In a development with significant implications both for Petrobras investor claims and for the global pursuit of investor claims generally, a Dutch court has accepted jurisdiction for a securities fraud action filed in the Netherlands against Petrobras, and also ruled that the arbitration clause in Petrobras’s bylaws do not preclude the Dutch proceeding. As discussed below, the court’s rulings could have important global ramifications for the viability of Dutch procedures for investors seeking collective redress, even (as is the case in the Petrobras action) with respect to companies based outside of the Netherlands.
The Dutch proceeding arises out of and relates to the long-running Operação Lava Jato investigation (Operation Car Wash), which began as a money-laundering and corruption investigation of the state-controlled oil company Petrobras. As revelations involving the company mounted, investors initiated a number of actions against the company. Investors who purchased Petrobras securities on U.S. exchanges filed a securities class action lawsuit against the company, as discussed here. Earlier this year, the parties to the U.S. securities suit announced a $3 billion settlement.
Consistent with the requirements of the U.S. Supreme Court in the Morrison v. National Australia Bank case, the U.S. settlement resolved the claims only of Petrobras investors who purchased company securities on the U.S. exchanges. Indeed, as discussed here, Southern District of New York Judge Jed Rakoff ruled in the U.S. action in July 2015 that the U.S. claims of investors who purchased Petrobras securities on Brazilian exchanges were both precluded by Morrison and barred by the mandatory arbitration provisions in Petrobras’s bylaws. Judge Rakoff expressly held that the mandatory arbitration provision bound all investors who purchased Petrobras securities after the clause was adopted.
As a result of Judge Rakoff’s ruling, the general view (as discussed, for example, here) is that the sole remedy of investors who purchased their Petrobras shares on the Brazilian exchange was to pursue arbitration in the Market Arbitration Chamber of the Bovespa (the São Paulo stock exchange).
Dutch Court OKs Petrobras Claim Jurisdiction
Notwithstanding these developments and constraints, a number of Petrobras investors sought to pursue their claims under in the Netherlands under Dutch procedures. Among other Petrobras investor groups pursuing claims under Dutch laws, in January 2017, the Stichting Petrobras Compensation Foundation (the “Foundation,” about which refer here) initiated a collective action in the Netherlands against Petrobras and its Dutch subsidiary on behalf of investors who purchased Petrobras securities outside the United States. Petrobras sought to have the Dutch proceedings dismissed, arguing, among other things, that the Dutch court lacked jurisdiction and that the Dutch action was precluded by the mandatory arbitration clause in Petrobras’s bylaws.