1 Introduction

Transnational civil litigation against MNEs differs from traditional civil litigation. The transnational nature of civil claims against MNEs has many distinct, yet significant consequences on the procedural and substantive law that applies. In particular, these claims raise a number of legal questions regarding whether the host or the home State courts have jurisdiction to hear the case, and whether to apply the law of the host or home State. Furthermore, various procedural aspects can affect the progress and the outcome of the proceedings. For example, standing impacts the ability of victims and NGOs to participate in civil proceedings, while the availability of collective redress mechanisms can improve the opportunities for poor communities to hold MNEs liable or obtain remedy where they may not have the resources to bring individual claims. In addition, rules that restrict access to evidence held by MNEs may also complicate victims’ ability to produce sufficient evidence to establish liability. Finally, litigation costs and limited availability of financial support may influence victims’ decision to bring, or continue, a claim against an MNE. Ultimately, all of these procedural rules will impact the plaintiffs’ ability to gain access to justice.

2 Jurisdiction of home State courts

When faced with a civil claim against an MNE for harm occurring in a host country, French and Dutch courts must assess whether they are competent to hear the claim. Rules of private international law, which govern transnational disputes that arise from the interactions between private persons, will guide judges in this exercise. In the context of this book, these rules are relevant for various reasons. First, transnational litigation against MNEs involves private parties from various countries, including host State plaintiffs and MNEs with their statutory seat, central administration, or main place of business in France or the Netherlands. Second, in some cases, the damage may have occurred in the host country while the event giving rise to the damage may have occurred in the home country. Third, litigators have brought transnational claims against MNEs under various branches of civil law, including tort and labour law, to which private international law applies.

In the EU, a number of regulations harmonize private international rules governing jurisdiction in civil cases across Member States, including France and the Netherlands. In particular, Regulation 1215/2012 (Recast Brussels I Regulation)¹ defines the rules that domestic courts must apply when they assess whether they are competent to hear a civil or commercial claim. This instrument has a major impact on whether civil claims can be brought against MNEs in EU home countries. Under the Recast Brussels I Regulation, different rules of jurisdiction will apply to transnational claims against MNEs depending on whether the corporate defendant is domiciled in an EU Member State.

This section aims to offer an analysis of the impact of the Recast Brussels I Regulation on access to courts in France and the Netherlands in the context of transnational litigation against MNEs. Readers should nonetheless keep in mind that the Recast Brussels I Regulation repealed Regulation 44/2001 (Brussels I Regulation),² which, until 9 January 2015, was the instrument applicable to claims against MNEs.³ Therefore, the following analysis may include references to the Brussels I Regulation. However, the change of Regulation has little impact on the potential determination of jurisdiction, as the rules applicable to transnational claims against MNEs are, except for the provisions on lis pendens, similar in both Regulations. Another aspect to keep in mind is that the Recast Brussels I Regulation applies in civil and commercial matters regardless of the court or tribunal.⁴ This means that specialized civil courts, such as labour courts, must also apply the regulation.⁵

Corporate defendant domiciled in the EU

Under the Recast Brussels I Regulation, the defendant’s domicile is the most relevant criteria for establishing jurisdiction, making it a general precondition for connecting a claim to an EU Member State.⁶ According to Article 4(1), persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State.⁷ A company, or a legal person, is deemed to be domiciled where it has its statutory seat, central administration, or principal place of business.⁸

In France, this rule is reflected in Article 42 French Code of Civil Procedure (Code de procédure civile), which states that the court with territorial jurisdiction is, unless otherwise provided, that of the place where the defendant resides. If there is more than one defendant, the plaintiff can seize the court of the place where one of them resides. Furthermore, the domicile of a legal person means the place where it is established.⁹ Another relevant rule is found under Article 15 French Civil Code (Code civil), which provides that a French person may be brought before a French court for obligations contracted by that person in a foreign country, even with a foreigner.

In the Netherlands, rules in the Dutch Code of Civil Procedure (Wetboek van Burgerlijke Rechtsvordering) differ depending on how civil proceedings are commenced. If the proceedings are initiated by a writ of summons, the Dutch court has jurisdiction if the defendant is domiciled or habitually resides in the Netherlands.¹⁰ However, if they are initiated by a petition, the Dutch court has jurisdiction in three situations: where the applicant, or one of the applicants, or one of the parties is domiciled or habitually resides in the Netherlands.¹¹ As a result, in both types of proceedings the Dutch court has, or can have, jurisdiction if the defendant is domiciled in the Netherlands. A legal person has its domicile where it has its seat.

In the context of transnational claims against MNEs, French and Dutch courts therefore have jurisdiction to hear a civil claim against a member of an MNE which has its statutory seat in France and the Netherlands respectively. So far, this rule has not posed problems where civil claims have targeted a company domiciled in France or the Netherlands, such as the French or Dutch parent company of an MNE.¹² For instance, in Alstom the Nanterre Regional Court held that, pursuant to Article 42 French Code of Civil Procedure, it had jurisdiction to hear the claims against Alstom and Veolia, as both defendants had their registered offices within the jurisdiction of the court.¹³ Similarly, in Shell both the District Court and the Court of Appeal of The Hague found that, based on the then-applicable Brussels I Regulation, they had undisputed jurisdiction over RDS, the parent company, because it was headquartered in the Netherlands.¹⁴

Corporate defendant domiciled outside the EU

Rules on jurisdiction are different for defendants which are not domiciled in a Member State.¹⁵ Article 6(1) Recast Brussels I Regulation provides that the law of each Member State determines the jurisdiction of its courts in such a situation (ie residual jurisdiction).¹⁶ Therefore, France and the Netherlands will determine whether their courts can exercise jurisdiction over defendants domiciled in foreign countries, such as subsidiaries based in host States.¹⁷ In the context of transnational claims against MNEs, there are a number of alternative grounds of jurisdiction upon which French and Dutch courts may base jurisdiction over host State subsidiaries, namely joining of co-defendants and forum necessitatis.

Joining of co-defendants

Both France and the Netherlands allow the joining, or joinder, of co-defendants. Under Article 42 §2 French Code of Civil Procedure, if there is more than one defendant, the plaintiff can choose to seize the court of the place where one of them is domiciled. Similarly, Article 7(1) Dutch Code of Civil Procedure provides that, if the Dutch court has jurisdiction with respect to one of the defendants, it also has jurisdiction with respect to other defendants involved in similar proceedings, provided the claims against the various defendants are connected to the extent that reasons of efficiency justify a joint hearing.

However, these claims must meet a number of criteria for French or Dutch courts to have jurisdiction in cases involving co-defendants. French courts require three elements to be met.¹⁸ First, the claims against the defendants must bear ‘close connected links’. Therefore, the object of the dispute has to be identical. Second, one of the defendants must be domiciled in France. As a result, French courts lack jurisdiction if the only basis for jurisdiction lies in a choice-of-court clause or if one of the defendants is a French national. Third, the defendant must be ‘an actual, serious defendant in order to avoid any fraudulent choice of jurisdiction by initiating a fictitious claim against a French resident’.¹⁹ In the Netherlands, the claims against the various defendants must be connected to the extent that reasons of efficiency justify a joinder of claims.

Both provisions reflect Article 8(1) Recast Brussels I Regulation,²⁰ which allows a joinder where one of the defendants is domiciled in the Member State whose courts have been seised, ‘provided the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings’. This alternative ground for jurisdiction aims to achieve efficiency and procedural economy to facilitate the sound administration of justice.

In the context of transnational litigation against MNEs, French and Dutch courts will therefore be competent to hear claims against various companies of an MNE, including those based in a third country, when one of these companies is domiciled in France or the Netherlands respectively, provided the above-mentioned requirements are met.

In the Netherlands, plaintiffs have strategically used the ground of jurisdiction under Article 8(1) Recast Brussels I Regulation and Article 7(1) Dutch Code of Civil Procedure to establish the Dutch court’s jurisdiction over the foreign subsidiaries of Dutch companies. This approach has proved successful in both Shell²¹ and Kiobel,²² as the Dutch courts concluded they had international jurisdiction to hear the claims against the Nigerian and British subsidiaries of the Shell group.

In Shell, the Court of Appeal of The Hague concluded that the claims against RDS and SPDC were connected to the extent that reasons of efficiency justified a joint hearing based on the facts:

Similarly, in Kiobel, the District Court of The Hague found that the claims against the Dutch and foreign defendants were based on the same facts, circumstances, and legal bases, and therefore pertained to the same situation, both factually and at law. If these related cases were to be prosecuted separately, there was a risk that contradictory decisions would be made.²⁴

These cases show that it is in the interest of the plaintiffs to join the parent company and its subsidiaries. Joining of co-defendants may not only ‘prove useful for establishing a shared liability, help ease the evidence issues, and even have a bearing on the applicable law’,²⁵ but it can also facilitate the plaintiffs’ access to home State courts when they should actually be barred from seizing them. In the Dutch context, a significant argument for the use of this jurisdictional ground is that the potential success of the claim against the Dutch defendant does not determine whether the Dutch court should have jurisdiction over the foreign defendants. In Kiobel, the District Court rejected the defendants’ argument that it did not have jurisdiction to hear the claims against the British and Nigerian subsidiaries ‘as the claims against “anchor” defendant SPNV have no chance of succeeding’.²⁶ Furthermore, dismissal of the liability claim against the Dutch anchor defendant at a later stage does not preclude the Dutch courts from assessing the liability of the foreign defendants. In Shell, dismissing the liability claim against RDS did not stop the District Court from carrying on with the proceedings against SPDC and finding that the Nigeria-based subsidiary was liable for some of the oil spills. Ultimately, joinder of co-defendants is a crucial strategic tool in helping plaintiffs establish jurisdiction to seek liability of foreign companies independently of that of their parent company in European home State courts.

Forum necessitatis

Both France and the Netherlands allow their courts to assume jurisdiction in situations where it would not otherwise exist based on forum necessitatis or the need to guarantee access to justice.²⁷

In France, the use of forum necessitatis is based on the prohibition of ‘denial of justice’ (déni de justice), and stems from case law.²⁸ French courts may exercise jurisdiction over claims for which they would normally have no jurisdiction as long as two requirements are met. First, the plaintiff must prove it is impossible for them to bring the case in a foreign court. Impossibility can be based either on factual grounds (eg the plaintiff would be seriously threatened if they returned to the foreign country) or legal grounds (eg the plaintiff can show that the foreign court has already ruled it does not have jurisdiction). If a foreign court rules that the case is inadmissible or dismisses the case on the merits, a denial of justice cannot be found, as the exercise of forum necessitatis would be deemed inappropriate.²⁹ Second, there must be some nexus with French courts.³⁰ This requirement is usually easily achieved, as the most stringent case law merely requires that the plaintiff has their habitual residence in France.³¹

In the Netherlands, forum necessitatis stems from statute. Dutch courts may exercise jurisdiction over claims that have no nexus with the Dutch legal order if legal proceedings outside the Netherlands appear to be impossible.³² Impossibility may be based on factual or legal impossibility. Factual impossibility may include circumstances beyond the foreign country’s control, such as natural disasters or war, while legal impossibility may be demonstrated by denial of access to a tribunal due to race or religion.³³ Moreover, Dutch courts may have jurisdiction if the legal proceedings have sufficient connection with the Dutch legal sphere and it would be unacceptable to demand from the plaintiff that they submit the case to the judgment of a foreign court.³⁴ While Dutch courts have used forum necessitatis to accept jurisdiction where no sufficient connection with the Netherlands exists, they have also refused to accept jurisdiction over claims based on poverty alone or prohibitively high litigation costs in the alternative forum.³⁵

The Recast Brussels I Regulation does not address the issue of forum necessitatis. During the review of the Brussels I Regulation, the EC proposed to incorporate a rule on forum necessitatis to harmonize this subsidiary jurisdiction rule among Member States. This notably aimed to guarantee access to a court as well as a level playing field for companies in the EU.³⁶ However, this option was excluded from the final version of the Recast Brussels I Regulation.

