Advisory Board

  • Cai Hongbin
  • Peking University Guanghua School of Management
  • Peter Clarke
  • Barry Diller
  • IAC/InterActiveCorp
  • Fu Chengyu
  • China National Petrochemical Corporation (Sinopec Group)
  • Richard J. Gnodde
  • Goldman Sachs International
  • Lodewijk Hijmans van den Bergh
  • De Brauw Blackstone Westbroek N.V.
  • Jiang Jianqing
  • Industrial and Commercial Bank of China, Ltd. (ICBC)
  • Handel Lee
  • King & Wood Mallesons
  • Richard Li
  • PCCW Limited
  • Pacific Century Group
  • Liew Mun Leong
  • CapitaLand Limited
  • Martin Lipton
  • New York University
  • Wachtell, Lipton, Rosen & Katz
  • Liu Mingkang
  • China Banking Regulatory Commission (CBRC)
  • Dinesh C. Paliwal
  • Harman International Industries
  • Leon Pasternak
  • Bank of America Merrill Lynch
  • Tim Payne
  • Brunswick Group
  • Joseph R. Perella
  • Perella Weinberg Partners
  • Baron David de Rothschild
  • N M Rothschild & Sons Limited
  • Dilhan Pillay Sandrasegara
  • Temasek Holdings
  • Shao Ning
  • State-owned Assets Supervision and Administration Commission of the State Council of China (SASAC)
  • John W. Snow
  • Cerberus Capital Management, L.P.
  • Former U.S. Secretary of Treasury
  • Bharat Vasani
  • Tata Group
  • Wang Junfeng
  • King & Wood Mallesons
  • Wang Kejin
  • China Banking Regulatory Commission (CBRC)
  • Wei Jiafu
  • China Ocean Shipping Group Company (COSCO)
  • Yang Chao
  • China Life Insurance Co. Ltd.
  • Zhu Min
  • International Monetary Fund

