SRKW acted as co-lead counsel in the Converium/SCOR securities class action, which made history as the first such case settled on a trans-Atlantic basis: a portion was resolved in U.S. federal court while monies recovered for non-U.S. purchasers are being overseen the Dutch Court of Appeal in Amsterdam and will be distributed by a Dutch settlement foundation.

On November 12, 2010, the Dutch Court of Appeal announced that it had jurisdiction to declare the international settlement of the Converium action binding. This wasn’t the Court’s first foray into this arena. Indeed, several years earlier it had notably secured jurisdiction over the settlement of the Royal Dutch Shell action (which SRKW was part of), resolving the claims of a worldwide group of shareholders against the Anglo-Dutch energy company. So what made the Converium decision groundbreaking? Because in addition to showing its willingness to provide an effective forum for European and other investors to settle their claims on a pan-European or even global basis, the Court of Appeal in Converium substantially broadened its jurisdictional reach -- to the benefit of investors in this case and in future actions. In the Royal Dutch Shell action, the wrongdoing largely took place in the Netherlands and the defendant company was Dutch as were a substantial number of the claimants. In Converium, the Dutch Court secured jurisdiction even though the claims were not brought under Dutch law, the alleged wrongdoing took place outside the Netherlands, and none of the potentially liable parties and only a limited number of the potential claimants are domiciled in the Netherlands. Although the decision is provisional, when it becomes final (likely in October 2011), all other European Union Member States, as well as Switzerland, Iceland and Norway, must recognize it, under the Brussels I Regulation and the Lugano Convention.

A U.S.-style class action device does not exist in Europe. Claims there must be brought as a group or mass of individual claims, rather than as a class. This has made it more difficult historically for investors to collectively protect their rights when injured by corporate wrongdoing. The Netherlands has taken the most pragmatic approach within Europe to aid investors and other claimants by enacting a law (the Dutch Act on the Collective Settlement of Mass Claims (the "Dutch Collective Settlement Act")) that allows them to reach a collective settlement with a defendant or group of defendants and then have that settlement declared binding on an entire class on an "opt out" basis which is the same under U.S. class action procedure. (In most of all Europe and elsewhere, the procedure is the opposite -- i.e., in order to participate in a group action, a claimant must register, i.e., "opt-in", in order to participate in the action such as the current action against Fortis Bank which is pending in Belgium-- SRKW is representing a large number of both U.S. and European institutional investors in this action).

The Dutch Collective Settlement Act requires that claimants' interests be represented through a Dutch foundation or association and the Dutch Court of Appeal will only declare a settlement binding if, among other things, the amount of the settlement is reasonable and foundation members are sufficiently representative of all participating investors. On February 18, 2009, the Stichting Converium Securities Compensation Foundation (the "Foundation") was incorporated to represent the interests of all legal and natural persons who, during the period from January 7, 2002 through September 2, 2004, purchased Converium common stock on a non-U.S. stock exchange and were not residents of the United States at the time of purchase. The Foundation is governed by a Board of Directors, each of whom is independent of Converium and ZFS. Pursuant to its articles of association, the Foundation is structured to include a number of participating parties, which signed agreements to become registered participants of the Foundation.

Because the Netherlands is the only European country with such a collective settlement procedure it has become an attractive venue for settling international mass claims, irrespective of whether any litigation has taken place in the Netherlands. The approach taken in the Netherlands is important for all investors. This was underscored by the U.S. Supreme Court’s recent decision in Morrison v. National Australia Bank, which denied investors (including U.S. investors) the right to bring their claims before U.S. courts for shares not purchased on a U.S. exchange. Thus, when U.S. courts will not hear their claims, European (and American) investors will more readily look to resolve them in European courts. The Dutch Collective Settlement Act, and the Court of Appeal's recent ruling in the Converium case, will make it easier for them to do so. The Court of Appeal noted the significance of its judgment in creating an alternative venue to declare international collective settlements in mass claims binding on all class members. The Court explicitly referred to the limitations for the U.S. courts to do so in securities cases as a result of the U.S. Supreme Court's decision in Morrison v. National Australia Bank.

Details and relevant documents pertaining to the settlement are available at

Background of the Case

The case began in October 2004 when investors sued two Switzerland-based companies -- Converium Holdings AG ("Converium") and Zurich Financial Services ("ZFS") in the U.S. for securities fraud violations. (Converium was acquired in 2007 by the French company SCOR and is now known as SCOR Holding (Switzerland) AG.). SRKW's client, a large European institutional investor, and the other co-lead plaintiff, alleged that when ZFS spun off Converium in an initial public offering, Converium's earnings were materially overstated because they concealed a massive deficiency in its North American loss reserves. (Converium was a major multi-line re-insurance company.) This caused Converium's stock price to be artificially inflated from December 11, 2001 through September 2, 2004. Ultimately, in September 2004, Converium increased its loss reserves by $562 million, reported a loss for 2004 of $761 million and announced that it would place its troubled North American operations into "run-off" and would no longer write reinsurance policies out of its U.S. offices. This caused Converium's stock price to drop sharply, resulting in large losses to investors.

Settlements on Two Continents

The action was originally brought on behalf of all investors who purchased Converium common stock on the SWX Swiss Exchange and American Depositary Shares in New York. However, on March 6, 2008, the U.S. federal court certified a class that excluded all non-U.S. purchasers who bought their shares on the SWX Swiss Exchange, concluding that there was insufficient evidence of subject matter jurisdiction over their claims. Converium and ZFS ultimately agreed to settle investors' claims for a total of $143 million. Because of the U.S. court's decision, this settlement was split between those who purchased Converium shares in the U.S. and those who purchased them on the SWX Swiss Exchange. The U.S. federal judge presided over the former and the Amsterdam Court of Appeal is currently presiding over latter.

For additional information, please email Robert M. Roseman at