In transnational claims against MNEs in France, plaintiffs have asserted jurisdiction based on denial of justice. However, courts have differed in their reception to this argument. In Alstom in 2009, the Nanterre Regional Court held it had jurisdiction over the corporate defendants, as both companies were French and had their statutory seat in France. In addition, it took into account the risk of denial of justice. Notably, it raised the point that:

However, in COMILOG the plaintiffs were unsuccessful in using denial of justice as a basis for establishing jurisdiction. In this case, in 1991, COMILOG – a Gabonese mining company created in 1953 when the country was under French colonial rule – fired more than 1,000 Congolese employees without compensating them. In 1992, some of COMILOG’s former employees lodged a complaint against COMILOG with the Pointe-Noire Labour Court in the Republic of Congo in order to obtain their severance pay. In 1993, the Labour Court rejected the exception of territorial incompetence raised by COMILOG, and this judgment was confirmed by the Pointe Noire Court of Appeal in 1994. COMILOG lodged an appeal in cassation against this decision. However, at the time of writing the Congolese Court of Cassation still had not ruled on this case.³⁸ To date, the former employees are still waiting to obtain compensation for their dismissal.

In 2007, a group of more than 800 former employees sued COMILOG, its subsidiaries based in France, and its parent company Eramet, a French metallurgical MNE, before the Paris Labour Court, arguing that the French court had jurisdiction on various grounds.³⁹ First, Article 15 Civil Code, which provides that a French person may be brought before a French court for obligations contracted by that person in a foreign country, even with an alien, was applicable for the plaintiffs, since COMILOG was a French company at the time of its creation. Second, Article R 1412-1 French Labour Code (Code du travail) provides that an employee may bring a claim before the labour court of the place where the agreement was contracted or of the place where the employer is established. Third, the plaintiffs had been denied justice in the Republic of Congo. They alleged that, pursuant to Article 6(1) ECHR,⁴⁰ ‘the right of access to a court is breached when one of the parties cannot bring a claim in front of any court. In such a situation, French courts have international jurisdiction based on the principle of denial of justice.’⁴¹

In 2011, the Labour Court rejected the plaintiffs’ arguments and ruled it was incompetent to hear the claims against all the defendants, including COMILOG.⁴² It found the case had no nexus with France, given that COMILOG was a Gabonese company and that all the plaintiffs were of Congolese nationality. Furthermore, it rejected the existence of denial of justice in the plaintiffs’ country:

The Labour Court concluded that the plaintiffs had not sufficiently demonstrated that they could not materially access courts in Gabon or the Republic of Congo.

The Paris Court of Appeal overturned the Labour Court’s judgment in two instances. First, it accepted that the French courts had jurisdiction over COMILOG’s French subsidiaries based on Article 15 Civil Code and Article 42 §2 Code of Civil Procedure.⁴⁴ Then it accepted, on the grounds of denial of justice, that French courts had jurisdiction over COMILOG for 600 claimants who were able to prove they had brought a claim in the Republic of Congo.⁴⁵ The Court of Appeal found that the case met all the conditions required to assume jurisdiction based on denial of justice. First, the Congolese courts had still not rendered a final ruling more than 20 years after the plaintiffs had first lodged their complaint, which was contrary to the principle of achieving justice within a reasonable time. Second, the Court of Appeal found a connection with France by concluding that Eramet was COMILOG’s main shareholder – it owned 63.71 per cent of its capital – at the time the complaints were brought before the French courts. The ruling of the Court of Appeal was hailed by NGOs.⁴⁶ It was significant from an access to justice perspective, as the Court of Appeal characterized denial of justice on the objective absence of a final ruling in the Congolese proceedings, as opposed to the formalistic criteria of access to a court in general.

However, in 2017 the Court of Cassation overturned this ruling.⁴⁷ It held that a foreign court was already seised of the dispute. It was therefore not impossible for the former employees to have access to a judge responsible for ruling on their claim. Furthermore, the mere acquisition by a French company of a shareholding in the capital of COMILOG was not a connecting factor by virtue of the denial of justice doctrine. In particular, ‘the connection with France cannot result from simple capitalist links between several companies that are not co-employers’.⁴⁸ In 2019, the Paris Court of Appeal rejected the plaintiffs’ claims, thus aligning with the Court of Cassation’s position.⁴⁹

The reasoning of the Court of Cassation regarding what constitutes a denial of justice is questionable from an access to justice perspective. The Court of Cassation adopted a formalistic view by focusing on the ability of the Congolese claimants to bring proceedings abroad and have access to a judge, rather than their ability to effectively obtain a ruling and therefore a remedy. This approach contradicts French statutory rules on denial of justice⁵⁰ and the right to a trial within reasonable time protected by Article 6(1) ECHR. The ECtHR recognizes that, in civil proceedings, the reasonable-time requirement usually starts from the moment the action is started before a competent court until the last decision delivered has become final and has been executed.⁵¹ In COMILOG, the plaintiffs lodged a complaint in 1992. At the time of the Court of Cassation’s ruling, they had been waiting for a judicial decision for 25 years. Such delay was a clear violation of the plaintiffs’ right to a trial within reasonable time. Ultimately, the Court of Cassation’s approach goes against the increasing recognition of the forum necessitatis doctrine to guarantee access to justice in a growing number of countries.⁵²

Lis pendens

In a cross-border context, lis pendens usually applies where the same dispute has been brought before courts from two different countries which may both exercise competence. Plaintiffs may ask to apply lis pendens to stay proceedings in a court when another court has already been seised of the same dispute. This rule is based on the aim to reduce the possibility of concurrent proceedings and to ensure that irreconcilable judgments will not be given in different States.⁵³

Provisions on lis pendens already existed in the Brussels I Regulation but were concerned with similar proceedings brought in the courts of different Member States. The Recast Brussels I Regulation introduced novel provisions on lis pendens where, in parallel to proceedings or actions before Member States’ courts, similar proceedings or actions are pending before the courts of third States.⁵⁴ These provisions are directly relevant in the context of transnational litigation against MNEs.

Two situations should be distinguished. First, Article 33(1) provides for the situation when the court of a Member State is seised of an action involving the same cause of action between the same parties as the proceedings pending before the court of a third State. In this situation, the court of the Member State may stay the proceedings if it is expected that the court of the third State will give a judgment capable of recognition and, where applicable, of enforcement in that Member State, and it is satisfied that a stay is necessary for the proper administration of justice. Second, Article 34(1) governs the situation where the court in a Member State is seised of an action which is related to an action pending in the court of a third State. Similarly, the court of the Member State may stay the proceedings if it is expedient to hear and determine the related actions together to avoid the risk of irreconcilable judgments resulting from separate proceedings, and if the conditions of proper administration of justice, and recognition and enforcement of judgment, are met. The court of the Member State may apply Articles 33 and 34 at the request of one of the parties or, where possible under national law, of its own motion.

Articles 33(1) and 34(1) apply only to proceedings over which the courts of Member States have jurisdiction based on specific articles of the Recast Brussels I Regulation. Some of these articles, in particular Articles 4, 7, and 8, are directly relevant in the context of transnational litigation against MNEs. The new rules on lis pendens could potentially interfere with the grounds of jurisdiction relied upon the most by plaintiffs to successfully establish jurisdiction in the home State. Even when it has jurisdiction to hear a claim against either an EU-domiciled parent company (based on Article 4) or an EU-domiciled parent company together with its foreign subsidiary (based on Article 8), a Member State’s court can stay proceedings if similar proceedings are pending before the host State court. MNEs have already raised lis pendens as a tactic to avoid litigation in the home State court. For instance, in Shell the defendants argued that similar claims pre-existed in Nigeria.

At the same time, Articles 33 and 34 provide courts with discretion on whether to stay proceedings based on lis pendens. In doing so, a court must consider whether a judgment of a third State is capable of being recognized and enforced in the Member State concerned. It must also take into account the proper administration of justice and assess all the circumstances of the case before it, such as whether the third State’s court can give a judgment within a reasonable time.⁵⁵ Importantly, courts of Member States may continue proceedings if the proceedings in the third State are themselves stayed, discontinued, or unlikely to be concluded within a reasonable time, if the continuation of the proceedings is required for the proper administration of justice, or when the risk of irreconcilable judgments no longer exists.⁵⁶ As such, courts may refuse to stay proceedings when legal proceedings against MNEs are lengthy and questionable in terms of fairness and impartiality in host countries with a weak legal and judicial system.

Both France and the Netherlands recognize the application of lis pendens in cross-border disputes. In the Miniera di Fragne case, the French Court of Cassation held that lis pendens can be raised before the French court, by virtue of French ordinary law, where proceedings are brought before a foreign court which is also competent, but cannot be upheld where the decision to be given abroad is not likely to be recognized in France.⁵⁷ Therefore, the possible recognition in France of the foreign judgment, usually through international conventions, is an essential condition for permitting an application of lis pendens. In the Netherlands, pursuant to Article 12 Dutch Code of Civil Procedure, if a case has been brought before a foreign court and a judgment may be given that may be recognized and, where appropriate, enforced in the Netherlands, the Dutch court seised subsequently of a case involving the same cause of action and between the same parties may stay the proceedings until the foreign court rules on the dispute.

3 The law applicable to transnational claims against MNEs

Once French and Dutch courts have established jurisdiction, they must decide on the challenging question of whether to apply the law of the host or the home State.

At EU level, Regulation 864/2007 on the law applicable to non-contractual obligations (Rome II Regulation)⁵⁸ defines the rules domestic courts of EU Member States must apply when they assess the law applicable to non-contractual obligations in cross-border civil and commercial disputes. The Rome II Regulation generally extends the European harmonization of private international law already advanced by the Recast Brussels I Regulation.⁵⁹

The Rome II Regulation has not yet applied to any civil claims against MNEs before French and Dutch courts due to its temporal scope. It applies to events giving rise to damage which occurs after its entry into force (11 January 2009),⁶⁰ while the majority of claims brought against MNEs have so far been concerned with events giving rise to damage that occurred before this date. Consequently, Dutch and French courts have applied previously existing domestic rules in determining the applicable law substantive to such cases.

This section provides an overview of the conflict of laws in transnational claims against MNEs before French and Dutch courts. It also describes how the Rome II Regulation will influence the choice of law in future cross-border human rights and environmental claims against MNEs.

Applicable law in transnational claims against MNEs

In the Netherlands, so far, courts have applied host State law to all transnational claims against MNEs based on Dutch domestic rules prior to the Rome II Regulation. In Shell, the District Court ruled that the Wet conflictenrecht onrechtmatige daad (WCOD),⁶¹ which is a 2001 act governing the rules applicable in private international law matters, should determine the law applicable. One of the basic rules of the WCOD is the application of the law of the State where the act occurred in matters relating to tort, delict, or quasi-delict.⁶² However, when an act has a harmful impact upon a person, property, or the natural environment outside the State where the act occurred, the law of the State where the impact occurred should apply.⁶³ In cases of complex delicts or torts with a multiple locus, such as in transnational cases against MNEs, the law of the place where the damage occurred should apply.⁶⁴ An injured party cannot choose the law of the place in which the tort occurred, even if it offers greater protection to the victim.⁶⁵

In Shell, the plaintiffs argued that Dutch law should apply, whereas the defendants argued for the application of Nigerian law. The plaintiffs contended that the application of Nigerian law would be manifestly incompatible with the Dutch public order. The District Court chose to apply Nigerian law in assessing the plaintiffs’ claims because of their connection with Nigeria:

In 2015, the Court of Appeal noted that the parties had finally agreed that Nigerian law would apply to all claims, even those against the parent company, since Nigerian law was ‘the law of the state where (i) the spill occurred, (ii) the ensuing damage occurred and (iii) where SPDC, whose activities were allegedly monitored insufficiently, has its registered office’.⁶⁷ However, the Court of Appeal clarified that Dutch law should still apply to procedural matters as lex fori (law of the forum).