Legal Roundtable

  • Dimitry Afanasiev
  • Egorov Puginsky Afanasiev and Partners (Moscow)
  • William T. Allen
  • NYU Stern School of Business
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Johan Aalto
  • Hannes Snellman Attorneys Ltd (Finland)
  • Nigel P. G. Boardman
  • Slaughter and May (London)
  • Willem J.L. Calkoen
  • NautaDutilh N.V. (Rotterdam)
  • Peter Callens
  • Loyens & Loeff (Brussels)
  • Bertrand Cardi
  • Darrois Villey Maillot & Brochier (Paris)
  • Santiago Carregal
  • Marval, O’Farrell & Mairal (Buenos Aires)
  • Martín Carrizosa
  • Philippi Prietocarrizosa & Uría (Bogotá)
  • Carlos G. Cordero G.
  • Aleman, Cordero, Galindo & Lee (Panama)
  • Ewen Crouch
  • Allens (Sydney)
  • Adam O. Emmerich
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Rachel Eng
  • WongPartnership (Singapore)
  • Sergio Erede
  • BonelliErede (Milan)
  • Kenichi Fujinawa
  • Nagashima Ohno & Tsunematsu (Tokyo)
  • Manuel Galicia Romero
  • Galicia Abogados (Mexico City)
  • Danny Gilbert
  • Gilbert + Tobin (Sydney)
  • Vladimíra Glatzová
  • Glatzová & Co. (Prague)
  • Juan Miguel Goenechea
  • Uría Menéndez (Madrid)
  • Andrey A. Goltsblat
  • Goltsblat BLP (Moscow)
  • Juan Francisco Gutiérrez I.
  • Philippi Prietocarrizosa & Uría (Santiago)
  • Fang He
  • Jun He Law Offices (Beijing)
  • Christian Herbst
  • Schönherr (Vienna)
  • Lodewijk Hijmans van den Bergh
  • Royal Ahold (Amsterdam)
  • Hein Hooghoudt
  • NautaDutilh N.V. (Amsterdam)
  • Sameer Huda
  • Hadef & Partners (Dubai)
  • Masakazu Iwakura
  • Nishimura & Asahi (Tokyo)
  • Christof Jäckle
  • Hengeler Mueller (Frankfurt)
  • Michael Mervyn Katz
  • Edward Nathan Sonnenbergs (Johannesburg)
  • Handel Lee
  • King & Wood Mallesons (Beijing)
  • Martin Lipton
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Alain Maillot
  • Darrois Villey Maillot Brochier (Paris)
  • Antônio Corrêa Meyer
  • Machado, Meyer, Sendacz e Opice (São Paulo)
  • Sergio Michelsen Jaramillo
  • Brigard & Urrutia (Bogotá)
  • Zia Mody
  • AZB & Partners (Mumbai)
  • Christopher Murray
  • Osler (Toronto)
  • Francisco Antunes Maciel Müssnich
  • Barbosa, Müssnich & Aragão (Rio de Janeiro)
  • I. Berl Nadler
  • Davies Ward Phillips & Vineberg LLP (Toronto)
  • Umberto Nicodano
  • BonelliErede (Milan)
  • Brian O'Gorman
  • Arthur Cox (Dublin)
  • Robin Panovka
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Sang-Yeol Park
  • Park & Partners (Seoul)
  • José Antonio Payet Puccio
  • Payet Rey Cauvi (Lima)
  • Kees Peijster
  • COFRA Holding AG (Zug)
  • Juan Martín Perrotto
  • Uría & Menéndez (Madrid/Beijing)
  • Philip Podzebenko
  • Herbert Smith Freehills (Sydney)
  • Geert Potjewijd
  • De Brauw Blackstone Westbroek (Amsterdam/Beijing)
  • Qi Adam Li
  • Jun He Law Offices (Shanghai)
  • Biörn Riese
  • Mannheimer Swartling (Stockholm)
  • Mark Rigotti
  • Herbert Smith Freehills (Sydney)
  • Rafael Robles Miaja
  • Robles Miaja (Mexico City)
  • Alberto Saravalle
  • BonelliErede (Milan)
  • Maximilian Schiessl
  • Hengeler Mueller (Düsseldorf)
  • Cyril S. Shroff
  • Cyril Amarchand Mangaldas (Mumbai)
  • Shardul S. Shroff
  • Shardul Amarchand Mangaldas & Co.(New Delhi)
  • Klaus Søgaard
  • Gorrissen Federspiel (Denmark)
  • Ezekiel Solomon
  • Allens (Sydney)
  • Emanuel P. Strehle
  • Hengeler Mueller (Munich)
  • David E. Tadmor
  • Tadmor & Co. (Tel Aviv)
  • Kevin J. Thomson
  • Barrick Gold Corporation (Toronto)
  • Yu Wakae
  • Nagashima Ohno & Tsunematsu (Tokyo)
  • Wang Junfeng
  • King & Wood Mallesons (Beijing)
  • Tomasz Wardynski
  • Wardynski & Partners (Warsaw)
  • Rolf Watter
  • Bär & Karrer AG (Zürich)
  • Xiao Wei
  • Jun He Law Offices (Beijing)
  • Xu Ping
  • King & Wood Mallesons (Beijing)
  • Shuji Yanase
  • OK Corporation (Tokyo)
  • Alvin Yeo
  • WongPartnership LLP (Singapore)

Founding Directors

  • William T. Allen
  • NYU Stern School of Business
  • Wachtell, Lipton, Rosen & Katz
  • Nigel P.G. Boardman
  • Slaughter and May
  • Cai Hongbin
  • Peking University Guanghua School of Management
  • Adam O. Emmerich
  • Wachtell, Lipton, Rosen & Katz
  • Robin Panovka
  • Wachtell, Lipton, Rosen & Katz
  • Peter Williamson
  • Cambridge Judge Business School
  • Franny Yao
  • Ernst & Young

Netherlands

EUROPEAN UPDATE – Guide to Public Takeovers in Europe 2016-2017

Editors’ Note: This guide summarises the main characteristics of the French, Dutch, German, Italian, Spanish and UK laws and regulations applying to public takeover offers as they stood at June 2016.

