In its response published on 20 July 2009 to the CJC’s recommendations for the expansion of collective claims, the government has rejected the proposal for a generic right of collective action. The government’s position is that such rights should be considered, and where appropriate introduced, in respect of specific sectors rather than for civil claims generally.


In recent years there have been numerous calls for the reform of collective litigation in England and Wales, with vocal claimant lobbies arguing that existing procedures do not provide effective access to justice where groups of individuals or businesses have suffered losses arising from the same wrongful conduct.

In this jurisdiction there is no direct equivalent to the US “opt-out”model of class action in which one or more parties can bring an action on behalf of a very large class which includes absent or unidentified parties. Procedures for multi-party litigation generally require potential claimants to make a positive decision to opt in to the proceedings.

The CJC’s December 2008 report “Improving Access to Justice through Collective Actions” made recommendations to government to expand the basis on which collective actions could be brought. The proposals envisaged a new form of generic collective action which would permit claims to be brought on behalf of a class of claimants, with the court deciding whether any particular case should proceed on an opt-in or opt-out basis. The OFT and the European Commission have also issued proposals for new forms of collective action in competition claims, which would allow cases to proceed on an opt-out basis in some circumstances.

Herbert Smith LLP has conducted research in which we canvassed the views of a cross-section of large corporates and institutions likely to be affected by any new collective action regime. A copy of our research report, “Class action reform: A business perspective”, is available here.

Government response to CJC recommendations

The government has accepted the CJC’s conclusion that there may be circumstances where collective litigation would bemore efficient than individual claims. However, it disagrees with a number of the CJC’s key recommendations. The principal points from the response are summarised below.

Sector by sector approach: The government has rejected the CJC’s proposal for a generic right of action across all sectors, stating that a sector based approach is likely to produce a better outcome overall and to be more achievable.

Collective actions only as last resort: The response stresses that a collective action should only be introduced for a particular sector where policy makers are satisfied that this will bemore cost-effective and proportionate than either individual claims or other available options, such as giving regulators the ability to order payment of compensation. The response notes that this latter option might be amore cost-effective way of dealing with cases involving a large number of small claims, and could in some cases be achieved without further legislation through the use of more flexible civil sanctions allowed under the Regulatory Enforcement and Sanctions Act 2008.

Authorisation of representative bodies: The government agrees with the CJC’s recommendation that collective claims should be capable of being brought either by individuals or by representative bodies (such as consumer groups). Under the CJC’s suggested approach, representative bodies could either be designated in advance as entitled to bring claims or could be authorised by the court on an ad hoc basis as part of the certification process. The government response leaves the issue of authorisation, including appropriate suitability criteria, to be determined by individual departments.

Opt-in or opt-out: The CJC recommended that it should be for the court to decide whether a particular collective claim should be brought on an opt-in or opt-out basis. The government response argues that the distinction between opt-in and opt-out is not as clear-cut as is normally assumed: a claimant must always opt in at some stage, if only to claim a share of the damages awarded. The response describes four alternative models, defined according to the stage at which claimantsmust come forward:

(a) Before the claim is issued: This would be a pure opt-in system, in which the action would be brought solely on behalf of group members identified at the outset of the claim.

(b) Before the common issues of liability are decided: Claimants could join the action at any time before liability is determined. This is described as a modified opt-in, or hybrid system.

(c) After the decision on liability but before the quantification of damages: All members of the defined class would be bound by the liability judgment unless they had expressly opted out before it was decided. They would however have to bring separate claims to obtain any damages.

(d) After the quantification of damages: This is described as a fully-fledged opt-outmodel. Damages would be assessed for all class members (save those who had expressly opted out) based on an estimate of the total size of the class.

The response states that the choice between these models must be considered on a sector by sector basis. It does however state that the government sees “considerable weight in the concerns about a full opt-out model, and considers that the same objectives would be better met in most cases by one of the hybrid models”. It does not however rule out an opt-out system if this is “the most cost-effective way of achieving a just outcome” for a particular sector.

Damages: The CJC recommended that the government should consult on the possibility of allowing the court to award aggregated damages (ie damages would be assessed by estimating the loss of the class as a whole, rather than requiring proof of individual losses). It also recommended that any surplus damages could be distributed on a cy-près basis, for example to a relevant charity. The government has deferred these issues for consideration on a sector by sector basis.

Certification procedure: The government agrees with the CJC’s recommendation of a strict certification procedure, in which the court would assess such matters as: whether the claim has legal merit; whether the likely benefits justify the likely cost; whether the claim could be achieved more cost effectively by a non-court mechanism (such as regulatory action or via an ombudsman) or by another form of litigation (eg individual claims, a GLO or a test case); whether the representative body or party is likely to be able to meet the defendant’s costs if unsuccessful and whether to order security for costs; and (depending on the statutory provisions in the particular sector) authorisation or approval of the proposed representative body or party.

