Editor: Following up on our interview with you both last November could you clarify for our readers the major differences between U.S. class actions and collective redress in Europe?
Craig: Over recent years, collective redress has become a hot topic in Europe. There is recognition that there is a real need to improve the means through which European consumers can obtain effective redress for harm suffered, whether individually or collectively. At present it is regarded as somewhat of a "passport lottery."
Broadly speaking, there are five key differences between collective redress in the U.S. and Europe: (1) opt-out class actions are available in very few European countries; (2) in Europe there are no jury trials in civil cases; (3) there is no strong claimants' bar in the majority of European jurisdictions, one reason being the unavailability of large contingency fees; (4) in most EU Member States there is a "loser pays" cost-shifting rule so the downside to bringing unsuccessful proceedings is much greater than in the U.S., and (5) generally in Europe there are no punitive or exemplary damages awarded - damages are compensatory. As a consequence, claimants cannot wield the same degree of threat over corporate defendants that they do in the U.S. There is a strong belief in Europe that the U.S. litigation culture is excessive as a result of these factors combining to create strong incentives for claimants and claimant lawyers to bring claims.
In terms of characterising collective redress as between different Member States of the EU, it is hard to generalise because mechanisms vary widely. In some Member States, there are established mechanisms for collective redress while in others, there are none at all. That said, it is an area of the law which many countries are looking to develop. For example, new opt-in class action mechanisms have been introduced in Poland and Italy over the past 12 months.
Editor: What developments have taken place in Europe since we last spoke in November 2007?
Craig : In 2007, the European Commission launched its Consumer Policy Strategy. The Commission is particularly concerned that consumers in some Member States currently have much greater access to justice than others and, as part of the initiative, there has been substantial consultation and research carried out in relation to collective redress across the EU.
The debate is slightly further advanced in relation to competition law. In April, the Commission published its long-awaited White Paper on damages actions for breach of the EC antitrust rules which found that there is a clear need for the introduction of mechanisms to allow aggregation of individual claims of victims in relation to antitrust infringements. Responses to the White Paper have been submitted by stakeholders and these are still being considered.
Also on the EU front, at a conference in Lisbon last November, EU Commissioner Kuneva announced a formal consultation on collective consumer redress in Europe which ran until March 2008. Recommendations arising from that consultation are expected in December.
As I have mentioned, initiatives have also been taking place at the national level in many countries. In England, July 2008 saw the publication of a report by the Civil Justice Council of England and Wales (CJC) which made groundbreaking recommendations to the UK government on improving access to justice through collective actions, not least of which is the recommendation that an opt-out procedure be adopted.
Editor: Could you please explain in greater detail the significance of the current EU proposals?
Craig : The Commission's White Paper proposed the introduction of (1) an opt-in system for collective redress, and (2) representative actions to be brought by consumer organizations or trade bodies on behalf of identified or identifiable victims of competition law infringements. Those proposals were regarded as very far reaching in the EU. For example, the proposed introduction of the concept of "identifiable" victims was regarded by many to be controversial because it goes well beyond what is presently permitted in the majority of Member States which have any representative action of this nature, most of which require victims to be "identified" rather than merely "identifiable."
Editor: Is the Commission's opt-in proposal also accompanied by an opt-out proposal?
Craig: No, the European Commissioners have been very vocal in stressing that the EU will not be heading towards an opt-out style class action. There is a high degree of suspicion in Europe in relation to opt-out class actions which are associated with the perceived excesses of the U.S. class action system. It is hard to imagine that at any time in the near future an opt-out proposal would be acceptable.
Editor: What is the significance of the recently published English proposals?
Craig: The recently published English proposals go way beyond the current EU proposals and, if adopted, they will constitute one of the most significant developments in the British justice system for a number of years. One of the most significant recommendations the CJC has made is that an opt-out collective action be introduced in England, and this is accompanied by a recommendation that the English courts be given the power to aggregate damages in appropriate cases. The latter will require further public consultation because of the effect on substantive law in relation to damages. Interestingly, the CJC has strongly recommend the retention of our "loser pays" costs shifting rule which it feels acts as a deterrent to vexatious litigants. On the other hand, there are other recommendations which U.S. readers would be familiar with, dealing with issues such as certification and fairness hearings.
Editor: In summary, what are the differences occurring at the EU level as contrasted with developments in England?
Craig: If adopted, the English changes would represent a significant shift in the current position in England and also take us a step beyond where the European Commission and other EU Member States seem to be going with collective redress. It will be interesting to see to what extent developments elsewhere in Europe might be influenced by the developments in England, but my feeling is that the rest of Europe will want to see how the English proposals work in practice before considering the adoption of any similar measures.