In Kiobel, the plaintiffs have acknowledged from the outset that their case is subject to Nigerian law, since the unlawful act was committed in Nigeria and the damage also occurred in Nigeria.⁶⁸

In France, the choice of which law to apply has been slightly different, as the question was raised in claims concerning a tort that occurred in the context of valid employment contracts or resulting from the participation of companies in unlawful international contracts.

In AREVA, the defendants argued against the application of French law on the grounds that the employment contract between Venel, the victim, and Cominak had been executed in Niger, that it was subject to Nigerien law, and that Venel was subject to the Nigerien social security fund. However, the French courts rejected this argument based on specific French social security law and a French–Nigerien Convention.⁶⁹ French law was applicable because Venel was affiliated to a compulsory social security scheme in France and had carried out his last employed activity on French territory.⁷⁰

In Alstom, the court was asked to determine the lawfulness of international contracts for the construction of a tramway in Jerusalem. The plaintiffs requested that the judge find that the contracting French companies were at fault for their participation in contracts that had contributed to the violation of international law norms based on international humanitarian treaties and French law.⁷¹ The defendants argued that the question of the lawfulness of an international contract could be examined only in the light of the law applicable to that contract, which in this case was Israeli law.⁷² The District Court eventually found that French law could not be applied to a public contract concluded between the State of Israel and a company incorporated under Israeli law for a building site in the City of Jerusalem.

The Rome II Regulation

As a general rule, the Rome II Regulation provides that the applicable law should be determined on the basis of where the damage occurs. At the same time, it also provides for exceptions to the rule as well as the application of specific rules for special torts/delicts where the application of the general rule would be incapable of striking a reasonable balance between the interests at stake.⁷³ Some of these exceptions and specific rules are relevant in the context of transnational claims against MNEs.

General rule: lex loci damni

Lex loci damni is the cornerstone of the Rome II Regulation. Under this general rule, the law of the country in which the damage occurs must apply to a tort/delict claim arising out of a non-contractual obligation.⁷⁴ This rule applies irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occurred. The Rome II Regulation makes it clear that, in cases of personal injury or damage to property, the country in which the damage occurs should be the country where the injury was sustained, or the property was damaged, respectively.⁷⁵ The rule of lex loci damni reflects the pre-existing practice of some EU Member States, including France and the Netherlands.⁷⁶

The application of the Rome II Regulation means that French and Dutch courts must apply the law of the host country in the context of transnational claims against MNEs. The host State law will apply to crucial substantive and procedural aspects of the litigation, such as corporate liability, evidence, or financial compensation.⁷⁷ This includes rules that govern not only liability standards – such as the basis and extent of liability, the grounds for exemption from liability and limitation or division of liability, and liability for the acts of another person – but also the existence, the nature, and the assessment of damage or the remedy claimed, the persons entitled to compensation for damage sustained personally, the rules of prescription and limitation,⁷⁸ and the rules raising presumptions of law or determining the burden of proof.⁷⁹ This solution is likely to be unsatisfactory for plaintiffs, as they generally pursue their case with the purpose of applying the home State law.⁸⁰ Furthermore, plaintiffs’ dissatisfaction may be reinforced if such standards are less favourable to plaintiffs in comparison with those of the home country. Litigators have argued that the determination of the applicable law may constitute a legal obstacle for victims when the content of the applicable law is difficult to ascertain before a foreign court, or when it is not protective of victims.⁸¹ The existence of exceptions to the general rule of lex loci damni is therefore of significant importance to plaintiffs if they allow the application of the law of an alternative forum with which the judge is more familiar, or one more protective of victims.

Residence of the parties

According to Article 4(2) Rome II Regulation, where the person claimed to be liable of causing damage and the person sustaining damage both have their habitual residence in the same country at the time the alleged damage occurs, the law of that country shall apply. This rule is unlikely to be relevant in the context of transnational litigation against MNEs, as plaintiffs often reside in the host State. If they sue the host State company, both parties reside in the host State, whose law remains applicable. If they sue the home State company, both parties reside in different countries and the exception of Article 4(2) is not applicable. Furthermore, even if the plaintiffs were to subsequently move to the home State where the parent company resides, this would not be helpful, as Article 4(2) looks at the time when the damage occurred in determining residency.⁸²

Escape clause

Article 4(3) Rome II Regulation contains a general escape clause.⁸³ It provides that, where it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with another country, the law of that country shall apply. A manifestly closer connection with another country might be based on a pre-existing relationship between the parties, such as a contract, that is closely connected with the tort/delict in question. Article 4(3) can potentially open the door to the application of French and Dutch law to civil cases. However, a strong connection with the home country must be manifest, which is difficult for plaintiffs to establish when bringing a claim against MNEs in Europe. Furthermore, it is likely that the requirement of ‘a manifestly closer connection’ will be interpreted and applied restrictively to guarantee the Rome II Regulation’s general aim of providing for legal certainty.⁸⁴

Environmental damage

Article 7 Rome II Regulation provides for a specific rule applicable to environmental damage. Accordingly, the person seeking compensation for environmental damage can choose to base their claim on the law of the country in which the event giving rise to the damage occurred. Environmental damage should be understood as ‘the adverse change in a natural resource, such as water, land or air, impairment of a function performed by that resource for the benefit of another natural resource or the public, or impairment of the variability among living organisms’.⁸⁵

This exception is directly relevant in the context of transnational litigation against MNEs, as a number of past and ongoing claims have raised environmental damage (eg Shell; Trafigura). The question of when plaintiffs can choose the law of the country in which the event giving rise to the damage occurred should be determined in accordance with the law of the Member State in which the court is seised, hence French or Dutch law.⁸⁶

However, the application of the environmental damage exception raises several issues. To choose the law of the home State, the plaintiffs must demonstrate that the event causing the damage occurred in the home State. This means convincing the court that direct instructions or negligent lack of oversight by the home State company led to the damage at issue.⁸⁷ As will be seen in Section 5, such a burden of proof is difficult to meet, since MNEs are often in possession of evidential information incriminating them, and disclosure procedures are often applied restrictively in EU Member States.

Freedom of choice

Under Article 14 Rome II Regulation, the parties are allowed to decide on the law applicable to their dispute in an agreement. However, this choice must be expressed or demonstrated with reasonable certainty by the circumstances of the case and cannot prejudice the rights of third parties. The practicality of this provision appears limited in the context of transnational litigation against MNEs. It is unlikely that victims and MNEs will agree on the rules that will govern the proceedings as they have opposing interests. MNEs are likely to be interested in applying laws that limit their liability and the potential compensation they may have to provide, whereas plaintiffs are inclined to choose laws that will give the most satisfactory level of protection and damages.

Overriding mandatory provisions

Article 16 Rome II Regulation provides that ‘[n]‌othing in the Rome II Regulation restricts the application of the provisions of the law of the forum in a situation where they are mandatory irrespective of the law otherwise applicable to the non-contractual obligation’. In exceptional circumstances, considerations of public interest justify allowing courts of Member States to apply exceptions based on overriding mandatory provisions.⁸⁸ These are provisions that are regarded as crucial by a country for safeguarding its public interests, such as its political, social, or economic organization, to such an extent that they are applicable to any situation falling within their scope, irrespective of the law otherwise applicable.⁸⁹ These provisions typically include domestic rules of a semi-public law nature that intervene in private legal relationships in order to protect the public interest, such as rules on working conditions or health and safety under labour law.⁹⁰ They can also include rules from non-domestic legal sources, such as public international law and international human rights law.⁹¹ It is unclear how Article 16 could be relevant to transnational litigation against MNEs. As already mentioned, this article should apply in exceptional circumstances only. Furthermore, it is unlikely that a State would apply its overriding mandatory provisions outside its territory.⁹²

Rules of safety and conduct

Pursuant to Article 17 Rome II Regulation, in assessing the conduct of the person claimed to be liable, account must be taken, as a matter of fact and in so far as is appropriate, of the rules of safety and conduct which were in force at the place and time of the event giving rise to the liability. The term ‘rules of safety and conduct’ should be interpreted as referring to all regulations having any relation to safety and conduct, including, for example, road safety rules in the case of an accident.⁹³ Rules on safety and hygiene in the workplace could also fall within the scope of Article 17, which would make it relevant in the context of transnational litigation against MNEs. For instance, Article 17 could potentially allow the court to take into account the home State’s rules of safety and conduct, such as those related to an employer’s duty of care vis-à-vis its employees, even when the law of the host State would be applicable. However, Article 17 would only impose on the court the duty to take into account the home State rules, not to apply them.⁹⁴

Public policy of the forum

Article 26 Rome II Regulation provides that the application of the law of any country specified by the Rome II Regulation may be refused if such application is manifestly incompatible with the public policy (ordre public) of the forum. In exceptional circumstances, the courts of Member States may apply an exception based on public policy which is justified by considerations of public interest. This is the case, for instance, where the applicable law would result in measures which are regarded as being contrary to the public policy of the forum seised, such as the award of non-compensatory exemplary or punitive damages of an excessive nature.⁹⁵ One consequence is that the application of this provision will depend on the circumstances of the case and the legal order of the forum, which may vary from one country to another.⁹⁶ It has been suggested that, in the context of transnational litigation against MNEs, Article 26 may be a useful tool for setting aside the applicable host State law where its application would amount, for instance, to serious violations of international human rights norms.⁹⁷

However, Article 26 may have limited practical value. First, the application of exceptions based on public policy should remain exceptional. Furthermore, courts are often reluctant to make an assessment of the well-foundedness of the law of the third country. Even if they were to make such an assessment, finding that ‘the applicable rules of the host country are wrong as to their substance and conclusion, is not a sufficient reason for invoking public policy, not even if the incorrectness is manifest’.⁹⁸

Towards a revision of the Rome II Regulation?

Litigators and NGOs have been calling for more flexibility to apply the law that best enables transnational claims against controlling companies.⁹⁹ This would suggest that a reform of the Rome II Regulation is necessary. For instance, the scope of Article 7 Rome II Regulation, on the environmental damage exception, could be extended to include human rights or health and safety damage.¹⁰⁰ Furthermore, the principle that the weaker party to a contract should be protected¹⁰¹ could be extended to disputes involving MNEs and victims of human rights abuse in third countries. The Rome II Regulation could provide the application of conflict-of-law rules that are more favourable to the weaker party’s interests than are the general rules.

Allowing the application of the home State law in specific circumstances, such as when the host State law does not sufficiently protect the rights of victims, seems all the more important in the current political context. As will be seen in Chapter 7 of this book, home States are increasingly imposing accountability standards upon business actors through, for instance, the adoption of mandatory HRDD legislation. It is therefore crucial to ensure that these standards are not dead letters and can effectively protect people and the environment. In the future, the European legislator is likely to be faced with the challenge of balancing legal certainty and the protection of parties’ interests with the need to protect victims of business-related human rights abuse.

