An extract from The Class Actions Law Review, 4th Edition
There is a substantial difference between litigating in Denmark and in common law countries such as England and the United States. The differences mainly relate to the process, including the forms and types of evidence and how they are provided, the timing, the risks, the costs and the way a claim or loss is calculated and documented. A Danish case can be initiated as one case, several individual cases or as a class action. In any event, the plaintiffs will have the burden of proving that (1) as a consequence of a negligent act (2) a loss has been suffered. It should be expected that there will be (or can be) an exchange of information between plaintiffs in different jurisdictions and despite the cases being independent of each other, it is recommended that there is some coordination between the lawyers on the different defence teams.
Under Danish law, a class action is characterised as a legal action where a number of uniform claims are heard as one case by the court without the members of the class action having to meet all of the ordinary procedural requirements for a plaintiff.
The legal basis of the Danish class action regime is Chapter 23a, Sections 254a to 254k, of the Danish Administration of Justice Act (AJA), which provides the possibility of initiating class actions in Denmark, provided certain criteria are met.
Pursuant to the provisions of the AJA, class actions may only be instituted where (1) the venue or jurisdiction for all claims is in Denmark, (2) the court is the geographically competent court for one of the claims, and (3) the court holds subject matter competence in respect of one of the claims.
The Danish courts decide whether a case may be heard as a class action, based on the following criteria:
- the claims are uniform (i.e., not necessarily identical, but arising from the same legal and factual basis);
- a class action is believed to be the best way to hear the claims;
- the class members can be identified and notified in an appropriate way; and
- a class representative can be appointed.
In the preparatory remarks to the bill on the introduction of group litigation, a non-exhaustive list of typical actions where a class action could be expected to be relevant is included.
Regarding the requirement that a class action must be the best way to hear the claims, the court assesses the advantages and disadvantages of a class action compared to other legal procedures available. In the court's assessment, a number of considerations are taken into account, including the advantages of a 'package solution' and the concentration of many claims in one case, the concentration of the procedural rights with the class action representative, and low costs per individual. The disadvantages traditionally include the slow start of a class action case and the risk that the opposing party may sue the individual group members for counterclaims. In addition, the assessment may somewhat overlap with the assessment of 'uniformity', given that non-uniform claims will per se not be considered to be fit for a class action under this requirement.
Case law shows that class actions have been found to be the best way to hear claims when the claims are nearly identical and the claimants comprise a large number of persons. For instance, questions related to the lawfulness of share redemptions or the overcharge of land registration acts have been tried as class actions.
The class action members are not parties to the case in the traditional way. As explained above, they are represented by the class action representative who is the legally competent party to the court action, having capacity to act as such in the class action proceeding and being responsible for conducting the action on the plaintiff's side. The AJA provides which individuals can be appointed as class action representatives. The class action representative has the authority to instruct an attorney, decide what arguments are to be made, etc.
Importantly, the class action members are not, as such, competent to instruct the representative. However, in recent years, the prevailing method of selecting a class action representative has been to form an association established and funded by class members with the purpose of acting as the class action representative.
Once appointed, only the court can release the class action representative from the assignment. In opt-in class actions, the court must decide whether it is necessary to appoint another class action representative if a minimum of 50 per cent of the members of the class action that have opted in request the court to do so. The request must be accompanied by a proposal for another class action representative who is willing to accept appointment.
It is difficult to indicate the time span between the filing of a lawsuit and a final decision. Unless settled, it is most likely that cases of this type will be appealed and thereby tried at two instances. Owing to formal issues in respect of accepting a case as a class action, such cases will normally require more time than individually filed cases.
The prospectus liability action BankTrelleborg was commenced on 14 February 2008 and decided by the Supreme Court in 27 January 2012. The case on land registration fees was initiated on 12 August 2011 and judgment was rendered at first instance by the Eastern High Court on 27 May 2019. The case is under appeal to the Supreme Court. The Amagerbanken class action was initiated in 2013 and was decided at first instance in 2018 and has not been appealed. In comparison, an older landmark prospectus liability action concerning Hafnia (which was not a class action but two individual claims) was filed in 1997 and a final judgment was rendered by the Supreme Court in 2002.i Types of action available
In principle, all types of civil claims may be heard together under the class action provisions, if the claims are uniform and made on behalf of several persons. However, the rules do not apply in:
- marriage and parental rights cases;
- paternity cases;
- guardianship cases;
- review of administrative detention;
- review of decisions on adoption without consent;
- acquiring judgment for declaration of nullity and voidance of documents;
- acquiring judgment for confirmation of ownership; and
- private criminal cases.
