unclear whether the Brazilian or U.S. court would render any decisions on claims 2 to 6.

The court dismissed Petrobras's other motions, and ordered the parties to file skeleton arguments.

According to analysts, the claimant's success in establishing this case in Rotterdam is a perfect example of the new tendency to launch mass-securities litigation in the Netherlands for events that may have taken place outside the Netherlands, but are linked to Dutch entities of large multinational conglomerates.

Because most multinationals have a Dutch presence, usually for financial purposes, this relationship can be used to attract litigation to the Netherlands against non-Dutch entities or foreign individuals on the basis of "closely connected claims."

To file this type of action, a claimant should submit a set of allegations outlining the claims against the defendants and detail how they are closely connected. (At this stage, the claimant does not have to prove the allegations.) The court will then decide whether it is competent to rule.


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