Executive Summary: The guide has been updated to reflect legal and regulatory changes made to the national takeover regimes since it was last published in April 2013. The Takeover Directive has been implemented in all of the countries which are covered. Its aim is to provide equivalent protection throughout the EU for minority shareholders of companies listed on an EU regulated stock exchange in the event of a change of control, and to provide for minimum guidelines on the conduct of takeover bids.

However, the Takeover Directive makes some of its provisions – relating to defensive measures and voting rights/restrictions – optional, which means that, even after implementation, different regimes exist in different countries.

Against this background, the intention is that this guide will not only be of practical use for users, but also that an understanding of how particular jurisdictions have changed their legal/regulatory systems and practices will be of additional help to users of this guide in understanding the ongoing implications of the Takeover Directive.

Click here to read the full report.

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

DUTCH UPDATE – AkzoNobel v. Elliott: landmark case on board conduct in takeover situations

Editors’ Note: Contributed by Geert Potjewijd, managing partner at De Brauw Blackstone Westbroek, and a member of XBMA’s Legal Roundtable, and Arne Grimme and Reinier Kleipool, partners at De Brauw Blackstone Westbroek. De Brauw Blackstone Westbroek is a leading Dutch law firm with broad expertise in M&A and governance matters.

The Enterprise Chamber has ruled that a company’s response to an unsolicited takeover proposal falls within the board’s authority to determine the company’s strategy. The board does not have to consult with shareholders first, but remains accountable to shareholders for the company’s actions. The ruling sets out important viewpoints for board conduct and other aspects of corporate governance in takeover situations.

Background

Akzo Nobel N.V. recently received three unsolicited takeover proposals from PPG Industries, Inc. The AkzoNobel management and supervisory boards have unanimously rejected these proposals, in each case after an extensive and careful decision-making process. On 1 June 2017 PPG announced the withdrawal of its takeover proposal for AkzoNobel.

In response to the proposals by PPG, activist hedge fund Elliott International, L.P. demanded from AkzoNobel that it enter into discussions with PPG. After AkzoNobel rejected PPG’s third proposal, Elliott filed a petition with the Enterprise Chamber in Amsterdam requesting a corporate inquiry into AkzoNobel’s conduct and policies, and certain interim measures, including an extraordinary general meeting to vote on the dismissal of the chairman of AkzoNobel’s supervisory board.

Corporate governance in takeover situations

In its judgment of 29 May 2017, the Enterprise Chamber denied the requests by Elliott and others to order interim measures, as it did not see sufficient reason to order any such measures. The Enterprise Chamber will rule on the request for a corporate inquiry at a later date.

The ruling by the Enterprise Chamber sets out important viewpoints for corporate governance in takeover situations.

Authority and accountability of the board

  • A company’s response to an unsolicited takeover proposal falls under the authority of the management board to determine the company’s strategy, under supervision of the supervisory board.
  • Shareholders do not have to be consulted prior to the company’s response to an unsolicited takeover proposal, but the management and supervisory boards remain accountable to shareholders for the company’s actions.
  • In assessing an unsolicited takeover proposal, the board must be guided by the interests of the company and its stakeholders with a view to long term value creation. As a logical consequence, an unsolicited proposal could be reasonably rejected even against the will of (a majority of) shareholders.
  • While the Enterprise Chamber does not test the validity of the grounds for rejecting an unsolicited takeover proposal, it is important that the company show it has seriously considered the proposal by following a careful decision-making process. Relevant factors are:
    • the intensity and frequency of management and supervisory board meetings;
    • the assistance from respected external financial and legal advisers;
    • the range of topics considered when rejecting the proposal (e.g. value, timing, certainty and stakeholder considerations).

Duty to negotiate

  • There is no general obligation for a target company to enter into substantive discussions or negotiations with a bidder that has made an unsolicited takeover proposal, not even in the case of a serious bidder making a serious bid.
  • The obligation of managing and supervising directors to properly perform their duties may lead to a requirement to enter into discussions or negotiations with a bidder. Whether substantive discussions or negotiations with a bidder are required depends on the actual circumstances, which may include:
    • whether the company has decided to abandon its standalone strategy;
    • the bidder’s strategic intentions;
    • to what extent the company can assess the proposal without substantive discussions;
    • other interactions between the company and the bidder, including whether the company has given the bidder sufficient insight into the reasons for its rejection as to enable the bidder to improve on its proposal;
    • whether the company can realistically withdraw from such discussions or negotiations, especially if there are reasons to anticipate a breach of confidentiality, which could impact the company’s share price and shareholder base.

