In a recent ruling, the Netherlands Supreme Court squashed the decision of an appeals court in the Trafigura case over the issue of capacity changes during litigation concerning a suit lodged by 120,000 people in the Ivory Coast demanding compensation for illegal waste dumping.
Applying a less formal approach over the procedural issue of changing capacity mid-litigation, the Dutch Supreme Court ruled that lower courts must sometimes take a less rigid view of this rule, and that Trafigura had been aware of the pro se claim position taken by the claimants' vehicle before the capacity change.
Background: claim vehicles in mass claims
Dutch mass claims are usually conducted through a claim vehicle: either a Dutch foundation or association. These vehicles are usually easy to establish: created within a few days at low costs.
Dutch claim vehicles traditionally have three basic approaches for conducting mass claims:
- Serving as a representative on the basis of power of attorneys from each and every claimant;
- Serving as a collection vehicle on the basis of assignments from each and every claimant;
- Pro se on the behalf all the constituents as described in the bylaws of the claim vehicle. (Note that a claim vehicle was not able to claim compensation pro se until after 1 January 2020).
The claim vehicle must opt for one particular approach, and Dutch procedural law prohibits a change in the capacity of a party during litigation.
In the Trafigura case, the claim vehicle initially stated in the writ of summons that it acted as the representative of 120,000 persons living in the Ivory Coast who were affected by the illegal dumping of waste by Trafigura in 2006. Applying option 1 above, the 2015 claim vehicle demanded compensation of EUR 280 million or EUR 2,500 per claimant.
Trafigura’s lawyers argued in letter to the court that the claim vehicle had not provided proper evidence of the powers of representation and had submitted a claim pro se for compensation of loss, which was not possible at the time. This letter proved central to the case since in response to it, the claim vehicle changed its tack and dropped the demand for compensation. Instead, it demanded a declaratory judgment pro se that Trafigua is liable and must clean the dump sites.
Trafigura then pointed out that the claim vehicle had changed its capacity during litigation. The vehicle had started as a representative and changed into a claimant with a pro se claim, which is a violation of a hard Dutch procedural rule that would render the claims inadmissible.
Both the court and the court of appeals granted Trafigura’s defence that the change of capacity of the claimant results in inadmissibility of the claims.
The Dutch Supreme Court overruled the decision of the court of appeals with a much less formal approach. The Supreme Court upheld the principle that a party in litigation cannot change its capacity during litigation, but pointed out that Trafigura had understood the vehicle's initial claim as pro se since Trafigura’s letter to the court contains a clearly articulated paragraph to that effect.
The Supreme Court held that the lower courts should have investigated whether Trafigura’s position had been prejudicial in any way given the fact that the letter was sent at the initial stages of the proceedings.
Contrary to the flurry of publicity surrounding this decision, the Dutch Supreme Court has not changed the rules. Instead, the high court has sent an even more important message to Dutch courts: do not take a strictly formal approach to the application of this rule and consider all relevant circumstances.
This important message is consistent with a powerful trend within the Dutch court system to take a less formal view of preliminary technical procedural issues in order to address the merits of a dispute. This is the real and important lesson of the Trafigura decision.
For more information on this ruling and insight into the Trafigura case, contact your regular CMS advisor or local CMS expert.