4 The procedural framework for initiating civil proceedings

The way in which the law authorizes natural and legal persons to bring civil claims before domestic courts has a direct effect on the ability of these persons to gain access to remedy or to hold MNEs to account. Various types of plaintiffs may bring a civil claim against an MNE, including individuals who suffer direct damage from the business-related abuse, a representative of a particular group, such as an affected village, or an organization defending a collective interest related to the claim.¹⁰² However, NGOs may face considerable obstacles to bring claims.¹⁰³ Furthermore, the absence or limited access to collective redress may be an obstacle to groups affected by business activities.

Right of action

In France, the action is the right of the plaintiff of a claim to bring an action to be heard on the merits of their claim so that the judge may declare it founded or unfounded.¹⁰⁴ The right of action is available to all those who have a legitimate interest in the success or dismissal of a claim. However, there are situations where the law confers the right of action solely upon persons authorized to raise or oppose a claim, or to defend a particular interest.¹⁰⁵ To have a right of action, a potential plaintiff must satisfy three criteria. First, plaintiffs must demonstrate that they have a ‘legitimate interest’ to bring a civil claim (intérêt légitime) against an MNE, meaning that the claim may provide an advantage or a benefit to the plaintiff. Such interest must already exist when the plaintiff brings the claim.¹⁰⁶ Importantly, French courts have progressively accepted that the interest to bring a civil claim is not subordinated to the legitimacy, or well-foundedness, of the claim.¹⁰⁷ Second, Article 31 implies that plaintiffs must have ‘standing’ to bring a civil claim (qualité à agir) against an MNE. However, the distinction between interest and standing to bring a claim is not always clear in French case law.¹⁰⁸ To have standing, plaintiffs must usually demonstrate a direct and personal interest, which may be problematic for NGOs when they seek to sue an MNE in defence of a collective or public interest (this aspect is studied in more detail below).¹⁰⁹ Nevertheless, the law may directly confer standing on NGOs in specific circumstances.¹¹⁰ Third, ‘legal capacity’ is a prerequisite for the right of action.¹¹¹ However, there is no requirement as to the plaintiff’s nationality and, as a result, foreign victims may be entitled to the right of action.

There are situations where a claim might be declared inadmissible for lack of a right of action (fins de non-recevoir), including lack of interest, lack of standing, statute of limitations, fixed time limit, or res judicata.¹¹² Furthermore, any claim raised by, or against, a person deprived of the right of action is inadmissible, and a person bringing a claim deemed abusive may be fined up to €10,000.¹¹³ In several cases, MNEs have used this as an argument against NGOs and victims seeking civil redress for human rights or environmental abuse.

In the Netherlands, pursuant to Article 3:303 Dutch Civil Code (Burgerlijk Wetboek), a person has no right of action where they lack sufficient interest. However, the existence of sufficient interest is generally presumed and there is no requirement to address questions of substance before ‘standing’ can be granted.¹¹⁴ Plaintiffs can be natural or legal persons, irrespective of whether they are Dutch nationals. However, legal personality is a prerequisite and, as a result, only companies, NGOs, and other foundations or associations that have legal personality may bring a civil claim.

Standing of NGOs

NGOs defending a collective or public interest often face obstacles in obtaining standing. For the purpose of this study, the words ‘association’ and ‘NGO’ are used interchangeably, as French and Dutch laws usually refer to NGOs as ‘associations’.

In France, a lawfully registered association¹¹⁵ can, without specific authorization, be a party to legal proceedings.¹¹⁶ However, France distinguishes between two situations: whether the association is suing to protect its individual interests or collective interests.¹¹⁷ For a long time, an association could only bring a claim to protect its individual interests, such as its own property. Since 1923, the Court of Cassation had rejected the idea that an association had standing to defend collective interests in the absence of direct and personal harm.¹¹⁸ However, legislative and jurisprudential developments have gradually removed obstacles to the action of associations for the defence of collective interests. The French legislator has authorized some associations to act in defence of the collective interests they aim to protect in civil matters, such as consumer or environmental protection. Furthermore, the Court of Cassation has accepted that an association could act in defence of collective interests as long as they fell within the scope of its statutes¹¹⁹ or its social purpose.¹²⁰

Associations may also be a party to legal proceedings to protect the interests of their members. For a long time, the Court of Cassation has recognized that an association may bring a claim to protect the individual interests of its members.¹²¹ This is the case for associations of local residents or of victims of a specific harmful activity.¹²² However, a number of conditions are required. First, associations can only act for their members and cannot bring a claim for third parties. Second, an association’s statutes must clearly provide that the association can bring a claim to protect its members’ interests.¹²³

Standing of NGOs was a major issue in Alstom. The corporate defendants challenged the assertion that AFPS, a French NGO that supports the rights of Palestinians, had standing in this case, arguing that AFPS had not established a personal interest or the collective interest of its members that would entitle it to bring the claim. Furthermore, AFPS had not been authorized by the legislator to bring a claim and its statutes were too vague to allow it to defend the Palestinian people. AFPS argued that, according to its statutes, it had the right to institute proceedings before national and international courts to defend the rights of the Palestinian people. The District Court ruled that AFPS was allowed to bring a claim, as its purpose was to initiate all procedures to ensure the defence of the rights of the Palestinian people.

However, the Court of Appeal reversed the District Court’s ruling, rejecting the argument that AFPS could bring a civil claim.¹²⁴ It held that an association cannot act for the general interest. Without specific statutory authorization, an association can take legal action on behalf of collective interests ‘insofar as its action corresponds to its social purpose’. In this instance, the Court of Appeal found that AFPS’ social purpose was worded in general terms and did not allow AFPS to bring a claim to annul international contracts, to which it is a third party, on behalf of the Palestinian people.

The Court of Appeal’s interpretation of NGO standing is questionable. AFPS’ statutes clearly indicated that the association could sue to defend the Palestinian people, which, according to the Court of Cassation’s jurisprudence, would have been enough to justify AFPS’ standing. Instead, the Court of Appeal focused solely on AFPS’ social purpose, which, taken together with a narrow interpretation of the purpose of the claim, led to a rejection of the possibility of an NGO challenging potential violations of international humanitarian law. This confusion is partly the result of the absence of a consistent and clear set of statutory rules on NGO standing. An intervention of the legislator therefore appears desirable to allow NGOs to play a more active role in defending societal interests and promote public interest litigation.

Alstom also demonstrates the interplay between the right of action of NGOs and the right of access to a court.¹²⁵ The Court of Appeal held that a declaration that AFPS’ claim is inadmissible does not conflict with Article 6 ECHR and Article 47 EU Charter as:

This position on the right of access to a court appears inconsistent with the spirit of the ECHR. Although such a right is not absolute, limitations should not impair its very essence.¹²⁷ The Court of Appeal’s view that AFPS had access to a court because it was able to bring its suit is erroneous in the light of the various interpretations given by the ECtHR of Article 6 ECHR. This approach limits the right of access to a court to the practical possibility to file a claim. However, the scope of this right is much broader, and must be practical and effective.¹²⁸ As such, the right of access to a court may be impaired by the existence of procedural rules barring certain subjects of law from bringing court proceedings¹²⁹ or by excessive formalism.¹³⁰ Alstom demonstrated that the complexity and formalism of rules governing NGO standing in French civil procedure affect the ability for NGOs to gain access to a court in transnational litigation against MNEs.

In the Netherlands, NGOs were traditionally barred from civil courts until the Dutch Supreme Court allowed them to bring an action to protect the public interest in a case related to environmental pollution.¹³¹ A number of requirements must be fulfilled: (1) the NGO must be a legal person; (2) its statutes must include the protection of the public interest on which the action is based; and (3) the action must aim to protect such an interest.¹³² Furthermore, since 1994, Article 3:305a Civil Code provides the possibility for an NGO to bring a representative action to protect interests similar to those that it promotes. This mechanism is addressed in the following section on collective redress.

Collective redress

In specific instances, business activities may cause damage to many victims. This can occur when, for example, a company operates a mine that pollutes the environment, damaging local flora and fauna. The health and livelihoods of communities living nearby might be impacted, as they cannot access drinking water, farm their land, or fish for themselves or commercial purposes.

In the context of mass harm resulting from business activities, collective redress mechanisms¹³³ are crucial instruments in achieving justice. As the UNGPs pointed out, inadequate options for aggregating claims or enabling representative proceedings, such as class actions and other collective action procedures, constitute barriers preventing effective access to remedy for claimants.¹³⁴ In France, the absence of collective redress mechanisms has constituted a significant obstacle for plaintiffs. In COMILOG, victims were unable to aggregate their claims and had to file more than 800 separate applications.¹³⁵ Lodging a large number of individual claims is costly and time-consuming for victims and NGOs who, often, have limited financial resources. The absence of collective redress mechanisms can therefore prohibit the vindication of rights on a collective basis, no matter how meritorious the claims are.

In the EU, for a long time the existence of collective redress mechanisms in Member States was limited. Reluctance to allow such instruments has notably been fuelled by fears of perceived excesses in the US class action system. Nonetheless, faced with rising demands for access to justice in situations of mass harm, and as a result of EU efforts to boost the development of collective redress mechanisms, Member States are increasingly adopting such instruments. However, collective redress mechanisms vary greatly from one Member State to another. Furthermore, their effectiveness is limited and, as a result, access to justice remains unsatisfactory in the context of mass harm caused by MNEs.

EU efforts on collective redress

At EU level, collective redress is generally perceived as a potential instrument for improving access to justice. However, the lack of political consensus has hampered the enactment of any binding instrument on collective redress.¹³⁶ Opponents to the development of EU collective redress instruments have also questioned whether the EU has competence to legislate for collective redress, as well as whether such mechanisms to ensure private enforcement are desirable. As a result, the work carried out by the EU institutions in this field has produced limited results.¹³⁷

In 2012, the EP called for the adoption of a legally binding horizontal framework which would include a common set of principles providing uniform access to justice via collective redress within the EU.¹³⁸ Such a framework should specifically deal with consumer protection but could be extended to other sectors. However, in 2013 the EC adopted a recommendation (2013 Recommendation) containing a series of non-binding principles ‘to ensure a coherent horizontal approach to collective redress in the EU without harmonising Member States’ systems’.¹³⁹ Pursuant to this document, all EU Member States should have collective redress mechanisms for both injunctive and compensatory relief that respect a number of principles on, for instance, standing, admissibility, funding, or the constitution of the claimant party by ‘opt-in’ principle. These principles should be applied horizontally and equally in consumer protection, competition, environmental protection, protection of personal data, financial services legislation, and investor protection. As will be seen below, the 2013 Recommendation was, to a certain extent, followed in France. However, a 2018 report by the EC showed that the implementation of the 2013 Recommendation was unsatisfactory, as the availability of collective redress mechanisms was still inconsistent across the EU.¹⁴⁰ Furthermore, the inability of EU citizens to access collective compensatory relief in cases such as the Volkswagen Dieselgate scandal demonstrated the limits of collective redress mechanisms in the EU.¹⁴¹ These developments led to the adoption of Directive 2020/1828 on representative actions for the protection of the collective interests of consumers in 2020.¹⁴² This instrument empowers qualified entities (ie consumer organizations or public bodies designated by the Member States) to bring representative actions (including cross-border representative actions) on behalf of groups of consumers seeking injunctive and redress measures against traders. This directive is significant because it requires all Member States to establish a representative action mechanism to protect the collective interests of consumers. However, it does not create a general collective redress mechanism. Representative actions can only be brought against traders who violate specific EU legal instruments in areas such as financial services, travel and tourism, energy, health, telecommunications, and data protection.