There are no particular limitation periods of a procedural or substantive nature applicable to class actions. In matters against public authorities for annulment of administrative decisions, particular limitation periods for filing court actions will apply depending on the statutory provisions of the relevant area of law.ii Commencing proceedings
The class action is initiated by submitting a writ of summons or claim form to the court with a request to examine the writ as a class action. The writ may be filed by any person who is eligible to be appointed as the class representative. In addition to (or as part of) the writ, the following information must be included:
- a description of the class (group) to be encompassed by the action;
- information on how the members of the class can be identified and be informed about the action; and
- a proposal for the class representative to be appointed and a statement confirming that this potential representative is willing to accept the appointment or assignment.
Professional companies or organisations often assist in the process of gathering relevant plaintiffs to act as class members, and some companies have specialised in managing or funding court actions.
There is no formal requirement to hear the defendant's view as to whether the criteria for accepting an action as a class action are met. However, in practice the court always invites the defendant to present comments on this point. Often several pleadings are exchanged and hearings can take place regarding whether to approve the class action, the appointment of the representative and the frame or scope of the action.
As an element in deciding whether to approve the class action, the court may limit the scope of the action (for the claims to be sufficiently identical), it may order the class representative to provide security for the potential legal costs, which the class representative may be ordered by the court to pay to the opposing party, and the court may also order individual class members to provide security for costs relating to the class members' own claims. Thus, the court will determine the framework of the court action (i.e., the types of claims that may be part of the action, the relevant period pertaining to the claims, specific criteria to be fulfilled by those who wish to participate in the class action, etc.). Court hearings on the question of approval of the class action are often required. A defendant will normally be allowed to comment on the approval of (1) the class action, (2) the suggested class representative, and (3) the framework for the action.
The parties may also ask for permission to have the case handled by either three judges in the district courts, by the high courts, or by the Danish Commercial and Maritime High Court. Permission will depend on a discretionary decision by the district court, which will only be granted if certain conditions are satisfied. If the case is referred, the receiving court will assess whether it agrees with the referral.
If the class action is approved by the court, the action encompasses the claims by eligible participants within the approved frame (e.g., investors having purchased shares of a company on a specific date or within a specific period).
Claimants who want to participate in the class action must register (i.e., opt in) with the court or the class action representative within a certain time frame. In this respect, the Danish rules are different from class actions known from the United States, as a class in the United States will normally consist of all potential class members unless they actively opt out of the class.
Conversely, approval of a Danish class action does not exclude parties who do not want to participate in the class action from initiating separate legal actions.
In addition to the opt-in class action, the court may, upon request from the class action representative, decide that the group action shall cover all members who have not opted out (the opt-out model). The opt-out model is subject to two conditions. First, the action must relate to claims whose small size makes it evident that they would not normally be expected to be processed in individual proceedings. The preparatory remarks to the bill on the introduction of class actions state that this condition will usually only be met if the individual claim does not exceed 2,000 Danish kroner. Second, it must be assumed that the opt-in model will not be a beneficial way to handle the claims. In these extraordinary opt-out cases, only public authorities specifically authorised by law can be appointed as the class representative. Currently, only the Consumer Ombudsman has been authorised to act as a representative in opt-out class actions. An opt-out class action has not yet been filed or approved in Denmark.
Cases against financial institutions involving claims for recovery of investment losses have often given rise to discussion as to whether the claims fulfil the criterion of being sufficiently uniform for the case to be tried as a class action. Although the decision on whether to approve the case as a class action depends on the specific circumstances of the case, the court is generally more likely to approve a case of this nature as a class action if:
- the claims may be said to have the same factual and legal basis; and
- for the purpose of ruling on the merits, the court is not required to examine the individual circumstances relating to each plaintiff's claim (e.g., the plaintiff's previous experience with investments, the plaintiff's educational and professional background, and the size of the individual loss).
In the OW Bunker prospectus liability class action, in February 2018, the Eastern High Court, in line with the court's previous decisions, confirmed that the court may freely determine the framework of the class action and will only include those claims that – in the court's opinion – are uniform. See also the previous decisions in BankTrelleborg and Roskilde Bank. The BankTrelleborg cases are referred in more detail in Section III.iv. In the Eastern High Court's decision in the AP Insurance case, the Court denied approval of the case as a class action. The claimants argued that a class action should be approved for a case concerning alleged misrepresentation by an insurer in connection with an offer for certain members to change their pension plans. It was envisaged that the class would encompass both claimants still working and others about to retire, as well as already retired individuals. The Eastern High Court ruled that the claims were not sufficiently identical.
