European updates: Portugal, the Netherlands, and England and Wales

Portugal – new legislation on recovery of litigation funders’ return on investment from defendants

Porfírio Moreira
Ferreira Pinto Cardigos Advogados, Lisbon
pm@fpclegal.pt

Portugal has had an opt-out collective redress mechanism since 1995 (the ‘1995 regime’). Under the 1995 regime, if the claim is successful, the defendant is ordered to pay the full global compensation. Unclaimed amounts from the global compensation revert to the state to finance access to justice. This regime did not address third party funding, which arguably explains why it remained relatively ineffective.

The foundation of the implementation of the EU Private Enforcement Directive 2014/104 in 2018 was the 1995 regime. It explicitly allowed the recovery of litigation costs incurred by the claimant from the unclaimed parcel of the global compensation. Whether costs included the funder’s return on investment (ROI) was unclear. Nonetheless, several funded claims have been filed since 2018 on that assumption.

In December 2023, Decree-law 114-A/2023 came into force, implementing the EU Representative Actions Directive 2020/1828. This regime has a wide material scope, as defined by the Directive, and regulates funding, qualifying ROI as a recoverable cost and requiring courts to assess what is a fair and proportional ROI by market standards. Time will likely tell that this new provision was the missing piece of an effective collective redress system.

The Netherlands – decision of Amsterdam Court of Appeal on standing in collective actions

Cas Michiels
Stibbe N.V., Amsterdam
Cas.Michiels@Stibbe.com

Jereon Kortmann
Stibbe N.V., Amsterdam
Jeroen.kortmann@stibbe.com

Mart Schoenmaker
Stibbe N.V., Amsterdam
mart.schoenmaker@stibbe.com

On 5 March 2024, the Amsterdam Court of Appeal (the ‘Appeal Court’) rendered judgment in a collective action of Stichting Elco Foundation (the ‘Foundation’) against several banks and brokers based on alleged manipulation of interest rate benchmarks.

According to the District Court, the 'benefit requirement' was not met, because whether an individual claimant had suffered damage depended on whether the banks had manipulated the specific benchmark of the financial product used by that individual claimant on a particular day. The Appeal Court, however, held that the requested declarations of law could be a 'stepping stone' for individual follow-on claims for damages, and that sufficed to render a collective action more effective and efficient.

Furthermore, the Appeal Court considered the Foundation's funding arrangements acceptable, as it had stated that (1) the funders did not have too much influence on its strategy and (2) the defendants had insufficiently substantiated why the funders’ negotiated fees would be too high. It remains unclear, however, how the Appeal Court arrived at this assessment, as the Foundation successfully resisted demands to submit its funding agreement.

England and Wales – appeal decision likely soon on jurisdiction in group claim by overseas claimants

Cat Greenwood-Smith
Freshfields Bruckhaus Deringer, London
cat.greenwood-smith@freshfields.com

Charlie Fisher
Freshfields Bruckhaus Deringer, London
Charles.FISHER@freshfields.com

In October 2023, the High Court declined jurisdiction in the environmental, social and governance (ESG) supply chain case of Limbu & Ors v Dyson Technology Ltd & Ors [2023] EWHC 2592 (KB). The claims were brought by 24 Nepalese and Bangladeshi migrant workers against three members of the Dyson group, two of which are UK-domiciled. The claimants alleged that they were subject to exploitative living and working conditions, including at factories operated by third parties contracted by the Malaysian-domiciled Dyson defendant.

The court found that Malaysia was the appropriate forum given it was the location of the alleged torts, Malaysian law was the governing law, and there was no real risk that the claimants would be deprived of substantial justice (including adequate legal representation and funding) if the proceedings were heard in Malaysia. The court gave particular consideration to the defendants’ undertakings that they would submit to the jurisdiction of the Malaysian courts, pay the claimants’ costs to give evidence and would not seek security for costs. The claimants have appealed the judgment; the appeal has been expedited and we anticipate a hearing in June or July.