The English perspective
There is no set procedural mechanism for claimants with similar grievances to bring a collective action. However, a group litigation order (GLO) can be made under the Civil Procedure Rules (CPR 19.11) for claims that “give rise to common or related issues of fact or law” (GLO issues).
A GLO must:
- contain directions about setting up a register where the claims managed under the GLO will be entered;
- specify the GLO issues that will identify the claims to be managed for the group under the GLO; and
- specify the court that will manage the claims entered into the group register.
Where a judgment is given (or an order is made) regarding a claim in the group register in relation to one or more GLO issues:
- The judgment or order will bind the parties to all other claims that are in the group register at the time the judgment is given or when the order is made, unless the court orders otherwise.
- The court may give directions about the extent to which that judgment or order is binding on the parties to any claim that is subsequently entered in the group register.
Any party who is adversely affected by a judgment or order that binds them may seek permission to appeal against that decision. However, a party to a claim that was entered in the group register after the judgment was given or the order was made may not appeal against the decision, or ask for it to be set aside, varied or stayed. They can, though, ask the court to order that the judgment or order does not bind them.
Opt in, opt out?
Unlike US class actions (where all potential claimants are bound unless they opt out of the class), all claimants wishing to join the group litigation must apply to be entered in the group register (ie they must opt in) by a date specified by the court. Judgment on one or more of the GLO issues will then bind all the claimants in the group register. Any non-GLO issues (such as compensation, for instance) will be determined in each individual case.
In December 2008, the Civil Justice Council (CJC), a body charged with advising the government on the modernisation of the civil justice system, published its report on collective actions. In it, the CJC said that the existing mechanisms in the UK for collective actions do not provide sufficient or effective access to justice for a wide range of citizens, and that meritorious claims which could be brought are not in fact being pursued.
The government responded to the CJC’s publication with its own report on 20 July 2009. This concluded that the creation of a generic collective right of action would not be appropriate in the UK.
Instead, the government thought that rights of collective actions should be introduced on a sector-by-sector basis, with the government departments concerned taking responsibility for introducing the necessary primary legislation. The government would also work with the CJC to develop proposals for procedural rules to be put before the civil procedure rule committee.
Consequently, the procedure in England will be on an opt-in basis for the foreseeable future. However, the issue of collective actions is ongoing and will probably feature prominently on government departments’ agendas in early 2010.
The claimants must be prepared to take the risk of paying the other side’s costs if they lose. They must also find funding for the class action, which is heavily frontloaded since the claimants must plead their fully formulated claim at the outset.
These rules are intended to promote flexibility and not be too prescriptive. It is usually more cost effective to proceed along the GLO route. However, as the frontloading of costs is a significant element, it is probably only worth applying for a GLO if there is a significant number of claimants. The court can, though, make a GLO of its own volition.
What has become apparent since the introduction of GLOs is that claimants are finding the costs burden difficult to bear and, as a result, there are relatively few GLOs currently in existence. Sadly for claimants, the government, like the CJC, remains in favour of retaining the usual loser-pays principle in relation to class actions.
The conditional fee agreement (CFA) was introduced for personal injury claims in 1995. The CFA only allows an uplift in the fees recoverable by the successful claimant from the losing defendant. Theoretically, a claimant’s solicitor can, on a no win/no fee basis, earn up to 100% uplift in the hourly rate. However, this is not always achieved, as the level of costs recovered may be challenged before a costs judge.
In AB in the matter of Nationwide Organ Group Litigation  EWHC 1034 QB, the High Court allowed an application by the defendants for an order to cap the costs of the claimants both retrospectively and prospectively in relation to a case that was being dealt with under a GLO. There were approximately 2,100 potential claims notified but four lead cases had been identified and were being dealt with under a GLO. The court allowed the defendant’s application, ruling that (in GLO cases) the court did not require exceptional circumstances to be shown before exercising its discretion to make a costs cap order. In this case, the claimants assessed the total sum in damages in excess of £15m.
The application for the costs cap was made in May 2003. It was to apply retrospectively (starting from 10 February 2003) and to continue up to and including the end of the forthcoming trial. The judge capped the claimant’s costs for that period at £506,500. In addition, the claimants could only apply to vary the order in the event of some future unforeseen and exceptional factor. This case is highly significant for defendant manufacturers who face group actions, as they can now have significant input into controlling the level of the claimants’ costs during the currency of the litigation.
In conventional litigation, the defendant can usually exercise no such control over a claimant’s costs. At best, they can query a claimant’s bill of costs retrospectively – but not prospectively.