Relationship with shareholders

  • Shareholders are entitled to adequate information about the considerations underpinning those policies, not only with a view to exercising their rights as a shareholder, but also to determine their own investment policies.
  • A continued lack of confidence of a substantial number of shareholders in the company’s strategy as determined by the management and supervisory boards is harmful to the company and its stakeholders. It is in principle up to the boards of the company to consider how the company can normalise its relationship with shareholders.

With this ruling, the Enterprise Chamber confirmed that it is the exclusive authority of the boards of a Dutch company to determine the response to an unsolicited takeover proposal. The boards do not have a duty to consult with shareholders prior to responding to an unsolicited takeover proposal. In such a situation, the boards need to carefully take into account the interests of all stakeholders of the company and they remain accountable to shareholders on the position taken in response to an unsolicited takeover proposal.

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

The Dutch Corporate Governance Code and The New Paradigm

Editors’ Note: This article was co-authored by Martin Lipton, Steven A. Rosenblum, Karessa L. Cain, Sabastian V. Niles and Sara J. Lewis of Wachtell, Lipton, Rosen & Katz.

Executive Summary/Highlights:

The new Dutch Corporate Governance Code, issued December 8, 2016, provides an interesting analog to The New Paradigm, A Roadmap for an Implicit Corporate Governance Partnership Between Corporations and Investors to Achieve Sustainable Long-Term Investment and Growth, issued September 2, 2016, by the International Business Council of the World Economic Forum. The new Dutch Code is applicable to the typical two-tier Dutch company with a management board and a supervisory board. The similarities between the Dutch Code and the New Paradigm demonstrate that the principles of The New Paradigm, which are to a large extent based on the U.S. and U.K. corporate governance structure with single-tier boards, are relevant and readily adaptable to the European two-tier board structure.

Both the New Paradigm and the Dutch Code fundamentally envision a company as a long-term alliance between its shareholders and other stakeholders. They are both based on the notions that a company should and will be effectively managed for long-term growth and increased value, pursue thoughtful ESG and CSR policies, be transparent, be appropriately responsive to shareholder interests and engage with shareholders and other stakeholders.

Like The New Paradigm, the Dutch Code is fundamentally designed to promote long-term growth and value creation. The management board is tasked with achieving this goal and the supervisory board is tasked with monitoring the management board’s efforts to achieve it.

Click here to read the full article.

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

Dutch Update – Private Company Law Simpler And More Flexible from 1 October 2012

Editors’ Note:  Geert Potjewijd is a partner at De Brauw Blackstone Westbroek, resident in Beijing, and a member of XBMA’s Legal Roundtable.  This paper was authored by Prof. Martin van Olffen and Prof. Harm-Jan de Kluiver, both partners at De Brauw Blackstone Westbroek.  De Brauw Blackstone Westbroek is a leading Dutch M&A firm with broad expertise in Dutch governance matters.

Executive Summary/Highlights:

The Act on simpler and more flexible laws of private limited liability companies (“BVs“) will come into force on 1 October 2012. The changes introduced by this Act will offer greater freedom in structuring BVs.  This article summarises the key changes and possibilities introduced by the new law. It also addresses a few points relevant to existing BVs.

For a matrix with the key changes please click here.

Main Article:

1              New possibilities

The new law offers a number of new possibilities when incorporating a BV or amending the articles of association of an existing BV. Some of these possibilities are summarised below.

1.1          Capital

The requirement of a EUR 18,000 minimum capital will be abolished, and also, as a consequence, various formalities, such as a bank’s statement for cash payment on shares and an auditor’s statement for contributions in kind.

Under the new law, the articles of association do not have to specify an authorised capital. As a result, the current requirement that 20% of the authorised capital be issued will no longer apply. Under the new law, the articles of association may provide for a par value of the shares in a currency other than euro.

