Shell Settlement Declared Generally Binding
On 29 May 2009, the Court of Appeal of Amsterdam declared the
Shell settlement to be generally binding, as envisaged in the Act
on the Collective Settlement of Mass Claims (Section 7:907 ff. of
the Dutch Civil Code), the "WCAM".
On January 9, 2004, and March 18, 2004, Shell announced
recategorizations of the proved reserves it had declared. In the
case at issue, investors argued that in the period from April 8,
1999, through March 18, 2004, (the "Relevant Period")
they had bought Shell shares at too high a price, since during that
period Shell had misrepresented the facts about the proved
petroleum reserves declared by Shell. The investors stated that at
the time when Shell made the recategorizations, the price of the
shares purchased dropped. The investors regarded this price drop as
the materialization of the damage that was caused by the
misrepresentation, which Shell previously allowed to continue.
The parties to the settlement were Shell, consisting of: Shell
Petroleum NV and The 'Shell' Transport and Trading Company
Limited, and an estimated number of over 500,000 investors,
represented by: Stichting Pensioenfonds ABP ("ABP"),
Stichting Pensioenfonds voor de Gezondheid, Geestelijke
Maatschappelijke Belangen ("PGGM"), Stichting Shell
Reserves Compensation Foundation (the "Foundation") and
the Dutch Association of Stockholders (Vereniging van
Effectenbezitters, "VEB"). The consultations between the
parties resulted in the conclusion of the Settlement Agreement on
April 11, 2007.
In the Settlement Agreement, Shell offers the shareholders
compensation for their losses as a result of the price drops,
without acknowledging that the recategorizations were the cause of
the losses eligible for compensation that were suffered by the
shareholders. The Settlement Agreement takes into account the
settlement that had already been made with shareholders in the
U.S.A. The Settlement Agreement provides for payments of USD
380,962,000 in total.
Section 7:907 of the Dutch Civil Code sets out a list of
requirements which a settlement agreement has to meet, such as,
among other things, that the agreement was entered into by a
foundation or association that represents the interests of the
interested shareholders by virtue of its articles of association.
Section 7:907 also contains a number of grounds for the Court to
reject declaring the agreement generally binding. The manner of
convocation of the shareholders is set out in Section 1013 of the
Dutch Code of Civil Procedure. The Court of Appeal has considered
all requirements and grounds for rejection of Section 7:907, and
has discussed the question of whether the shareholders were
convened in the correct manner. The Court of Appeal concluded that
all requirements had been met and that the shareholders had been
convened in the correct manner.
In this article we shall specifically go into three aspects of
the declaration to be generally binding, namely: 1) the question of
whether the Court of Appeal has international jurisdiction; 2) the
question of whether the petitioners are sufficiently
representative; and 3) the question of whether the shareholders
were convened in the correct manner.
The Convocation
Out of the estimated total number of 500,000
shareholders, the parties had data available of 111,588 that could
be used for convocation. These were addresses in 104 different
countries. At the pre-trial review on July 12, 2007, special
arrangements were made with regard to the convocation. The
shareholders with a known place of residence in the Netherlands
were convened by ordinary mail. The shareholders with a known place
of residence outside the Netherlands were convened using the
services of a process server, while observing the instructions
given by the Court of Appeal. The convocation for the hearing of
interested parties whose places of residence were unknown was made
by announcing the convocation in 47 newspapers (published in
editions for 22 countries, and also for Asia, South America, Europe
and the whole world), and was repeated on October 7, 2008 in The
Times. The announcement was also posted on a number of websites.
Apart from additional smaller messages in (digital) newspapers, the
convocation also received considerable media attention. The Court
of Appeal held that the requirement of convocation had been
fulfilled.
Representativeness
A request to declare an agreement generally binding must be denied
if the association or foundation that entered into agreement to
which the request relates is not sufficiently representative of the
interests of the parties for whose benefit the agreement was
concluded. The Court of Appeal held that the question here is
whether the joint lobby organizations are sufficiently
representative. A clear majority of the shareholders was domiciled
outside the Netherlands, and only one quarter of the shareholders
was domiciled in the Netherlands. The Court of Appeal considered
the VEB to be definitely sufficiently representative in view of its
articles of association and activities. The Court of Appeal
considered the Foundation to be sufficiently representative
together with the VEB, in view of its articles of association and
the significant number of participants that have joined the
Foundation. The Court of Appeal considered ABP and PGGM to be
insufficiently representative, because the articles of association
of these parties do not specifically provide for upholding the
interests of the interested parties in the settlement.
International Jurisdiction
With regard to the interested parties in the
Netherlands and the states within the scope of the EEX Regulation,
the Court of Appeal stated that there is such a close connection
between the claims of the interested parties that a proper
administration of justice requires their simultaneous hearing and
trial (in order to avoid incompatible decisions being rendered if
the cases would be heard separately). The Court of Appeal
considered it important here that the acts on which the claims will
be based were not committed in all individual countries, but only
in the Netherlands and the United Kingdom. With regard to the
interested parties outside the Netherlands and Europe, the Court of
Appeal referred to Section 3, opening lines and under a) of the
Code of Civil Procedure, pursuant to which the Dutch court has
jurisdiction in the event that the petitioner (or one of the
petitioners) has its ordinary domicile or residence in the
Netherlands. This was the case here.
Conclusion
In the range of decisions by the Enterprise Section within the
scope of the WCAM, the decision in the Shell case declaring the
settlement agreement generally binding stands out, because this is
the first time that an agreement was declared generally binding on
a global scale. The convocation of the interested parties around
the world (except from the U.S.A.) was directed and carried out in
consultation with the parties and the Court of Appeal. The Court of
Appeal considers it no hindrance to the assumption of jurisdiction
that the large majority of the interested parties is domiciled
outside the Netherlands. What matters is whether (any of) the
petitioners are domiciled in the Netherlands and are sufficiently
representative, together with the other petitioners. The Court of
Appeal also considers it important for a proper administration of
justice that the acts were only committed in the Netherlands and
England. The order declaring the Shell agreement generally binding
has shown that the WCAM may be an effective tool for multinationals
to find a global solution for disputes involving interested parties
throughout the world. The WCAM procedure is expected to see a rise
in popularity and/or imitation on a global scale.