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IPE special report May 2018

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Foundation set up to pursue investor claims against VW in Dutch court

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An independent entity – the Volkswagen Investor Settlement Foundation (VISF) – has been set up to pursue investors’ claims against Volkswagen in the Amsterdam Court of Appeals.

The claims centre around revelations last year that the car manufacturer used “defeat device” software on thousands of diesel vehicles sold in the US, enabling them to violate emissions standards.

The revelations provoked a collapse in the share price, with €25bn wiped off the company’s market capitalisation on German exchanges in two days.

The VSIF is seeking compensation for economic loss on all Volkswagen securities, including equities and fixed income stocks, that were publicly traded outside the US, and purchased or held by investors worldwide between 23 April 2008 and 4 January 2016.

It intends to do so by using the Dutch Collective Settlement Act, which allows a foundation, supported by representative investors, and a defendant company to petition the Amsterdam Court of Appeals jointly for approval of a settlement.

If approved, investors that do not opt out receive payment, while the defendant receives a release of claims.  

Investors that have opted out are free to pursue their individual actions.

The Act can be applied to resolve securities claims of non-Dutch investors against a non-Dutch company.

The court’s decision is enforceable throughout the European Union and several other European nations.

The foundation, since its launch last week, has attracted a rapidly growing number of supporting investors, including some European pension funds, according to Anatoli van der Krans, senior adviser for European investor relations at Bernstein Litowitz Berger & Grossmann (BLBG), the US law firm financing the foundation.

A San Francisco judge has already appointed BLBG lead counsel in the consolidated class action involving Volkswagen’s American depositary receipts in the US.

But Germany, in contrast with the US, has no opt-out class action system, said van der Krans.

He told IPE: “While there is an opt-in group model procedure – KapMuG – this is a lengthy process, does not solve all procedural aspects, and comes with a ‘loser pays’ rule.

“Furthermore, any settlement will only apply to the group, not to all other investors.”

The VISF’s board includes Huub Willems, the former president of the enterprise chamber of the Amsterdam Court of Appeals; Jean Frijns, former CIO at the civil service pension scheme ABP; Frans van der Wel, professor in accounting at VU University of Amsterdam; and Rob Okhuijsen, an expert in mass claim resolution and former board member of the Royal Dutch Shell Foundation.

Investors can join at: http://volkswageninvestorsettlement.com.

Meanwhile, third-party litigation funders Bentham have appointed lawyers Quinn Emanuel to pursue legal action against Volkswagen in Germany, using the KapMuG model process.

They are currently putting together a list of investor plaintiffs.

Jeremy Marshall, CIO at Bentham, said: “Dutch foundations are not the silver bullets they are portrayed to be. The danger is that investors are effectively in a subservient position – if VW says ‘You’re not getting anything out of us’, you’re stuck.”

Marshall added: “With the certainty of litigation in Germany, it is hard to see how a defendant would come to a settlement with a Dutch foundation before that German litigation is itself compromised.”

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