The AP Insurance case decision is therefore consistent with the position that class actions will be dismissed if any of the criteria cannot be met. Alternatively, the court may scope the class action in such a way that the criteria are met; however, doing so may also exclude potential claimants.
Under Danish law, the plaintiffs in, for example, securities cases must provide evidence supporting their loss, and the plaintiffs must further prove that the ordinary conditions for imposing civil liability upon the defendant (e.g., negligence, causality, foreseeability) have been fulfilled. This often renders it very difficult for plaintiffs to document an actual loss, as Danish law does not recognise standardised mathematical methods of computing losses. In securities cases, an important element with regard to the computation of losses is whether a plaintiff kept or sold any of its securities following the event that gave rise to the alleged claim. Strong evidence of a correlation between negligent behaviour and the development (decrease) of the stock price is normally required.iii Procedural rules
The civil procedure rules applicable to class actions are generally the same rules that apply to individual civil actions.
Court involvement in class action procedures can, however, be held to deviate from involvement in other ordinary civil litigation proceedings, since the mere approval of the action requires the court to rule that a class action is the best way to handle the case.
Normally, courts do not interfere with parties' decisions whether to commence proceedings or joint claims. In addition to the introduction of the rules on class actions, the courts were given authority to order joint hearings of actions and refer actions to other courts where feasible. However, the courts have not shown increased activity in these areas.
The courts are also more involved with the substance in class actions than they are in other cases at a non-ruling level, as the courts have to approve any settlement that the parties may wish to adopt. In individual cases, settlements out of court do not require court approval.
The length of procedures involved in class actions are, in theory, no different from other types of actions; however, given the requirement to encompass several claims, class actions can generally be expected to have a longer duration than other cases.
Issues regarding whether to bifurcate proceedings and, for example, split liability and quantum are likely to occur in class actions, but these will be of a specific nature, depending on each case. Such splitting of proceedings is also seen in other cases.iv Damages and costs
There is no jury involved with Danish civil litigation and this applies to class actions as well. Damages are not computed differently in class actions from those in ordinary civil cases. In the White Paper prepared in connection with the proposal of the bill on the introduction of class actions, the following was stated: 'The Commission for the Administration of Justice does not propose an amendment of any substantial regulation, and it is thus not proposed to introduce the option of awarding standardised (average) damages or the like.'
Not many class action cases have resulted in an award of damages. In the only class action case decided by the Supreme Court to date, BankTrelleborg I, the Court did not approve any damages.
BankTrelleborg was a savings bank (organised as a self-owned institution). The savings bank had been converted into a bank with the status of a limited liability company, and for which a prospectus had been issued. Subsequently, the shares were all redeemed by the majority owner, Sydbank, as a measure to save BankTrelleborg, which would have gone bankrupt otherwise. The court cases involved four different lawsuits (one individual action and three class actions). BankTrelleborg I (one of the class actions) concerned alleged liability due to illegal compulsory redemption by the majority owner, Sydbank. The three other cases concerned prospectus liability. Two class actions were filed concerning the same claim as the individual case. One encompassed claimants who only became shareholders by conversion of their position as guarantors in BankTrelleborg through a global offer. The other class action encompassed claimants with various backgrounds who had subscribed for shares over a certain period, and both private individuals and companies could join the action. The Eastern High Court only approved the first of the two cases as a class action. These cases were never dealt with by the Supreme Court but apparently settled based on the individual case. In the case involving individual claimants, the Supreme Court also rendered a decision and ruled in favour of the claimants confirming prospectus liability and adopted a general approach to the shareholders' damages. The approved damages consisted of the difference in value between a later compulsory redemption of shares and the offered conversion price.
Costs are awarded in the same way for class actions as in other cases and are based on a tariff system by the courts, depending primarily on the amount of the claim.
The special act on the processing of damages actions concerning violations of competition law applies in follow-on damages cartel cases and sets out special provisions of both a procedural and a substantive nature. According to the act, the Consumer Ombudsman is also authorised to act as the class representative.
Danish lawyer fees are governed by Section 126 of the AJA. While no-win-no-fee arrangements are allowed, genuine success fees such as a mere percentage of a claim are not allowed.v Settlement
For filed and approved class actions, a settlement requires court approval. The court shall assess whether the settlement is fair. There are no public decisions on approved settlements.
With a reservation for the limited possibility of issuing a class action and subsequently having that action approved as an opt-out class action, a settlement will bind all class members that have joined the class action (i.e., that have opted in) unless they specifically decide to opt out of the settlement. Those class members who do not accept the settlement will, within certain time limits, be entitled to continue their claims as individual civil cases.