Foreign Shareholders, Royal Dutch Shell, and a Record (Attempted) Settlement

We  hear a great deal about the litigious environment in the United States.  It turns out that European investors are growing increasingly combative towards managers and directors.  Traditionally shareholder suits in Europe have been far less common than in the United States.  This is true even though derivative suits are generally available on the continent.  This may, however, be changing.  For one thing, as ISS has reported, large numbers of foreign institutional investors have served as lead plaintiffs in US class action securities law suits. 

Last month, Royal Dutch Shell announced a settlement of a class action suit with non-US investors that arose when the company restated its oil and natural gas reserves by more than 25% in 2004.  Assuming the District Court finds the settlement binding on non-US investors and the Amsterdam Court of Appeals approves of the settlement, the settlement will be the largest European securities shareholder settlement in history.  The Shell action was facilitated by a new Dutch law (Wet collectieve afwikkeling massaschade, June 23, 2005 (Netherlands)) allowing for such settlements to be binding on non-US investors.   

This settlement, however, has not made everyone happy.  Lead Plaintiff in the securities class action has objected to and has asked the court to enjoin the settling shareholders from pursuing approval of the settlement.  The filings on this issue can be found at the DU Corporate Governance web site.

Comments

[B. Salman Banaei]

Still looking for the Dutch law mentioned in the articles referenced above. BSB.

[Werner R. Kranenburg]

Thanks for spotting this.

Indeed the plot thickens with this twist of events, though it must be noted that, as you correctly noted, the US court already had to rule on the issue, with or without this memorandun in opposition.

The DUSCL folder helpfully contains both the Lead Plaintiffs' motions of opposition to sever and in support of enjoinder as well as the motions in response from Shell and the Opt-out Plaintiffs.

On the topic of derivative actions it may be interesting to add that there are no derivative actions in the Netherlands (there are other avenues available) and the law on such actions is due to change in the UK with the taking effect of the Companies Act 2006 later this year.

Werner R. Kranenburg
Editor, With Vigour and Zeal http://kranenburgesq.com/blog/

(And in response to BSB's comment, the statute you're looking for can be found under the link 'Dutch law' in the post.)