1.2          Shares without voting rights and shares without entitlement to profits

The new law allows the articles of association to limit or exclude certain shares from sharing in the profits. Certain shares may also be excluded from voting.

This offers shareholders greater flexibility in structuring their mutual relationship and provides an alternative to issuing depositary receipts for shares, the current option for separating profit-sharing and voting rights.

1.3          Right to give instructions

The general meeting or another corporate body will be allowed under the new law to give specific instructions to the managing board. The managing board must follow these instructions unless this is not in the company’s interest. Under the current law the managing board can only be required by the articles of association to follow general policy principles.

1.4          Obligations of shareholders under the articles of association

Under the new law, the articles of association may attach to share ownership certain contractual obligations towards the BV, other shareholders or third parties. The articles may also attach certain requirements to share ownership and provide that shareholders must offer or transfer all or part of their shares in certain situations.

In current practice, these types of obligations are regularly included in a shareholders’ agreement. The advantage of including the obligations in the articles of association is that a provision can be added suspending a shareholder’s voting rights, profit-sharing rights and/or meeting rights if the shareholder fails to meet its obligations.

1.5          Appointment of managing and supervisory directors

There will be greater flexibility in how to appoint and dismiss managing and supervisory directors of companies that are not qualified as ‘large’ and therefore not subject to the Dutch structure regime. Under the new law, the articles of association may allow a shareholder to appoint, suspend and dismiss its “own” managing or supervisory director. Every shareholder with voting rights should be able to take part in the decision-making about the appointment of at least one managing director and one supervisory director, respectively.

Under the current law, the articles of association may not contain this type of provision. Parties often try to achieve the same result via a combination of binding nominations and a shareholders’ agreement.

2              Changes for existing BVs

The new law will offer new possibilities when incorporating a new BV or amending the articles of association of an existing BV. It also introduces changes that will be of immediate relevance to existing BVs as of 1 October 2012.

If and how these changes could affect a company will vary and depend partly on the wording of the company’s existing articles of association. These may contain a reference to sections of the current law that will change or cease to apply under the new law. It depends on the wording and intent of the relevant provision in the articles whether it will continue to apply after the new law enters into force. We would therefore recommend assessing whether existing articles of association will be applied and interpreted differently as a result of the new law or seeking advice on this. The following key areas could play a role:

2.1          Distributions

Distributions may only be made insofar as the company’s equity exceeds any reserves maintained by law or pursuant to the articles of association. In principle, distribution of share capital will be permitted under the new law. Under the new law a resolution of the general meeting to make a distribution will not have effect until the company’s managing board has approved the resolution. The managing board will refuse to give its approval if the company is unable to continue paying its due debts after the distribution.

 
Shareholders resolutions to make a distribution adopted before 1 October 2012 will remain subject to the current law.

2.2          Repurchase, capital reduction

The same rules will apply to repurchase and capital reduction as those introduced for distributions. In the case of capital reduction, the possibility of creditors’ opposition will no longer exist. This means that it will no longer be necessary to file a resolution to reduce the capital with the Trade Register and publish it in a national newspaper. A resolution to reduce the capital involving repayment to shareholders will not have effect until the managing board has approved the resolution. As in the case of distributions, the managing board will refuse approval if the company is unable to pay its due debts after the repurchase or capital reduction.

The prohibition of repurchasing more than 50% of the issued share capital will cease to exist after 1 October 2012. But a party other than the company or one of its subsidiaries will at all times have to hold at least one voting share. Under the new law, it will also be possible to cancel certain shares only.

A shareholders’ resolution to reduce capital adopted before 1 October 2012 will remain subject to the current BV rules.

2.3          Prohibition on financial assistance

The current law provides that a BV may not provide security for the acquisition of its own shares and may only extend loans insofar as the free reserves allow this. This financial assistance prohibition will cease to exist under the new law.

Existing companies have frequently included the financial assistance prohibition for information purposes in their articles of association. In such cases this restriction will generally no longer be in effect. Only in specific cases will such restriction remain in effect, provided that in principle this restriction will no longer be externally enforceable against third parties but can only be enforced internally.

