The debate in Europe as to whether collective redress mechanisms should be more widely available has recently reignited. This comes at a time when in the US, whose class action system looms large over the European debate, the Supreme Court has adopted a series of rulings which have made it more difficult to bring and maintain class actions.

Whilst there are no plans to introduce a US-style regime in Europe as yet, steps are currently being taken which will result in enhanced forms of group actions being available in a number of Member States, with corresponding risks (and potential opportunities) for business.

UK developments: competition specific opt-out collective action

In January 2013 the UK Government announced an overhaul of the system for the private enforcement of competition law, including most significantly the introduction of a competition specific collective action in the specialist Competition Appeal Tribunal (CAT).

The legislative provisions to implement the proposals were introduced to Parliament in January 2014 as part of the Consumer Rights Bill, which is currently working its way through the legislative process (and which remains subject to opposition from the CBI in particular). Further detail on the operation of the collective proceedings will be contained in revised CAT Rules, which were published in draft on 10 March 2014 (and a formal consultation on which is awaited).

The key features of the collective action regime are as follows:

  • Actions can be brought on either an 'opt-out' or 'opt-in' basis, subject to certification from the CAT (non-UK domiciled claimants will need to opt in).
  • Representatives can be class members or other bodies (subject to a "just and reasonable" requirement). The Government has stated that law firms and litigation funders will not be able to act as representatives.
  • Actions can be brought on behalf of both consumers and businesses.
  • Contingency fees or 'damages-based agreements' will be prohibited.
  • 'Loser pays' costs rules will apply.
  • Unclaimed damages in an opt-out pot will be payable to a named organisation, the Access to Justice Foundation.

Alongside the collective action, a competition specific opt-out collective settlement regime is also being introduced (similar to the Dutch regime (WCAM), although non-UK domiciled claimants will need to opt in).Subject to Parliamentary schedules and approval, adoption of the legislation is expected in late 2014 (although it is not yet clear when the reforms, if adopted, will come into force).

The introduction of an opt-out action is a significant departure from existing procedures for multi-party litigation in England and Wales, which generally require potential claimants to make a positive decision to opt in to the proceedings, and will give rise to a significant change in the landscape for competition law damages actions. Only time will tell whether the regime, if successful, will be replicated in other areas.

See here for more details.

EU developments: Commission Recommendation on collective redress

At EU level in June 2013, following years of debate and disagreement, the European Commission published a Recommendation on collective redress. The Recommendation invites Member States to adopt collective redress mechanisms for both injunctive and compensatory relief for breaches of EU law rights (such as competition, consumer and environmental law rights) which follow a set of basic principles set out in the Recommendation. The Recommendation aims to ensure a coherent horizontal approach to collective redress in the European Union, without harmonising Member States' systems, in order to improve access to justice for citizens and companies in respect of their EU law rights.

The Recommendation includes various safeguards aimed at avoiding the perceived excesses of the US system. Most significantly, unlike the UK competition specific action, it recommends an 'opt-in' regime. It also proposes 'loser pays' costs rules, limitations on contingency fees and on the use of litigation funding.The Recommendation is non-binding, but states that Member States should implement the principles within two years. The Commission will then consider whether further action is needed.

See here for more details.

It remains to be seen whether as a result of the Recommendation Member States will introduce/amend collective redress regimes (for EU law rights or more widely), and if so in what form. Certainly in a number of jurisdictions this is already very much on the agenda, with France finally adopting an opt-in group action law in February 2014 (limited to claims by consumer groups), and a collective redress regime (extending to both opt-in and opt-out actions) currently being adopted in Belgium. In a number of other Member States there are existing collective redress mechanisms in place (although these have not tended to be utilised regularly).

In the absence of collective redress mechanisms, in other Member States claimants have sought to achieve similar results through the consolidation of claims/their assignment to claims bundling entities.