The current EU collective redress framework, which focuses on consumer rights, is unhelpful in dealing with mass harm situations caused by corporations in the context of transnational litigation against MNEs. There is currently no EU legal framework requiring, or even recommending, Member States to establish a mechanism for collective redress in civil litigation. Furthermore, because of the TFEU’s limitations on EU competences, existing EU initiatives have limited collective redress to specific areas of law that are not necessarily relevant for the type of damage suffered by victims of corporate mass harm. As a result, any meaningful collective redress mechanism in the context of transnational litigation against MNEs is more likely to emerge from national initiatives.

Collective redress in France

The creation of collective redress mechanisms has been much debated within political and economic circles.¹⁴³ However, France has traditionally been reluctant to allow such instruments.¹⁴⁴ Fears of the perceived excesses of the US class action system and a strong business lobby opposed to collective redress have been effective in delaying the adoption of mechanisms for solving mass harm.¹⁴⁵

Nonetheless, France recently introduced the possibility for group action (action de groupe) in a limited number of sectors, in line with the 2013 Recommendation. The first step was taken in 2014 when France passed a new law that introduced a group action in the fields of consumer law and competition law.¹⁴⁶ France later extended the possibility for group action to other fields, namely health,¹⁴⁷ privacy and data protection,¹⁴⁸ environment,¹⁴⁹ and discrimination.¹⁵⁰ Furthermore, France adopted a set of procedural rules that apply to the above-mentioned group actions.¹⁵¹ In general, a group action follows a complex two-stage procedure. First, there is the liability phase during which the court decides on the liability of the defendant based on individual model cases. At this stage, there is no group of claimants. The court then defines the group of potential claimants and the parameters that individual claimants must meet to join the group. It also specifies how the case will be publicized in the media and the deadline for plaintiffs to join the group. Second, there is the compensation phase during which claimants meeting the criteria fixed by the court can join the group via an opt-in system and receive compensation.¹⁵²

This system has been criticized for its complexity, its hurdles to bringing claims, and its ineffectiveness in solving mass claims.¹⁵³ In particular, only accredited associations can file a group action, which means that lawyers and other public bodies cannot start group actions from their own motion. Moreover, not all associations can launch group actions, as they must meet restrictive prerequisites. Additionally, in practice only a few associations have sufficient resources to effectively initiate and handle group actions. Furthermore, the effectiveness of group actions is limited by the fact that they are usually costly, burdensome, and time-consuming. Difficulties also arise with the quantification of loss and the type of damage to be compensated (only material) for each individual within the group.¹⁵⁴

In the context of transnational litigation against MNEs, the group action of some sectors, such as environment, privacy and data protection, and discrimination, could be relevant. Furthermore, some aspects of the current system offer some significant advantages. In the few group actions that have taken place so far, associations have used the media intensively to advertise proceedings. Important media coverage is likely to trigger some behavioural changes in businesses. Additionally, group actions have incentivized defendants and associations to settle their case, therefore providing victims with faster access to a remedy.¹⁵⁵ However, the current system of group action appears, at the same time, insufficient to help victims of business-related abuse gain access to justice. Not all claims against MNEs are likely to fall under the scope of the current group actions. Furthermore, the group action mechanism seems to reproduce the same flaws that have plagued transnational litigation against MNEs, such as high costs and lengthy duration. To date, claims have rarely reached stage two of the procedure. Finally, the current rules provide limited elements for the resolution of international mass claims.¹⁵⁶

Collective redress in the Netherlands

Collective redress mechanisms have existed in the Netherlands since 1994. However, they are quite different from US class actions or UK group actions in order to prevent transforming the Dutch legal system into a ‘perceived aggressive American litigating society’.¹⁵⁷ One striking aspect of the Dutch practice of collective redress is its emphasis on mediation. In the Netherlands, there are two main collective redress mechanisms: representative action and settlement.

In a representative action under Article 3:305a Civil Code, an NGO (either a foundation or an association with full legal capacity) can bring an action on behalf of a group of claimants who have suffered harm as a result of the defendant’s acts. The interests of the claimants must be analogous to be suitable for protection through the representative action.¹⁵⁸ Furthermore, the action must aim to protect similar interests of other persons to the extent that the NGO’s articles promote such interests. The representative action under Article 3:305a is frequently used for the protection of common interest issues, such as general environmental concerns. It presents a number of strengths. For instance, the NGO can be established after the dispute has arisen.¹⁵⁹ Moreover, Article 3:305a allows a person whose interest has been represented in the action to opt out by refusing to be bound by the ruling’s effect. Furthermore, as a result of the emphasis of Dutch civil procedure on conciliation, the NGO must adequately consult with the defendant before initiating the action. This means that the NGO will have no locus standi if it has not made a sufficient attempt to achieve the objective of the action through consultations with the defendant.¹⁶⁰ Litigation should only be initiated when consultations are not possible. At the same time, some requirements under Article 3:305a limit the effectiveness of representative action. Article 3:305a is confined to injunctive relief and/or a declaratory decision. It does not allow the NGO to claim collective damages on behalf of the claimants. If the liability of the defendant is established, each claimant must bring their own claim for damages on that basis separately. This means that a successful claimant must incur extra costs and go through additional proceedings to access remedy. This aspect defeats the aim of collective redress to facilitate access to justice in the context of mass harm.

In Shell, Milieudefensie brought a claim on the basis of Article 3:305a. Both the District Court and the Court of Appeal of The Hague accepted the admissibility of Milieudefensie’s claim. However, the corporate defendants disputed the admissibility of Milieudefensie’s claim,¹⁶¹ and their arguments raised important questions for collective redress in the context of cross-border private enforcement. First, Shell challenged whether Milieudefensie, a Dutch NGO, could use Article 3:305a to advocate for the protection of non-Dutch interests, namely the interests of the Nigerian victims of the oil spills, which were not linked in any way to the Dutch domestic jurisdiction.¹⁶² Shell also argued that Milieudefensie’s object clause in its articles of association was not specific enough to include the protection of the environment in Nigeria and that Milieudefensie did not perform any activities in that country. However, both the District Court and the Court of Appeal concluded that there were no valid grounds to restrict the scope of application of Article 3:305a and dismissed Shell’s argument. For the courts, Milieudefensie had engaged in activities in support of the interests of the environment in Nigeria. Furthermore, the protection of the environment globally is an objective set out in Milieudefensie’s charter. There was no reason to assume that this objective was not sufficiently specific, or that localized damage to the environment abroad felt outside that objective or outside the application of Article 3:305a.¹⁶³ The Court of Appeal added that ‘there is a sufficient link with the Dutch domestic jurisdiction, namely to the extent that the existence and scope of the duty of care of the parent company having its headquarters in the Netherlands have been submitted for review’.¹⁶⁴

Shell also challenged the representativeness of the group and the benefit of using the action under Article 3:305a in this case. For the defendants, the case at issue involved a ‘purely individual representation of interests’.¹⁶⁵ Furthermore, the claim did not offer any advantages ‘whatsoever over litigating in the name of the interested parties themselves’.¹⁶⁶

However, the District Court held that the plaintiffs’ claims rose above the individual interests of the parties, as the decontamination of the soil and the clean-up of the fishponds would benefit not only the plaintiffs but also the rest of the community and the environment. It also recognized that it could well be inconvenient for the interested parties to litigate as individuals, seeing as many people could now be affected. The Court of Appeal also reiterated that, for the admissibility of an action under Article 3:305a CC, it is a condition that the claim seeks to protect similar interests of other persons. This requirement is satisfied if the interests that the action seeks to protect are suitable to be joined, so that an efficient and effective safeguarding of legal rights can be promoted for the benefit of the interested parties.¹⁶⁷ The size of the group does not matter in this regard.

The second collective redress mechanism is a settlement-only action under the 2005 Act on collective settlements of mass claims (Wet collectieve afhandeling massaschade or WCAM).¹⁶⁸ The idea behind the WCAM is to settle cases of mass damages in a smooth manner by enabling liable and injured parties to reach a collective settlement.¹⁶⁹ There are two main stages. First, a foundation or an association representing victims of a mass harm reaches a collective settlement with the tortfeasor. Second, the Court of Appeal of Amsterdam approves the settlement. One advantage is that the WCAM is not restricted to a particular area of law or to certain sectors, such as competition or consumer law.¹⁷⁰ One disadvantage from a victim’s perspective is that all injured parties, including those who have not participated in the negotiation of the settlement, are bound by the court decision approving the settlement, unless they have opted out. Although this rule aims to ensure legal certainty and prevent additional claims, it is problematic for injured parties who disapprove of the settlement or ignore the proceedings. Another disadvantage is that the WCAM does not deal with the process of reaching a settlement. It only provides that the settlement is a prerequisite that must be reached out of court.¹⁷¹ However, the requirement for a pre-trial hearing has existed since 2013. This mechanism could potentially be used by claimants seeking remediation for mass harm caused by MNEs and may provide a cheaper and faster alternative for accessing a remedy than transnational litigation against MNEs. However, only nine class settlements were successfully reached through this mechanism between 2005 and 2019, which raises questions as to the chances of success and the effectiveness of this mechanism in the context of mass harm caused by MNEs.¹⁷²

In 2019, the Netherlands adopted new legislation called Wet afwikkeling massaschade in collectieve actie (WACAM),¹⁷³ which introduced changes to the mechanism under Article 3:305a. An important positive change is that the WACAM introduced the possibility to claim compensatory damages. The WACAM also established stricter standing and admissibility requirements. An NGO must now have a supervisory board, a mechanism for decision-making by the persons whose interest is represented, sufficient financial resources for the costs of the representative action, and sufficient experience and expertise to bring the action. While these new requirements aim to improve the effectiveness of the mechanism, they raise concerns that fewer NGOs will be able to bring a representative action in areas of common interest. Another potential hurdle is that new criteria are required for the representative action to be sufficiently connected to the Dutch jurisdiction: the majority of the claimants must be Dutch residents; or the events on which the action is based must have occurred in the Netherlands. The mere fact that the defendant is located in the Netherlands is now insufficient. It is unlikely that foreign victims of mass harm caused by Dutch MNEs will meet these criteria.

5 Production of evidence

Rules governing the production of evidence have a major impact on the ability of victims to gain access to justice, especially in the context of human rights abuse and environmental pollution involving MNEs. Until now, access to, and production of, evidence in transnational litigation against MNEs has been problematic for several reasons. First, collecting evidence in transnational cases is costly for plaintiffs, as evidence is usually located in both host and home countries. In cases raising complex issues, such as environmental pollution, the use of experts may be required, necessitating additional financial resources. Second, plaintiffs must usually prove corporate involvement in the production of the harm. Frequently, MNEs are in possession of such evidence and refuse to share compromising information with plaintiffs. Furthermore, MNEs often operate in a complex way with little transparency as to the structure, management, and operational functioning of the corporate group. Third, the rules governing the collection and admissibility of evidence may place an excessive burden on plaintiffs or fail to provide effective disclosure procedures to reduce potential inequality of arms between the parties. Ultimately, difficulties arising from the production of evidence reveal the asymmetric positions of plaintiffs and corporate defendants. These obstacles have been acknowledged in the UNGPs, which provide that unbalanced access to information and to expertise between parties in business-related human rights claims create barriers to accessing judicial remedy.¹⁷⁴ NGOs and scholars have also described how the lack of transparency and access to information, as well as formalistic rules on evidence, are significant obstacles for victims of corporate abuse seeking remediation.¹⁷⁵

This section aims to give an overview of the rules governing burden of proof, admissibility of evidence, and disclosure and discovery procedures in France and the Netherlands, and how they impact on the ability of victims to demonstrate the merits of their liability claims against MNEs.

Burden of proof

As a result of the Rome II Regulation, French and Dutch courts are more likely to apply the host State rules governing the burden of proof. However, in a number of exceptional circumstances, they may be able to apply the law of the forum – meaning French and Dutch procedural law – to determine the burden of proof.¹⁷⁶ Therefore, a brief overview of French and Dutch rules is relevant here.