2.4          Depositary receipt holders with meeting rights

BVs with depositary receipts issued with the company’s cooperation before 1 October 2012 will have to attach meeting rights to such depositary receipts if they amend their articles of association after 1 October 2012.

If depositary receipts have been issued with the company’s cooperation before 1 October 2012, the company must enter the details of the depositary receipt holders in its shareholders register before 1 October 2013.

If such details of these depositary receipt holders have not been entered in the shareholders register one month before the date of the first general meeting to be held after 1 October 2012, these depositary receipt holders will have to be called to the general meeting in the manner prescribed under the current BV rules.

2.5          Managing and supervisory directors – vacancy or being prevented from acting

Under the current law, the articles of a BV must provide for situations where there is a vacancy on the managing board or a managing director is prevented from acting. The new law also requires such provision for supervisory directors. Existing BVs will have to include the provision for supervisory directors if they amend their articles of association after 1 October 2012.

The new law will also allow provisions in the articles of association specifying when managing or supervisory directors are deemed ‘prevented from acting’.

2.6          Convening general meetings

Under the current law, general meetings must be convened at least 15 days before the date of the meeting. This period is reduced to 8 days under the new law.

General meetings held after the new law takes effect may be convened applying the new shorter notice period. If the articles require a longer notice period, however, that longer period will have to be observed.

3              More information

The following tools can be found on De Brauw Blackstone Westbroek’s website:

Sample Articles of Association

A guide for a 100% subsidiary under the new law

For these Articles of Association and a comparative text (in Dutch)

An overview of changes in Book 2 of the Dutch Civil Code resulting from the new law

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

DUTCH UPDATE – Dutch Court Assumes International Jurisdiction and Declares An International Collective Settlement Binding

Editors’ Note: Kees Peijster and Geert Potjewijd are partners at De Brauw Blackstone Westbroek, resident in Amsterdam and Beijing, respectively, and are members of XBMA’s Legal Roundtable.  As leading Dutch M&A lawyers, they have broad expertise handling significant cross-border transactions involving China and the Netherlands.  The authors are Ruud Hermans, head of De Brauw´s corporate litigation, and Jan Tjeenk, partner in financial markets and corporate litigation.

Highlights: 

  • The Netherlands has become an attractive venue for settling international mass claims, irrespective of whether any litigation has taken place in the Netherlands.
  • The Netherlands is the only European jurisdiction offering a procedure to declare a collective settlement binding on all class members on an “opt out” basis.
  • Recently, the Amsterdam Court of Appeal declared an international collective settlement binding in a case where none of the potentially liable parties and only a limited number of potential claimants were domiciled in the Netherlands.
  • The decision will in principle have to be recognized in all European Member States, Switzerland, Iceland and Norway and, depending on local law, possibly in other countries as well.

MAIN ARTICLE

On 17 January 2012, the Amsterdam Court of Appeal declared an international collective settlement binding in a case where none of the potentially liable parties and only a limited number of the potential claimants were domiciled in the Netherlands. This decision confirms the Court of Appeal’s earlier provisional decision to assume international jurisdiction. The decision will in principle have to be recognised in all European Members States, Switzerland, Iceland and Norway. The Netherlands is the only European country where a collective settlement can be declared binding on an entire class on an “opt out” basis. This makes the Netherlands an attractive venue for settling international mass claims, irrespective of whether any litigation has taken place in the Netherlands. This option has become more important since the U.S. Supreme Court’s decisions in Morisson v. National Australia Bank and Hoffman-La Roche v. Empagran.

See for more general information on the Dutch Act on the Collective Settlement of Mass Claims (Wet collectieve afwikkeling massaschade; the “WCAM”): Ruud Hermans and Jan de Bie Leuveling Tjeenk, International Class Action Settlements in the Netherlands since Converium, in The International Comparative Legal Guide to: Class & Group Actions 2012.