Editor: So England is really a laboratory for the rest of Europe?
Craig : I don't think the other Member States would consider England to be a "laboratory." It is understandable on many levels that the English system is more receptive to developments that have taken place in other common law jurisdictions, and the CJC in their report looked in detail into other common law traditions of collective redress, such as the U.S., Canada, and Australia. Given the similarities between those legal systems and ours and, of course, a common language, present developments in England are perhaps not surprising.
Shankland : The other big difference between England and the rest of Europe is that our system is, like the U.S. system, truly adversarial. In contrast, large areas of continental Europe have a civil justice system which is more inquisitorial rather than adversarial. An adversarial system more easily lends itself to the idea of people banding together to bring or defend actions. I also think there is more commercial pressure in England because claims-funding is considerably more advanced here than it is in Europe.
Editor: Do you think that the development in England of an opt-out procedure is likely to influence the adoption of similar practices in Europe?
Craig : Longer term, if the rest of Europe see opt-out class actions functioning in a "European style" that is not characterized by U.S. style "excess," it may become more palatable.
Shankland: In many respects, the pace of change in Europe in terms of adopting a framework for the whole of the EU as to how collective actions should proceed will be the speed at which other jurisdictions begin to encourage individuals to pursue their rights in respect of findings of competition law infringements. For example, in the UK, consumer groups, and the government, are encouraging individuals to take private enforcement action following findings by the regulator that a particular business has been guilty of anti-competitive practices. Moreover, the European Commission is also very keen to move away from a purely regulatory function towards encouraging people to bring private actions based on regulators' findings. In my view, it is this issue that will drive the need for EU-wide collective redress systems since many anti-competitive practices operate across Europe. The competition factor is likely to drive a lot of developments and ultimately dictate the European framework.
Craig: That said, the European Commission has expressly stated that it does not want to introduce new procedures at the EU level except on the basis of need.
Editor: So there may not be the uniformity in the way in which the European group as a whole would operate?
Craig: There may not be. At the moment it is too early to tell whether the European Commission will seek to impose a uniform system across all of the Member States and, if it does, how far reaching will such a system be. In any event, some Member States such as England are likely to go beyond the European consensus with the introduction of more radical reforms, so it would seem that the most the Commission might hope to achieve would be a minimum standard across Europe which might be supplemented with more comprehensive national legislation.
Editor: When do you expect the opt-out class action to be approved by the UK government?
Craig: The government has yet to consider the CJC's recommendations. It is worth noting however that on past consultation, British business has come out very much against the introduction of this kind of class action. In a situation where we have a fragile economy and an unpopular government, the introduction of these measures is unlikely to be a priority. In any event, we probably would not see the passing of any implementing legislation for at least a couple of years.
Editor: What developments are taking place in terms of funding of collective redress actions?
Shankland: Funding of litigation generally, not just collective actions, is another big issue under debate in England at present. A key question is whether or not the costs regime in this country lends itself as an attractive commercial proposition to people who want to invest in litigation. (In England solicitors are only allowed to charge an uplift of 100% of their actual fees.) The litigation funding industry here is growing very rapidly, and is pushing for change in terms of the way that they are allowed to collect the upside of actions. We are increasingly seeing large-scale commercial litigation being funded by third party claims funders and if that takes hold in the way that people expect it to, it will further incentivise claims-funding companies and claimant lawyers to put pressure on the government to change the rules. This is a subject that the CJC and the Department of Justice have been looking at very seriously.
Editor: What would your advice to our readers be in terms of what they should be looking for as to how these developments might affect their businesses?
Shankland : What corporate counsel should be aware of is that these matters will not change dramatically overnight. Changes to procedural systems from opt-in to opt-out or the introduction of a Europe-wide form of action based on either system are the types of changes that will require the engagement of the legislative process both in individual countries and at the EU level, neither of which is particularly speedy. Readers should be keeping themselves broadly aware of where the debate is, but the pace of change is not going to be dramatic.
Craig : Although change will not happen overnight, there is increasing public awareness of the ability to bring claims in respect of certain wrongdoings. Although the mechanisms may not be in place quite yet to bring proceedings in the most efficient way, there are mechanisms out there, and consumers, with the help of a growing number of claimant firms and consumer groups, are trying to use them more than they have been in the past. It is a prospect worth bearing in mind.
See www.metrocorpcounsel.com/current. php?artType=view8EntryNo+7414 for discussion of actual class action proceedings.