Alternative Dispute Resolution (ADR): The response notes that  ADR will forma crucial element of any collective action procedure. It suggests that consideration be given to whether ADR ought to be mandatory in collective actions, either across the board or in particular circumstances. In any event judges should use existing case management powers to stay proceedings for the purposes of ADR or settlement negotiations. These issues will be considered as part of the proposed framework of procedural rules for collective actions (see below).

Costs and cost shifting: The response notes that the absence of cost shifting (or the “loser pays” rule) in US class actions has led to perceived abuses, in particular the encouragement of unmeritorious claims and so-called “blackmail litigation” whereby defendants feel forced to settle claims regardless ofmerit due to the huge costs they would otherwise incur and which they would not be able to recover. The government agrees with the CJC’s recommendation that cost shifting should be retained for collective actions as a disincentive to unmeritorious claims.

The future

In agreement with the CJC, the government considers that a new collective action would require primary legislation, not least in order to give a right of action to representative bodies which would not otherwise have standing to bring a claim. On the government’s approach it will be for the government department responsible for a given sector to decide whether a new collective action should be considered and/or introduced and the timetable for doing so. If appropriate, it will then be for that department to introduce the necessary primary legislation (following consultation with stakeholders and completion of the appropriate impact assessments).

The government does however intend to develop a framework document to act as a “toolkit” for policy makers and legislators introducing a right of collective action. The document will set out the options and, where appropriate, a preferred approach. It will address, for example: regulatory and other alternative options; criteria for designating or authorising representative bodies; funding options; issues regarding opt-in, opt-out and hybrid models; issues regarding damages; and enforcement and crossborder issues.

In addition, the government will work with the CJC to develop proposals for procedural rules for consideration by the Civil Procedure Rule Committee, in order to deal with the different models of collective action thatmight be introduced.

Work on the framework document and generic rules will begin in the second half of 2009.


The government’s decision to defer to individual sectors the question of whether collective actions should be introduced, and in what form, means that it remains unclear whether there will be any new collective action procedures and, if so, for which types of claim.

Critical issues such as whether claims are to be brought on an opt-in or opt-out basis, and whether damages can be awarded on an aggregate basis, are to be left to individual government departments to determine. The government’s approach achieves flexibility for introducing the form of collective action deemed to bemost appropriate for individual sectors. However, it could lead to a significant divergence between the procedures available for different types of claim. If so, there is a risk of encouraging claimants and those promoting and funding claims to seek to present cases in an artificial manner in order to bring them within what is seen as the most favourable regime. Further, the existence of differing regimes for different types of claims could lead to confusion for claimants as well as increased costs for businesses which would have to get to grips with the different procedures available.

However, the emphasis on adversarial litigation being used only as a last resort may mean that any new collective action procedures are quite limited. We may bemore likely to see enhanced regulation, such as giving regulators increased powers to order payment of compensation. The government considers that regulatory solutions have a number of advantages over private civil litigation, including in some cases the capacity to deal with matters in a “holistic and relatively inexpensive and timely way”.

If a new collective action regime is introduced for any sectors, it seems likely that competition law claims will be among the first given that proposals in this area are relatively far advanced. The Office of Fair Trading made recommendations to government in November 2007 for representative actions to be brought by designated bodies on behalf of both consumers and businesses on an opt-out basis – see our e-bulletin dated 28 November 2007. It may in any event be necessary for action to be taken to implement an EU Directive arising from the Commission’s White Paper on damages actions for breach of EC antitrust rules – see oure-bulletin dated 3 April 2008. The White Paper proposed a two-pronged approach, allowing representative actions to be brought by qualified entities effectively on an opt-out basis as well as collective actions by individuals or businesses on an opt-in basis. Publication of a draft Directive is currently awaited.

The government has given strong support for retaining costs shifting for collective claims. This will be welcomed by business. In our research on the views of large corporates and institutions relating to class action reform (“Class action reform: A business perspective”,May 2009) respondents were unanimous that the cost shifting rule must be retained as a protection against weak claims. We fully endorse this approach. This contrasts with the approach taken by Lord Justice Jackson in the preliminary report in his year-long costs review, published on 8 May 2009, in which he suggested that the abolition of costs shifting in the context of collective actions “merits serious consideration”. It remains to be seen what recommendations Lord Justice Jackson will make in his final report which is due by the end of the year. The government’s emphasis on assessing the economic and other impacts of potential reforms prior to implementation is also welcome.

In any event, any new collective action procedures are likely to be a long way off, given the need for policy makers to: consider alternatives to collective actions, including whether there are viable regulatory alternatives; consult with relevant stakeholders; conduct a full assessment of economic and other impacts; and bring forward primary legislation.What seems clear is that new collective action procedures will not be introduced before next year’s general election.