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Historic Royal Dutch Shell settlement with non-US shareholders

Royal Dutch Shell is to pay $381 million plus interest to a foundation representing over 150 institutional investors in nineteen countries. The settlement, following a binding declaration by the Amsterdam Court of Appeals, is considered to be a milestone, given that European courts lack a class action mechanism for pursuing securities fraud claims.

The  settlement covers all non-U.S. purchasers of Shell stock obtained on European securities exchanges – principally London and Amsterdam – during the period of Shell’s allegedly illegal energy reserve accounting between April 1999 and March 2004. Under Dutch Law, the settlement (under the Dutch Act on Collective Settlement of Mass Damages introduced in 2005) binds all members of a class who do not “opt out” of it.

Shell was forced to issue multiple large financial restatements beginning in 2004 as a result of the extended inflation of its energy reserves. Estimates are that over the six-year period covered by the case, Shell overstated more than $100 billion of future cash flows, based on billions of barrels of oil that were not actually held in its reserves.

“We are pleased that the Amsterdam Court of Appeals has issued its final approval on this historic settlement, which represents a watershed outcome for European and other non-US investors in gaining substantial, collective recovery in one of the most high-profile securities cases in recent years,” said Jay Eisenhofer, co-managing partner of Grant & Eisenhofer.


The pension funds leading the settlement represent millions of public and trade-based employees across Western Europe, including: The Netherlands, United Kingdom, Ireland, Germany, Sweden, Luxembourg, France, Denmark, Austria, Belgium, Finland, Italy, Liechtenstein, Spain, Switzerland and Norway. Some legal advisers see this as a potential new model for universal class action settlements.

Quoted in The Guardian, a spokesperson for Aviva Investors said:  “We are delighted with the decision by the Amsterdam court of appeal. The settlement provides welcome closure to the reserve ­mis-statements for both the company and its shareholders”.

“The case has also set important precedents, both for shareholder collaboration and for the jurisdictional scope of such cases. It’s important now for pension funds and others to ensure that their claims will be properly filed.”

Further Reading

The American Lawyer >>
(Jan 2008) ‘Shell Model’ Opens Door to European Class Actions

Grant & Eisenhofer Announcement >>

What do you think?