Three essential things you need to know about Dutch Foundations

By Mike Lange, Securities Litigation Counsel, Financial Recovery Technologies

We’re seeing more Dutch Foundations established concurrent with the filing of securities litigation in countries where corporate defendants are headquartered.  Recent examples include Tesco (litigation in the UK) and Volkswagen (VW) (litigation in Germany).

Here are some essential things you need to know about Foundations when formulating your recovery strategy in such matters.

1. What is a Dutch Foundation?

Called a Stichting, a Dutch Foundation is a legal entity created under Netherlands law for a specific purpose.  Separate from its underlying members – e.g. for the Stichting Volkswagen Investors Claim, investors who lost money in VW securities following disclosure of the company’s emissions scandal – the Foundation can prosecute and settle claims in its own name and at its own cost.  Indeed, they are often organized and supported by U.S. law firms that don’t practice in the country where the corporate defendant resides.

When a Foundation pursues legal claims, the process resembles a declaratory judgment action in the U.S.  The court first resolves factual and legal questions common to all members, and assuming success, then resolves individual claims.

Foundation members are not parties to this litigation.  In fact, their identities are not disclosed publicly or to the defendants except in connection with settlement talks and then only with the members’ prior consent.

Before resolution of common questions, Foundations involve an ‘opt-in’ process, meaning investors are not included unless they register.  When a settlement occurs, the process resembles a U.S. class action administration.  The parties’ agreement defines a settlement class; eligible investors file claims to share in the recovery; and they are bound by the court’s order releasing defendants from liability unless they opts-out or exclude themselves from the class.

In practice, most Foundations that are set-up in securities matters do not have any intention of litigating claims.  Indeed, questions have been raised about the ability of Dutch Courts to assert jurisdiction over cases involving foreign companies and investors who purchased securities outside of Dutch exchanges.  To encourage settlement, some Foundations will send demand letters, while others rely on pressure from litigation in the home country to (hopefully) incent the defendants to seek global peace through their Foundation.

Most Foundations are just that, vehicles created with the hope of voluntary settlements.  They offer a venue for resolution if defendants eventually decide they want to buy global peace; and the jurisdiction questions are less likely to be advanced when both sides want the court to assume it.

2. What’s involved in joining?

Joining a Dutch Foundation is easy.  The size of your losses doesn’t matter, and Foundations won’t analyze your trading information beforehand as organizers contemplating direct litigation in the home country do.  You’ll only be asked to sign a short document saying you’ll support the Foundation in its efforts.  You can withdraw this limited commitment for any or no reason with written notice.

So why not instead simply wait and see if a settlement occurs?  To encourage early participation, some Foundations give more to early registrants in the event of settlement.  In the Fortis case, for example, those filing suit or joining a Dutch Foundation before settlement announcement could receive as much as 50% more on their losses than those submitting claims after the announcement.

In short, if you’re not contemplating suit in the underlying country for some reason (e.g. your losses are too small or you’re not inclined to be a plaintiff), we suggest you consider joining a Dutch Foundation if one exists.  If you’ve already filed or are considering direct suit in another country, the Foundation will still accept you but you should consult with your local counsel and funder first to ensure this won’t affect the filed or planned suit.

3. What are the risks/downsides to joining?

Foundations have a big Achilles Heel.  Joining them does NOT perfect your claims or stop the expiration of the limitations period, the time required by law for you to file suit or be permanently barred from recovery.  Foundations often emphasize this up-front.

So what does this mean?  If the matter settles before the limitations period expires, most likely nothing.  But if time passes and your claims become barred, the parties may limit or eliminate amounts paid in settlement.  After all, defendants face limited or no prospect of suit if the filing deadline has elapsed.  Given how far back misconduct in most securities cases goes, and how long claims are often litigated before settling, you’re likely to face the risk of expiring claims in many matters.

Foundations can try to mitigate this risk.  Some attempt to negotiate tolling agreements to suspend the clock, usually without success, or attempt to preserve member claims in the underlying country if there’s a method available.  We’re seeing this in the VW matter where both Foundations previously encouraged investors to directly file suit in Germany; and now that the time to do so has passed for some securities, one of them is helping its members register claims in the Braunschweig KapMug in order to preserve any time remaining.  (Please see our earlier blog post on VW claim registration in Germany).


Dutch Foundations should have a limited place in your recovery strategies for securities matters outside the U.S. and Canada.  If you’re not filing suit in the underlying country, then consider registering with a Dutch Foundation, if one exists.  If a Foundation announces a settlement and you have not filed suit earlier, submit a claim for your eligible losses.  (If you have filed suit in the home country or are considering it, do NOT file a claim without first checking with your local counsel and litigation funder.  As in the U.S., submitting a claim to could release your claims and complicate planned or pending proceedings.)  Finally, always bear in mind that Foundations cannot be used to perfect claims and prevent them from expiring.  If the limitation period passes before a settlement occurs, you’ll likely get less (if anything) by way of compensation.

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Founded in 2008, Financial Recovery Technologies (FRT) is a leading technology-based services firm that helps the investment community identify eligibility, file claims and collect funds made available in securities and other class action settlements. Offering the most comprehensive range of claim filing and monitoring services available, we provide best-in-class eligibility analysis, disbursement auditing and client reporting, and deliver the highest level of accuracy, accountability and transparency available. For more information, go to

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