Both France and the Netherlands follow the principle that ‘whoever asserts a fact must prove it’. In France, this principle is contained in Article 1353 French Civil Code, which provides that ‘anyone claiming enforcement of an obligation must prove it’. Furthermore, each party shall bear the burden of proving the facts necessary for the success of their claim.¹⁷⁷ However, the facts on which the resolution of the dispute depends may, at the request of the parties or ex officio, be the subject of any legally admissible investigative measure.¹⁷⁸ An investigative measure may be ordered in respect of a fact only if the party alleging it does not have sufficient evidence to prove it. However, under no circumstances may an investigative measure be ordered to make up for the party’s failure to provide evidence.¹⁷⁹

In the Netherlands, Article 150 Dutch Code of Civil Procedure states that the party claiming the legal consequences of facts or rights shall bear the burden of proving them. Therefore, plaintiffs initiating a civil claim against an MNE must prove the facts and circumstances to substantiate that claim. If the plaintiffs are not able to meet their evidentiary burden, it will be assumed that the facts and circumstances in question do not exist.¹⁸⁰ However, there are a number of exceptions to this rule, such as when the law specifically provides otherwise, or when the application of such requirement would be contrary to the principles of reasonableness and fairness.¹⁸¹ Furthermore, under specific circumstances a reversal of burden of proof is possible during the proceedings or an aggravated burden of proof may be placed on the defendant to motivate their defence.¹⁸²

As will be seen below, strict rules on the burden of proof, coupled with the absence or inadequacy of disclosure procedures and complex systems of liability within corporate groups, are challenging for plaintiffs to overcome.

Admissibility

In France, according to Article 1358 French Civil Code, proof may be provided by any means, except where the law states otherwise. However, French civil procedure is characterized by the prevalence of written evidence.¹⁸³ Parties argue their cases almost exclusively based on written evidence, and statements by parties do not count as evidence. Nonetheless, the judge may invite the parties to provide factual explanations deemed necessary for the resolution of the dispute. The judge can also appoint an independent expert to further investigate technical matters or admit evidence from third parties by affidavit or oral testimony. However, this last option is less common. In general, evidence will not be admissible if it violates the privacy of individuals or the secrecy of correspondence. Nonetheless, judges should assess whether the production of evidence is indispensable to the exercise of the right to evidence and proportionate to the conflicting interests involved before dismissing evidence.¹⁸⁴

In the Netherlands, there is no restriction on the admissibility of evidence, which may be presented in any form, unless the law provides otherwise.¹⁸⁵ In some cases, evidence unlawfully obtained may be admissible.¹⁸⁶ Dutch courts usually have discretion to assess evidence.¹⁸⁷ The absence of restrictions on the admissibility of evidence benefits victims bringing civil claims against MNEs. The flexibility of Dutch rules allows victims to present a large range of documents to substantiate their arguments. It also reduces the inequality of arms between the parties. However, as will be seen below, the benefit of these rules appears to be limited due to inadequate disclosure procedures. Furthermore, Dutch courts sometimes reject evidence that has been lawfully obtained when, for instance, it would violate the other party’s right to a private life.¹⁸⁸

Disclosure

MNEs often hold information that can substantiate the plaintiff’s liability arguments, such as information regarding their structure, operations, ownership, or governance. However, information is not always transparent or easily available to third parties. Therefore, disclosure is crucial in allowing plaintiffs to access necessary evidence held by MNEs.

In France, parties must respect an obligation ‘to contribute to justice with a view to the manifestation of the truth’.¹⁸⁹ As a result, parties are required to communicate in due time and spontaneously to one another the evidence they produce or rely upon.¹⁹⁰ The judge may order parties to transmit evidence if communication of proof is not done spontaneously.¹⁹¹

Furthermore, French civil procedure allows parties to request the production of evidence held by the other party or third parties.¹⁹² In this situation, the judge may order the issuance or production of the document or exhibit if they consider the application to be well-founded.¹⁹³ They can impose penalties on the party holding the evidence, if necessary, or may order third parties, such as other members of MNEs, to disclose documents. However, the judge has the discretion to appreciate the opportunity of such requests and controls the procedure tightly.¹⁹⁴ The plaintiff’s request must be specific and identify existing documents that the corporate defendant possesses. Any general requests are considered inadmissible.¹⁹⁵

In the context of transnational litigation against MNEs, criteria, such as the specificity of documents requested, and the discretion of French judges to consider whether a request for disclosure of evidence is well founded, have proven challenging for plaintiffs. In COMILOG, the plaintiffs requested the disclosure of specific documents, including corporate by-laws and minutes of meetings, in order to establish the situation of co-employment.¹⁹⁶ The corporate defendants challenged the request. However, the Court of Appeal ordered the companies to disclose the documents in 2013 and the Court of Cassation later upheld this decision.¹⁹⁷

The plaintiffs’ disclosure request has been less successful in Bolloré thus far. Plaintiffs have asked for the disclosure of various documents in the defendants’ possession demonstrating the legal and capitalistic links between the various companies. Their disclosure request targeted specific documents (eg the concession contract between the Cambodian State and Socfin-KCD) as well as broad categories of files (eg Bolloré group’s internal memos concerning the operations of Socfin and Socfin-KCD between 2008 and 2016). To support their request for disclosure, the plaintiffs alleged that Bolloré and Compagnie du Cambodge exercised, from France, operational powers in the Socfin-KCD joint venture, and that they directed and organized, on a daily basis, the activities harming them in Bu Sra, Cambodia. However, the Court found that the plaintiffs provided no evidence as to the operational power alleged or of the alleged harm, even though some information was publicly available, since the two companies are listed on the stock market. Accordingly, the Court stated that ‘the request for an order of disclosure of evidence, the purpose of which should not supplement the plaintiff’s failure to obtain evidence, must be rejected’.¹⁹⁸

Restrictive disclosure rules under French law legitimately aim to discourage ‘fishing expeditions’. At the same time, they can negatively affect equality of arms between the parties and, ultimately, the ability of plaintiffs to have access to justice. According to lawyers and NGOs, requiring that requests for information be very specific as to the type of document or piece of evidence sought may constitute an obstacle as, in practice, this level of detail may not be fully known in advance.¹⁹⁹

In the Netherlands, parties are free to submit or withhold evidence to a large extent. There is no obligation on a party to disclose documents that are damaging to its own case. Furthermore, a party has limited options to request documents from the other party, as ‘fishing expeditions’ are not allowed.²⁰⁰ However, pursuant to Article 843a Dutch Code of Civil Procedure, anyone who has records at their disposal or in their custody must allow a person with a legitimate interest to inspect, have a copy of, or obtain an extract from those records pertaining to a legal relationship to which they or their legal predecessors are party. If necessary, the court may determine how an inspection must be conducted or how a copy or extract must be produced. However, there are several limits to the application of Article 843a. As a result, obtaining evidence from MNEs remains problematic when they are unwilling to disclose it.²⁰¹ Access to evidence using disclosure has been a major obstacle for plaintiffs in the two ongoing cases against Shell.

In Shell, the claimants requested disclosure, based on Article 843a, of Shell’s internal documents, including management reports and internal emails. For the plaintiffs, these documents aimed to demonstrate that insufficient maintenance of the oil pipelines, and not sabotage, was the cause of the spills, and to demonstrate the control that RDS had over SPDC’s environmental policy.

In 2011, the District Court rejected the plaintiffs’ request. It held that Article 843a covers an exceptional obligation to produce evidence, and that ‘there is no general obligation for the parties to proceedings to produce exhibits in the sense that they can be obliged as a rule to provide each other with all manner of information and documents’.²⁰² Therefore, and to avoid ‘so-called fishing expeditions’, the application of Article 843a must meet a number of conditions to be admissible:

The District Court held that the demonstration of a concretely substantiated and disputed argument appears as a sine qua non condition to justify a legitimate interest. However, it found that the plaintiffs had insufficiently substantiated their argument and, as a result, had no legitimate interest in obtaining the items of evidence they requested.

The plaintiffs also invoked their right of disclosure on the grounds of the principle of equality of arms laid down by Article 6 ECHR. Nonetheless, the District Court rejected this argument and maintained that the conditions under Article 843a were compatible with Article 6 ECHR and the principle of equality of arms.²⁰⁴

The District Court’s judgment was a major drawback for the plaintiffs, who appealed it. Furthermore, they sought a new injunction under Article 843a following the 2013 ruling of the District Court, which had found SPDC liable for some of the oil spills.²⁰⁵ In 2014, new factual information became available as a result of disclosure in Bodo, the tort suit against SPDC in England. Documents disclosed by SPDC demonstrated that RDS and SPDC had acted negligently in preventing the oil spills that were at the heart of the Dutch court case. The plaintiffs used this new information to request access to evidence that was in the hands of RDS and SPDC.²⁰⁶

In December 2015, the Court of Appeal ordered Shell to disclose some of the documents requested by the plaintiffs. First, it found that there was insufficient cause to order Shell to produce documents to allow Milieudefensie to make a plausible case for insufficient maintenance. Instead it suggested that an inspection might be a more appropriate way to understand the cause of the oil spills and invited the parties to agree on an expert examination. It concluded that ‘there is insufficient evidence of the interest of Milieudefensie et al. in inspection of those documents’, as ‘it can reasonably be assumed that a proper administration of justice is safeguarded even without the submission of the information requested.’²⁰⁷ Second, the Court of Appeal authorized the plaintiffs to have access to Shell’s documents to understand whether RDS had failed to supervise SPDC. It held that the ‘assertion by Shell that the parent company did not know about the spillage and the condition and maintenance of the pipeline locally does not seem to be an adequate defence in all cases, particularly not if sabotage ceases to be a cause of damage.’²⁰⁸ Access to Shell’s documents is important when

Similarly, in Kiobel the District Court ordered the defendants to produce some internal documents while it rejected the plaintiffs’ request for the release of other confidential files, including trial exhibits produced during the US proceedings in relation to the same facts (see Chapter 3). With regard to the second set of documents, it ruled that the plaintiffs had not met the requirements of ‘legitimate interest’ and ‘specific documents’ under Article 843a. The plaintiffs’ request for documents was defined too broadly. Furthermore, they did not have an automatic legitimate interest to examine documents relevant to the US proceedings, even though they had brought that case, in the context of the Dutch litigation. Finally, the fact that a large number of documents in a general sense might be relevant or interesting was insufficient to meet the requirements set out in Article 843a.²¹⁰

In the Shell and Kiobel cases, the Dutch courts adopted a restrictive interpretation of the requirements triggering disclosure. This attitude reflects the Dutch objective of balancing the legitimate interest of parties to have access to evidence to substantiate their claims with the concern to prevent so-called ‘fishing expeditions’ and therefore frivolous litigation. This is in stark contrast with the more liberal approach to disclosure adopted by judges in common law countries, particularly in the US and the UK.

In conclusion, from an access to justice perspective, restrictive disclosure in civil law jurisdictions is problematic in the context of transnational litigation against MNEs, as it ignores the underlying asymmetry between MNEs and victims and could potentially lead to unfair results for the weaker party. As will be seen in Chapter 6, rules applicable to corporate group liability make it difficult for victims to hold the parent company liable for the damage caused by its subsidiaries. To demonstrate the role of the parent company in the production of the damage, or the degree to which one company entity relates to another, victims need to produce evidence which is often in the MNE’s possession. Therefore, flexible disclosure procedures are crucial for remedying the original asymmetry between the parties. Ultimately, disclosure and access to justice are intricately connected, as disclosure requirements can have a significant influence on the substantive outcomes of cases and, therefore, the opportunities of success for victims.