Another problem with funding group actions through CFAs is that, to be workable, a CFA must be backed by adequate litigation protection insurance. However, such policies come at a high price and, in some instances, do not provide adequate protection for the claimants, so CFAs are consequently not appropriate. Also, the CFA requires significant investment from claimant lawyers, many of whom are now less inclined than previously to take on risky multiparty litigation for what appears to be very little reward.
The other way that group actions achieve financial backing is via the Legal Services Commission (LSC) funding system. However, it is becoming harder and harder for claimants to obtain such funding for multiparty actions. Withdrawal of funding decisions by the LSC include the MMR litigation and the Seroxat group action.
While the growing trend is for LSC funding to be withdrawn from group actions where causation is a problem, it does not mean that funding will be unavailable where the claimant’s case on causation is more clear-cut. However, the likelihood is that for a class action to get off the ground, funding will come via the CFA/insurance route, which (as explained earlier) has its own problems.
The net effect is that fewer and fewer group actions are being launched in England. This is, of course, very good news for defendant manufacturers and their insurers.
The Italian perspective
Group actions for damages – azione di classe – were first introduced into Italian law in 2007 by article 140-bis of the Consumer Code.
Article 140-bis was approved by Italian lawmakers on 1 July 2009 and will become fully effective in January 2010. However, it will only apply to conduct that occurred after 15 August 2009. As Italian law has no retroactive effect, it cannot, therefore, be used to support class actions for past conduct.
The right to sue does not belong to individuals but to the 16 accredited consumer associations with a nationwide presence, as well as to ad hoc committees that are sufficiently representative of collective interests, as assessed by a judge. These representative entities can bring an action against any commercial, financial, banking or insurance enterprise on behalf of all consumers who have been injured by the same action.
According to the Italian consumer code (codice dei consumatori ), the representative entities can claim that individual consumer rights of the same type have been violated by:
- a breach of contract;
- a tort;
- unfair trade practices; and/or
- breaches of competition law.
In the preliminary hearing, the court must verify that the class action is admissible and determine that:
- the action is not preposterous;
- there is no conflict of interest; and
- the action is being taken to protect individual consumer rights.
If the group action is deemed admissible, the claimant will be ordered to advertise the content of the claim, in order to enable consumers to opt into the action if they so wish.
The second stage of the proceedings consists of a trial. If the court rules in favour of the claimants, it does not award a specific amount of damages. Instead, the judge makes a substantive declaration and sets out the criteria that will be useful in calculating the amount to be paid to the individual consumers and users who have joined the class action or intervened in the proceedings. Where possible, the court will also establish the minimum amount payable or refundable to each consumer.
Within 60 days of the service of the court’s judgment, the relevant defendant company can make a written proposal of payment. Any form of proposal accepted by the consumer will be enforceable. If the company fails to make its offer within 60 days, or if the offer is not accepted during that time, the president of the court will appoint a conciliation committee (camera di conciliazione) to set the amounts to be paid or given back to the consumers who have joined the class action or intervened, and who have asked the conciliation committee to rule on this issue.
Opt in opt out?
Consumers may opt into the collective action by way of a simple written notice (without any particular formality) to the plaintiff. This must be sent before the final hearing giving the results of the appeal. Only opt-in consumers will be bound by the result. As a result, many consumers may decide to opt in only if the action succeeds in the first round of legal proceedings.
The final decision will also have a legal impact on the consumers and users (intervenienti) who have joined the class action.
Individual consumers or users who have not joined the class action or intervened in the proceedings will still be able to bring individual actions under the civil procedure code. If they prove their case, damages will be calculated in line with the criteria laid down by the court in the judgment given in the collective action.
The opt-in process will apply after either the court has given judgment determining liability and quantifying damages, or a court settlement has been reached.
Generally speaking, the loser-pays principle also applies in Italian law. However, when it comes to group actions, the legal rules are silent.
Most costs disputes for collective redress will probably relate to:
- the percentage of the winner’s costs that must be paid by the losers; and/or
- the amount that would have to be paid by consumers participating in the action if the case is lost.
In certain circumstances the claimants may also be liable for the defendant’s legal costs if the action fails.
Under Italian law, public funding (gratuito patrocinio) is available for any type of civil litigation and it covers all the legal costs related to a claim.
CFAs were legalised in Italy in 2006 and can also be used by claimants as a way of financing legal action. Third party funding is allowed too.
Overall, whilst group actions are available under English and Italian law, it is important to note that whilst a number of well known group actions have been made in England the procedure has not been regularly utilised in Italy.