The EU has been looking into the issue of collective redress and has recently embarked on a consultation with EU members with a view to facilitating collective claims across member states. Collective claims allow a group of individuals who have all suffered the same loss to bring a civil action against the wrongdoer.

There has been a trend over the past few years to facilitate collective claims across Europe. In the US, collective redress by means of class actions has been around since 1966 and one of the main reasons for the EU to act now is that a growing number of member states are introducing their own rules for group actions.

But class actions can have far reaching implications for businesses which potentially face an upsurge in claims and abusive litigation. A number of proposals are being considered in an EU Green Paper, including binding measures for collective action in all member states, a self-regulate system of collective redress as best practice or simply taking no action to put in place a collective redress mechanism immediately and reviewing progress at a later date. Consumer organisations generally favour an EU-wide judicial collective action. The public consultation under the Green Paper will run until February 2011, with the intention of proposals being made public later next year.

Whilst the outcome of this EU initiative is being awaited, steps for collective action are also being looked at in the UK. A limited form of collective redress exists under English law, the most common being group litigation orders (GLOs), representative actions and 'super complaints' by the Office of Fair Trading under the Enterprise Act 2002.

Under a GLO, one claim of a group proceeds as a test claim and the parties are bound by the outcome. There is a low participation because potential claimants must opt-in to the litigation, by expressly wishing to participate in the group. Pursuing a GLO can also be complex and messy, particularly on funding the litigation. The fact that a claimant has to opt-in contrasts with the US system under which those in a class who do not want to participate must expressly decline to be included.

There is a growing desire to change the current status. The Civil Justice Council report in 2008 recommended that it should be possible for collective actions to be brought in respect of any type of civil claim. The previous Labour Government stated that it did not support the introduction of a generic right of collective action but that collective action should be considered and reviewed on a sector by sector basis. The Financial Services Act 2010 makes provision for collective actions in financial service claims but the provision for opt-out rather than opt-in class actions was removed just before the Act was passed.

What next?

It is unlikely that any collective regime introduced would follow the US style and indeed the Green Paper states that collective action should avoid punitive damages and contingency fees which are common to US class actions. The Green Paper identified sectors where consumers find it most difficult to obtain redress - financial services, telecommunications, transport, travel and tourism.

The introduction of collective action is likely to increase the potential for claims against motor manufacturers and developments in this area should therefore be monitored.