Discovery

Civil law countries traditionally show reluctance regarding the concept of discovery, which is mainly found in common law jurisdictions.²¹¹ In the Netherlands, discovery does not exist, although it may be possible to order pre-trial hearings of parties as witnesses if a Dutch court is competent to hear the claim.²¹² However, this procedure has been of little use to plaintiffs in transnational litigation against MNEs.

France allows a form of discovery with the legal regime of measures of inquiry in futurum provided for in Article 145 French Code of Civil Procedure.²¹³ Accordingly, ‘if there is a legitimate reason to preserve or establish, prior to any legal proceedings, evidence of facts upon which the outcome of a dispute could depend, legally permissible measures of inquiry may be ordered at the request of any interested party, by way of application or interlocutory proceedings.’ In the context of transnational litigation against MNEs, plaintiffs can request that the judge orders measures to allow them access to items of evidence in the MNE’s possession before any procedure is brought in court. However, to be admissible, such requests must be justified by the need to preserve or establish evidence for the purpose of a potential trial. The applicant must have a legitimate reason, which is assessed by judges in a discretionary manner.²¹⁴ Furthermore, the dispute must not be ongoing, which means that there must be an absence of proceedings on the merits.²¹⁵ The judge enjoys broad powers to order investigative measures. However, such measures must be legally admissible and cannot violate fundamental freedoms. For instance, an investigative measure allowing a bailiff to search the premises of a company, without having previously requested the spontaneous delivery of the documents concerned and having obtained the consent of the requested party, is not considered legally admissible.²¹⁶ Usually, French judges authorize measures under Article 145 in a restrictive manner.

To date, NGOs have struggled to make use of Article 145. In September 2020, the Paris Court of Appeal dismissed Sherpa and Friends of the Earth France’s request for an investigation against the oil company Perenco SA pursuant to Article 145.²¹⁷ This request was intended to obtain evidence in order to demonstrate the involvement of the French company in environmental pollution occurring in the context of its oil activities in the DRC. Before the Court of Appeal’s decision, in August 2019 the Paris Judicial Court had allowed their request and authorized them to seize, by bailiff, documents from the Paris headquarters of Perenco. However, the company’s directors had opposed the execution of the court order by refusing access to the company’s premises. Despite this unlawful refusal, no measures were allowed in order to force the company to comply with the order. Furthermore, the courts, including the Paris Court of Appeal, refused to proceed further when the NGOs lodged a new request in October 2019 asking the judge to impose a periodic penalty payment until the company complied with the measure.²¹⁸ This situation is in clear contrast to the discovery and/or disclosure procedure which may exist in common law countries and which allows for a genuine level playing field between the parties.

Discovery procedures in common law jurisdictions, including the US and England, have nonetheless produced information that has been useful in several cases heard against Shell in the Netherlands. In Kiobel, the plaintiffs submitted their complaint based on evidentiary material submitted by Shell in the context of various discovery proceedings in the US.²¹⁹ Similarly, in Shell plaintiffs used information disclosed by Shell in the Bodo tort suit against SPDC in England to request access to evidence in Shell’s hands. Disclosed information demonstrated that RDS and SPDC had acted negligently in preventing the oil spills in question in the Dutch court case.

6 Remedies

The UNGPs clearly provide that States must take appropriate steps to ensure that those affected by business-related human rights abuse have access to effective remedy, notably through judicial or legislative means.²²⁰ Remedies vary and may include apologies, restitution, rehabilitation, financial or non-financial compensation, punitive sanctions, and prevention of harm through injunctions or guarantees of non-repetition.²²¹

In the context of transnational litigation against MNEs in France and the Netherlands, victims have asked for a variety of remedies, including financial compensation for personal loss or environmental damage, public apologies, condemnation as symbolic reparation (un euro symbolique), environmental remediation, contract annulment, publication of judgment in newspapers, or payment of salary. In Shell, for instance, the plaintiffs have requested that the defendants maintain their oil pipelines in good condition and implement an effective plan for avoiding and/or responding to oil leakages. However, to date, plaintiffs have rarely had access to judicial remedy. Often, courts dismiss claims before they are decided on their merits. Furthermore, courts have rarely found companies liable for human rights abuse or environmental damage in host countries.

At EU level, the Rome II Regulation applies to the determination of remedies in transnational litigation against MNEs. The general rule is that the type of remedy, including the character and amount, must be determined according to the law of the host State.²²² NGOs and scholars have criticized the effect of the Rome II Regulation on remedies available to plaintiffs.²²³ They suggest that available remedies in host States might not always be appropriate to remediate corporate abuse of human rights or environmental pollution, and that the maximum amount of compensation might be too low to cover the real costs of litigation in the home country.²²⁴

Nonetheless, an overview of potential remedies in France and the Netherlands remains noteworthy for understanding whether effective remedies are available in practice and in law in the event of human rights abuse or environmental pollution. It is also important to consider whether remedies can realistically place victims or the environment in the same position in which they would have found themselves had the harm not occurred. Furthermore, as mentioned above, the Rome II Regulation provides for a number of situations where the home State law may apply.

Damages

Plaintiffs have asked for compensation for the personal damage they suffered in most of the claims analysed in this study. However, very few of them have been effectively compensated. In France, in COMILOG and AREVA, the plaintiffs were originally awarded damages for the loss they suffered. However, these rulings were quashed by the Court of Cassation, and the claims were eventually dismissed on jurisdictional grounds or on the merits. In the Netherlands, in Shell, SPDC was eventually found liable and was ordered to pay damages to some of the plaintiffs in 2021. At the time of writing, the amount of the compensation had yet to be determined in a follow-up procedure.

In French and Dutch tort law the principle behind awarding damages is generally aimed at repairing the harm suffered by the victim rather than punishing the tortfeasor.²²⁵ In France, victims of corporate abuse can obtain damages before civil and criminal courts in order to repair and compensate them for the harm they suffered. French courts calculate damages on a case-by-case basis and there is generally no maximum limit to damages. Courts assess damages at the time of the ruling on the basis of the injury suffered by the plaintiff. French courts can order the defendant to compensate the plaintiff for the entire injury, which may comprise pecuniary loss (dommage patrimonial) and non-pecuniary loss (dommage moral), such as pain, suffering, or loss of amenities.²²⁶ Compensation for non-pecuniary loss may be granted for personal injury, for death or serious injuries to a loved one, or even for harm to feelings.²²⁷ French courts tend to award generous sums to compensate non-pecuniary loss.²²⁸ Furthermore, an extensive list of relatives are eligible to claim damages for the loss of a close relative or a loved one.²²⁹ However, any benefits to the defendant as a result of the harm are not taken into account in the assessment of damages. In addition to reparation and compensation, French courts may award a euro symbolique to recognize that the victim has suffered a wrong or that their right has been infringed.²³⁰

In the Netherlands, compensatory damages may cover loss to property, rights, and interests, such as any loss incurred and any deprivation of profits, as well as any other damage.²³¹ In personal injury cases, victims may claim damages for their recovery and for other pecuniary and non-pecuniary damage, such as pain and injury.²³² As a general rule, damages shall be paid in monetary form, although Dutch courts have discretion to award them in other forms.²³³ They also enjoy discretion to assess the amount of financial compensation and are not bound by rules of evidence in this regard. Nonetheless, the injured party should be placed, as far as possible, in the situation they would have been in if the event that caused the damage had never occurred.²³⁴ Unlike France, the Netherlands allows the injured party to request that the damages be assessed according to the amount of the profit (or a part thereof) that the tortfeasor derived from committing the tort.²³⁵ This provision could potentially be useful for plaintiffs in the context of transnational claims against MNEs. For instance, MNEs may derive a profit from the sale of goods produced by employees who did not receive the minimum wage in violation of labour law requirements.

Punitive damage awards do not exist under French and Dutch law. This limits the benefit of using litigation to deter MNEs from committing human rights or environmental abuse. In general, under French and Dutch law damages aim to repair the harm and compensate the victim rather than punish the tortfeasor. In France, courts continue to show distrust towards punitive damages, even though the Court of Cassation recently held that they were not contrary to public policy.²³⁶ Nonetheless, foreign awards of punitive damage can be enforced in France when the amount awarded is not disproportionate with regard to the damage sustained.

Other remedies

France provides for various types of injunctive relief, most notably to prevent or halt ongoing infringement of the plaintiff’s rights, or to order the defendant to take positive action to further limit harm that has already occurred.²³⁷ Similarly, Dutch courts can issue injunctions that order the defendant to perform certain acts after the tort took place, or to abstain from certain acts before the tort takes place.²³⁸ As a result, plaintiffs in transnational litigation against MNEs may ask courts to order MNEs to honour any legally enforceable obligations or to grant interim injunctions or orders.²³⁹ However, it remains to be seen whether such remedies are applicable or effective, particularly as the harm usually takes place in host countries where there are limited means of enforcement.²⁴⁰

To date, courts have tended to focus on the award of damages to injured individuals. In Shell, the plaintiffs requested the Dutch courts to order the corporate defendants to clean up the oil spills in Nigeria. However, in 2013 the District Court ordered the subsidiary to compensate plaintiffs for the damage they suffered, but ignored the plaintiffs’ requests to clean up the pollution. In 2021, the Court of Appeal found that SPDC was liable for damages resulting from the leakage from the pipelines, but rejected the request that it should further clean up the contaminated areas. Despite persistent pollution in the areas at stake, the Court of Appeal nonetheless held that SPDC had already remedied the areas according to the remediation standard published by the Nigerian Department of Petroleum Resources and was not required to comply with target values, meaning to return the soil to its previous state.²⁴¹ It dismissed the assertion that the residual pollution constituted an unlawful situation or a violation of the plaintiffs’ right to a clean environment.²⁴² While the choice to apply governmental remediation standards has the merits of legal certainty, this approach is nevertheless open to criticism when such standards are so low that they fail to restore the land to the state in which it was before the pollution occurred and to address the source of the victims’ deteriorating standard of living. On a positive note, one important aspect of the Court of Appeal’s ruling was that it ordered both SPDC and RDS to set up a leak detection system (LDS) within one year of the ruling in order to detect future leaks more rapidly. In the event that the companies do not comply with this order, they will be obliged to pay a periodic penalty payment of €100,000 per day. This order has the benefit of preventing future oil pollution or, at the very least, reducing the damage that could result from potential oil leakage. However, the Court of Appeal could have been bolder, in particular by ordering the replacement of old and defective pipelines at the source of the pollution.

Scholars and activists have generally called for home country courts to take into account types of remedy other than financial compensation, such as injunctions or clean-up operations. They have pointed out that excessive focus on financial compensation to injured individuals does not remedy long-standing social and environmental problems.²⁴³ Furthermore, according to the ECtHR, a remedy cannot be considered effective if, despite its theoretical existence, there is significant uncertainty as to its practical availability.²⁴⁴ Therefore, plaintiffs must be able to effectively invoke other remedies.

7 The cost of civil litigation against MNEs

Transnational litigation against MNEs in France and the Netherlands is generally costly,²⁴⁵ even though litigation costs in those countries are perceived to be moderate compared to common law countries.²⁴⁶ Various reasons explain such high litigation costs. First, MNEs will forcefully fight against transnational claims against them to prevent the establishment of unfavourable precedent.²⁴⁷ As a result, litigation is often lengthy, lasting at least several years, with limited chances of success for plaintiffs. Second, essential evidence, including documents and witnesses, is often located in the host country and bringing it to the home country where proceedings take place increases litigation costs.²⁴⁸ Third, transnational litigation against MNEs is usually complex and requires specific legal and scientific expertise, thus increasing costs.

