On January 1, 2010, a new class action statute took effect in Italy. Enacted pursuant to article 49 of Law no. 99 dated July 23, 2009, amending article 140-bis of Legislative Decree no. 206 dated September 6, 2005, (the Consumers’ Code), it allows for groups of consumers claiming to have suffered identical damages to bring their claims against a common defendant in a single action.
Under the new statute, only consumers and end users have standing to bring class action claims. The law is not available to legal entities or individuals acting in their professional, commercial or entrepreneurial capacities.
An action can be initiated by any member of the class (the so-called “promoter,” i.e. any user, consumer or valid committee or association of consumers) alleging damage by the defendant’s conduct, where the defendant is a company or an individual running a business.1
Although the class action statute became effective in Italy on January 1, 2010, actions may be filed with respect to breaches that occurred after August 16, 2009.
Scope of the Proceedings and Protected Rights
The class action is a proceeding aimed at protecting consumers’ rights that have been allegedly breached by a defendant’s conduct. Class actions are applicable to a wide variety of contractual rights as well as torts. As listed under article 140-bis of the Consumers’ Code, class actions may be brought with respect to:
- Breach of contractual rights of a multitude of consumers and end users vis-à-vis the same party (the so called “contractual corporate liability”)
- Product liability, regardless of a direct contractual relationship
- Unfair trade practices
Most commentators deem that class actions cannot be used in relation to damages outside a purchase or consummation process, such as an action for environmental damages suffered by people residing in a specific geographic area, or damages suffered by employees within the scope of an employment relationship or for sexual, racial or religious discrimination.
Class Actions in Connection with Providing Financial Services
Companies that provide financial services could possibly be subject to detrimental consequences under the new class action regime. Although some commentators have raised doubts as to the feasibility of applying the class action statute to victims of financial fraud, the majority admit that the statute, as written, can be applied to financial damages.2 Therefore, class actions may be brought against investment services companies that have entered into contractual relationships with consumers using standard forms of contracts, such as policyholders and non-professional investors. However, it is controversial whether an issuer can be subject to a class action brought against it by holders of its financial instruments, since such circumstances would lack the element of use or consumption of a good or service.
The Opt-In Mechanism
Individual consumers may join a class action by means of an opt-in mechanism, through which they give their express consent to being part of the proceeding (as opposed to the opt-out mechanisms employed in class action proceedings in the US, through which the action applies to all members of the class except those who expressly request to be excluded). Therefore, the court decision is effective only vis-à-vis the consumers who actively seek to be included in the proceeding.
By bringing a class action, the consumer waives any additional claims based on the same rights and is subject to the decision of the court. Consumers who do not join the class action proceeding maintain their right to bring an individual action.
However, consumers who adhere to the class action proceeding are not fully bound by the decisions taken by the promoters of the class action. For example, in case of waiver or settlement of the action between the promoter and the defendant, consumers who joined the class action are free to reject the waiver or the settlement.
The new Italian class action can be activated only if none of the following are applicable:
- The claim appears to be manifestly ungrounded after a preliminary review by the court
- There is a conflict of interest
- The rights breached are not homogeneous
- The class action promoter appears to be inadequate to represent the interest of the class
These requirements are meant to balance the need to efficiently protect consumers’ rights with the need to prevent vexatious litigation. This latter need is particularly relevant considering that class actions generally entail negative publicity for the defendant, which cannot always be superseded by a favorable court decision.
The court can suspend its judgment on whether the class action should be permitted to move forward when independent authorities (e.g. antitrust authorities) or administrative courts are separately assessing facts on which the claim is based. Alternatively, the court can seek cooperation with such independent authorities or administrative courts in the relevant evaluation.
There is no specific provision governing the expenses connected with the proceedings, and the general rules on trial expenses apply. However, in the event of a decision favorable to the defendant, the promoter must bear the costs of advertising the judgment.
At the end of the proceedings, a competent court may accept the class action claim and order the defendant to pay damages to each consumer. The defendant, however, may request that payment of damages be stayed while it appeals the decision. In such case, the court may request that the amounts due be deposited in escrow.
The ‘Ne Bis in Idem’ Principle
The class action is a proceeding made available to a multitude of consumers to jointly bring a claim against a defendant. However, once the term set by the court to bring the action has lapsed, no further class actions may be brought against the same entity based on the same grounds.