Background of the case

Converium Holding AG (“Converium”) is a Swiss reinsurance company (currently known as SCOR Holding AG). Converium was a wholly owned subsidiary of Zürich Financial Services Ltd (“ZFS”) until 2001, when ZFS sold all its Converium shares through an IPO. Converium shares were listed on the SWX Swiss Exchange and Converium ADSs were listed on the New York Stock Exchange. Converium’s share price declined after the company announced increases in its loss reserves in the period from 2002 through 2004. These announcements led to securities class actions in the United States against Converium and ZFS on behalf of a worldwide putative class. The United States District Court for the Southern District of New York (the “U.S. Court”) certified a class consisting of all U.S. persons who had purchased Converium securities on any exchange, as well as all persons – regardless of their residence – who had purchased Converium securities on a U.S. exchange (the “U.S. Purchasers”). The U.S. Court excluded from the class all non-U.S. persons who had purchased Converium securities on any non-U.S. exchange (the “Non-U.S. Purchasers”). The U.S. class action was settled and these settlements (the “U.S. Settlements”) were approved by the U.S. Court. Both Converium and ZFS then settled the potential claims of all Non-U.S. Purchasers with a Dutch foundation representing the Non-U.S. Purchasers (the “Non-U.S. Settlements”). The Non-U.S. Purchasers were predominantly domiciled in Switzerland and the U.K. Only a few were domiciled in the Netherlands. De Brauw acted as legal counsel to ZFS in its successful application to the Amsterdam Court of Appeal to declare this settlement binding.

Decision

The Amsterdam Court of Appeal (the “Court”) confirmed its provisional decision on jurisdiction which followed substantially the same line of reasoning as its Shell decision. But the Converium settlement is less connected to the Netherlands than the Shell settlement. In Converium, none of the potentially liable parties and only a limited number of the interested persons were domiciled in the Netherlands. The Court emphasised the significance of a Dutch foundation representing the interested persons and having to distribute the settlement relief under the settlement agreement. This suggests that even without any interested persons domiciled in the Netherlands the Court could have jurisdiction to declare the settlement binding. In its earlier provisional decision, the Court explicitly referred to the limitations for the U.S. courts to do the same in securities and anti-trust cases as a result of the U.S. Supreme Court’s decisions in Morrison v. National Australia Bank and Hoffman-La Roche v. Empagran.

In Converium, a number of defendants argued that the amount of settlement relief for the Non-U.S. Purchasers under the Non-U.S. Settlement concluded by Converium was unreasonable, because the amount of settlement relief for the U.S. Purchasers under the U.S. Settlements was relatively higher. The Court dismissed this objection on the ground that the legal position of the Non-U.S. Purchasers differed substantially from the legal position of the U.S. Purchasers, because the Non-U.S. Purchasers had been excluded from the class by the U.S. Court and no litigation by Non-U.S. Purchasers had been initiated outside of the U.S.

The same defendants also argued that the amount of settlement relief was unreasonable, because the fees for U.S. plaintiffs’ lead counsel, to be deducted from the settlement relief, were too high. The Court dismissed this objection on the ground that the work in connection with the settlement had been carried out for a substantial part within the U.S. jurisdiction by U.S. law firms and that what is considered customary and reasonable in the U.S. may be taken into account in applying the reasonableness test under Dutch law.

The Court also ruled that the representativity test had been met because the Dutch foundation representing the interested persons had various participants and supporters, including shareholder associations and institutional shareholders, domiciled in Switzerland and the U.K., where most known Non-U.S. Purchasers were domiciled.

Implications

The Netherlands is the only European jurisdiction offering a procedure to declare a collective settlement binding on all class members on an “opt out” basis. Using the Shell decision as a precedent, the Converium decision confirms that the Amsterdam Court not only has jurisdiction to declare an international collective settlement binding on all class members, irrespective of their domicile, but also has the appetite to facilitate such settlements even if the parties to the settlement and the class members only have a limited connection to the Netherlands.

All EU Member States, Switzerland, Iceland and Norway will in principle have to recognize the Converium decision. However, no case law on this issue exists at this point. Whether other countries will also recognize it, will depend on local law.

The Converium decision confirms that the Netherlands is Europe’s most attractive venue for facilitating international settlements. It is irrelevant in this context whether the settlement forms the outcome of class action litigation, and if it does, in which country the litigation took place.

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

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