According to the UNGPs, barriers to accessing judicial remedy arise where ‘the costs of bringing claims go beyond being an appropriate deterrent to unmeritorious cases and/or cannot be reduced to reasonable levels through Government support, “market-based” mechanisms (such as litigation insurance and legal fee structures), or other means’.²⁴⁹ A lack of resources may also make finding legal representation difficult for claimants.²⁵⁰ In France and the Netherlands, the application of the loser pays principle, limited legal aid schemes, and absence of funding arrangement options between plaintiffs and their lawyers may prevent victims and NGOs from accessing courts.

The loser pays principle

France applies the loser pays principle, whereby the losing party bears the costs of the legal proceedings.²⁵¹ However, the judge may decide to impose the whole or part of the legal costs on the other party. Furthermore, Article 700 French Code of Civil Procedure provides that the judge can order the losing party, or the party obliged to pay the legal costs, to pay an amount determined by the judge to the other party to cover any expenses not included in the legal costs. Nonetheless, the judge must consider rules of equity and the financial condition of the party ordered to pay. On such grounds, they may free the losing party from paying other expenses in addition to the legal costs.²⁵² In Alstom, the plaintiffs lost, and the Versailles Court of Appeal ordered them to pay the entire costs of the legal proceedings. In addition, the plaintiffs were ordered to pay €30,000 to each of the corporate defendants pursuant to Article 700. Following the ruling, AFPS stated that those sums were substantial financial penalties for an NGO.²⁵³

Similarly, the Netherlands applies the loser pays principle.²⁵⁴ Dutch courts will also order the losing party to bear the legal costs and the costs of the prevailing party, including registry fees, compensation for witnesses and experts, and lawyer fees.²⁵⁵ However, the losing party is not required to pay the full lawyer fees incurred by the prevailing party. As a rule, lawyer fees are calculated on the basis of a scale of costs set out in non-binding, but generally applied, court guidelines. In practice, this scale leads to a remuneration that does not cover the complete costs of legal representation and, as a result, the prevailing party will usually recover only a small percentage of its actual costs.²⁵⁶ An important feature of Dutch civil procedure is that a claimant may request the court to order the defendant to pay the costs. The defendant can make the same request in their statement of defence.²⁵⁷

In Shell, the District Court ordered the plaintiffs to pay the defendants’ costs concerning the production of evidence during the legal proceedings following the dismissal of the plaintiffs’ request to obtain access to evidence. For two of the claims, the plaintiffs were ordered to pay jointly and severally the sum of €2,712 to the defendants within 14 days of the judgment.²⁵⁸ Furthermore, in 2013 the District Court ordered Milieudefensie and the plaintiffs who had lost in the first instance to pay the defendants’ costs, including their court fees and a fixed lawyer fee. However, the cost of the lawyer fees was relatively low due to the application of the above-mentioned scale. In 2021, the Court of Appeal ruled that the successful plaintiffs should be compensated for the costs of the proceedings at first instance, so that the parties bear their own costs. It also ordered SPDC to bear the costs of expertise.²⁵⁹

The application of the loser pays principle is particularly problematic when one considers that victims and NGOs often have limited financial resources, if any, to pursue legal proceedings compared to the large sums spent by MNEs. Ultimately, the loser pays principle reinforces the inequality of arms between plaintiffs and MNEs. It also deters victims and NGOs from initiating legitimate legal proceedings to gain access to remedy and to hold companies to account.

Access to legal aid

In view of the high legal costs incurred by plaintiffs to bring claims against MNEs, as well as the limited financial resources of victims and NGOs, access to legal aid is therefore crucial to guarantee that plaintiffs can nonetheless use courts to seek justice. However, restrictive conditions for granting legal aid may impede effective access to justice by plaintiffs. In the EU, there is a legal framework applicable to legal aid, which is relevant to plaintiffs in transnational litigation against MNEs in France and the Netherlands.

The EU legal framework on legal aid

Access to legal aid is an important part of the right to a fair trial. Article 47(3) EU Charter, on the right to an effective remedy and to a fair trial, provides that legal aid must be made available to those who lack sufficient resources in so far as such aid is necessary to ensure effective access to justice. The CJEU has interpreted that national courts should ascertain ‘whether the conditions for granting legal aid constitute a limitation of the right of access to the courts which undermines the very core of that right; whether they pursue a legitimate aim; and whether there is a reasonable relationship of proportionality between the means employed and the legitimate aim which it is sought to achieve’.²⁶⁰

The EU also enacted Council Directive 2002/8/EC (Directive on legal aid)²⁶¹ to promote access to legal aid in civil and commercial cross-border disputes for persons who lack sufficient resources, particularly where aid is necessary to secure effective access to justice. However, the Directive on legal aid applies only to cross-border disputes where the party applying for legal aid is domiciled or habitually resides in a Member State other than the Member State where the court is sitting or where the decision is to be enforced.²⁶² As a result, the Directive on legal aid does not confer rights to individuals domiciled or residing in countries outside the EU, such as victims of abuse committed by EU MNEs in host countries. This situation discriminates against foreign victims and limits their opportunities to obtain effective access to civil remedy in the EU.

National experiences

In France, legal aid (aide juridictionnelle) is available to natural persons who lack sufficient resources in order to secure their effective access to justice.²⁶³ The State will cover the costs of legal assistance, including lawyer fees, and the costs of proceedings. The latter include the fees to persons mandated by the court to perform acts during the proceedings on behalf of the legal aid recipient. One advantage for plaintiffs is that legal aid can be obtained for any type of legal proceedings, including civil and criminal.

However, various restrictions apply to legal aid in France. First, the legal aid recipient may obtain either full or partial legal aid depending on their resources. Second, legal aid does not cover the costs that may be imposed if the plaintiff loses the case (eg the defendant’s legal costs, damages). Third, only a natural person, who is a French national, an EU national, or a foreign national legally and habitually residing in France, may receive legal aid.²⁶⁴ Moreover, legal persons are excluded from receiving legal aid. In the context of transnational litigation against MNEs, these conditions limit access to legal aid by foreign victims and NGOs. Only in exceptional cases can nationals of non-EU countries residing outside France receive legal aid, for instance where their situation appears particularly noteworthy regarding the subject matter or the costs of the proceedings.²⁶⁵ In exceptional circumstances, legal aid may be available to non-profit legal persons, which have their seat in France and lack sufficient resources to bring a claim.²⁶⁶

The Netherlands has one of the most elaborate legal aid systems in Europe.²⁶⁷ Article 18(2) Dutch Constitution provides for the granting of legal aid to persons of limited means.²⁶⁸ In general, the Dutch State will cover a certain amount of the court fees and the lawyer fees paid by the legal aid recipient. Legal aid may be granted to both natural and legal persons with inadequate financial resources in relation to legal interests within the Dutch legal sphere of influence.²⁶⁹ Furthermore, depending on the recipient’s income, legal aid may allow for a reduction in court fees.²⁷⁰ Moreover, there is no restriction of nationality or residence on obtaining legal aid, as long as legal interests within the Dutch legal sphere of influence are involved. In Shell, the Nigerian plaintiffs were able to receive legal aid. However, due to high litigation costs, legal aid has been insufficient to fund the whole case and other sources of funding have been necessary to initiate and continue the lawsuit.²⁷¹ Another limit of the Dutch system is that legal aid recipients must always cover part of their litigation costs according to their financial resources.²⁷² Moreover, legal aid will not be granted if the party’s chance of winning is considered to be close to zero or if the costs incurred during the proceedings are not reasonable compared to the interest of the case.²⁷³

Market-based funding mechanisms

The UNGPs explicitly mention ‘market-based’ mechanisms, such as litigation insurance and legal fee structures, to fund legitimate cases involving business-related abuse. In contrast with common law countries, market-based mechanisms (eg contingency fees in the US or conditional fees in the UK) are less widespread in civil law countries.

In France, the ‘no win, no fee’ agreement (pacte de quota litis) is generally considered to be ‘shocking’ and ‘inappropriate’,²⁷⁴ and French law prohibits it.²⁷⁵ As a result, parties, and not their lawyers, must bear the costs of legal proceedings. Nonetheless, a party and their lawyer may agree a contingency fee or a success fee in addition to the remuneration for the service.

In the Netherlands, parties and their lawyers are free to agree on how lawyers are to be paid. However, the Code of Conduct of the Dutch Bar Association imposes certain limitations.²⁷⁶ As a general rule, a lawyer must take into account all the circumstances of the case when determining their fee, and they must charge a reasonable fee.²⁷⁷ Furthermore, US-style contingency fees are not permitted. A lawyer should not agree to charge a proportionate part of the value of the result obtained.²⁷⁸ Success fees are not allowed either. A lawyer should not agree that they will only charge for their services upon obtaining a specific result.²⁷⁹ However, the Disciplinary Appeals Tribunal has accepted certain forms of success fees, such as charging fees at a higher hourly rate if the case is successful.²⁸⁰ Finally, WCAM settlements can be used by plaintiffs to pay their lawyer fees, which can be substantial.²⁸¹

8 Conclusions

This chapter has examined how French and Dutch rules of civil procedure and remedies affect the opportunities of plaintiffs to gain effective access to justice in the context of transnational litigation against MNEs. It showed that plaintiffs have faced significant procedural and practical obstacles that impede their right to a fair trial, including their right of access to a court and the respect of equality of arms, as well as their right to access an effective remedy. Some of these obstacles originate from the civil law nature of these countries (eg lack of effective collective redress mechanisms or unfit rules on production of evidence),²⁸² while others are the consequences of EU harmonization.

The nature of transnational civil litigation against MNEs raises a number of legal challenges with regard to the home State’s competence to hear claims, and whether the law of the home or host State applies to the proceedings. Under the EU regime of private international law to which France and the Netherlands are bound, plaintiffs can successfully establish French and Dutch jurisdiction over a company domiciled in France and the Netherlands. However, the jurisdiction of French and Dutch courts to hear claims against companies domiciled outside the EU (such as host State subsidiaries) is less certain. Furthermore, the host State law will generally apply to transnational claims against MNEs in France and the Netherlands. This solution is likely to be unsatisfactory for plaintiffs, as they generally pursue their case with the purpose of applying the home State law.

France and the Netherlands have traditionally been reluctant to allow collective redress mechanisms similar to those found in common law countries. As a result, collective redress has generally not been available to plaintiffs in French and Dutch proceedings. Nonetheless, as a result of EU policy, France and the Netherlands recently reformed their legal framework on collective redress mechanisms. However, EU policy on collective redress has to date focused excessively on consumer issues and, as a result, it provides no opportunities to address mass harm situations caused by corporations in a transnational context.

Another significant procedural issue relates to the production of evidence. Plaintiffs initiating a liability claim against an MNE usually bear the burden of proof. Furthermore, although France and the Netherlands allow disclosure for the benefit of plaintiffs, their courts have been reluctant to require corporate defendants to produce evidence and have been wary of allowing ‘fishing expeditions’. As a result, plaintiffs face significant obstacles to demonstrate the validity of their claims, especially since they often have limited access to crucial evidence possessed by MNEs.

Other procedural and practical issues include restrictive approaches to NGO standing in litigation, high litigation costs, and insufficient legal aid. Moreover, even though a wide range of remedies are theoretically available in France and the Netherlands, courts have tended to focus on financial compensation, neglecting other important remedies, such as environmental remediation.

As a result, it is unlikely that foreign victims of business-related abuse can hold MNEs to account and obtain remediation for the loss they have suffered. Despite the existence of these claims for more than a decade, domestic rules remain unfit to face the transnational justice challenges created by MNEs’ global activities.

The next chapter provides an analysis of criminal litigation against MNEs in France and the Netherlands.