Europe Looks At Collective Redress

Thursday, November 1, 2007 - 00:00

Editor: Would each of you tell our readers something about your professional experience?

Shankland: I am a partner in Weil Gotshal's London dispute resolution team. I have been with the firm for seven and a half years. I originally qualified as a barrister but left the bar to join Berwin Leighton Paisner LLP. I then came to Weil Gotshal to help set up the dispute resolution team.

Craig: I am a senior associate in the dispute resolution team. I studied Scots law and spent a year studying in Brussels before converting to English law. I trained at Clifford Chance LLP where I remained on qualification before moving to Weil Gotshal four years ago.

Editor : Please tell us about your practice.

Shankland: The fundamental idea behind our London operation has always been the development of a litigation and arbitration practice broadly equivalent to what is carried on in the U.S. Our strategic direction is linked to that of the practice globally. When the practice was formed we were primarily engaged in disputes and advisory work arising out of general commercial matters. However, over time, we have adapted in response to changes in the market, seeing, and acting on, opportunities for strategic growth. This has rewarded us with a substantial international disputes practice. At any given time, the department has the conduct of at least one or two large multi-jurisdictional commercial disputes, often involving aspects of international arbitration and/or litigation with links in particular to Central and Eastern Europe, the Caribbean and, of course, the U.S.

Within the practice, the particular specializations that we have been developing are Products Liability and IP/Media - both of which are coordinated with very established practices in the U.S. We were recently instructed on the largest ever product recall in Europe - Sudan 1 - and have just completed a high profile copyright tribunal in London on behalf of a consortium of major media companies responsible for providing online music. We also continue to focus on international arbitration.

Editor: Would you give us an overview of the London dispute resolution practice.

Shankland: The practice was founded as a result of a conscious decision to develop a London disputes platform with a global reach, working closely with our colleagues in the U.S. and Europe to form a single, seamless dispute resolution network.

In terms of our highlights over the past three or four years, we have acted on a number of high profile cases. We acted in a number of related international arbitrations across several jurisdictions concerning the ownership of a shareholding in a major telecommunications company with shares worth in excess of $1 billion at stake. We also recently acted in a case involving a Swiss arbitration and related English, New York and Bahamian actions which raised important issues relating to the circumstances in which the English High Court could interfere with a foreign arbitration. Another instruction involved English High Court litigation between Motorola and a group of Turkish telecom companies which established several precedents regarding the use of asset freezing orders that the English Court can grant on an international basis.

We were instructed by Enron to manage litigation in respect of its London asset recovery portfolio. This amounted to hundreds of claims in multiple jurisdictions, with a combined recovery of several hundred million dollars. Parmalat, another major bankruptcy case, also involved a series of arbitration and High Court proceedings. The injunction we obtained in London underpinned the entirety of the Italian prosecutors' case.

Another success was an application for a GE subsidiary, i-Group, concerning rectification of the Official Register of Companies which has become the leading authority on that subject.

We have also handled a number of product recall and consumer cases for a variety of clients in addition to the media work I mentioned earlier. As you can see, we have a very broad practice.

Editor: You are also involved in the discussion on, and recent developments in, collective redress in Europe.

Craig: At the moment there are numerous proposals, both at the European level and at the national level across the EU Member States, to encourage greater access to justice for consumers. Consumer empowerment is one element of a more general move towards enhanced consumer protection. A major European Commission conference to discuss collective redress for consumers is scheduled for the beginning of November this year. The European legal market is awaiting the outcome with much anticipation.

Shankland: Originally, the European Union was concerned with ensuring a cohesion of policies among the Member States. I think that has been achieved with considerable success. Today, however, we have moved to the point where people are looking at how the competition regime, for example, can be utilized for the rights of individuals as opposed to just the member states. In this context, individuals translate as consumers. The underlying purpose of the EU is to promote the European free trade area, of course, and you cannot have such an area without consumers. Price-fixing is a singular example: on an individual basis the loss may be negligible, but if 25,000 people have each paid 5 too much, the thinking is that they should be entitled as a group to seek restitution.

Editor: What impact might the availability of certain funding models - or lack thereof - have on greater access to justice in different European jurisdictions?

Shankland: That is a crucial point. What is not going to happen in Europe is the explosion of the kind of plaintiffs' bar litigation seen in the U.S. because the approach to damages and the remuneration of lawyers is fundamentally different. Additionally, most European jurisdictions - as characterized by their civil procedure rules - do not lend themselves to the commoditization of litigation claims. For example, in England a lawyer cannot act on a contingent fee basis. An "uplift" may be permitted in the case of a successful conclusion, but a lawyer is not permitted to fix the level of his fee by reference to the amount recovered in the action. And that serves as a deterrent to this kind of activity.

The European Commission wishes to see mechanisms in place which permit the consumer to gain redress. But, the Commission is on record as having stated that it wishes to avoid the development of a litigation culture.

Craig: Also, what we are seeing in some European jurisdictions - notably in England and Germany - is an increase in the third-party party funding of litigation. In England, third-party funding has been around for some time, largely in relation to proceedings arising out of insolvencies, where liquidators have been permitted to third-party fund litigation in exchange for a return on any successful claim. However, it is now on the rise in general commercial proceedings, and this will be interesting because third-party funding can still be found to be unenforceable on public policy grounds and there is also the risk that the funder be found liable for costs under the "loser pays" rule. Elsewhere - in France and the Netherlands, for example - we are unlikely to see these kinds of developments because the statutory framework is different.

Editor: What lessons is Europe planning to take from the U.S. class actions experience?

Craig: On the positive side, I think Europe looks to the U.S. experience in terms of increased access to justice and the empowerment of consumers. The mechanisms to ensure these are still being developed however.

We are also seeing the emergence of a plaintiffs' bar. In Germany, for example, there has never traditionally been a plaintiffs' bar, but one is now beginning to emerge. Here in London the American plaintiffs' class action law firm Cohen Milstein Hausfeld & Toll has set up an office, and they have said they will be looking for class actions to bring in England and, indeed, across Europe. There is a general consensus across Europe, however, that frivolous or vexatious litigation is detrimental to the legal system and to the people it serves. I think that is likely to prevent at least some of the excesses of U.S.-style litigation.

Shankland : People will be trying to draw different things from the U.S. experience. Weil Gotshal's London office is very fortunate in being integrated into a network of practitioners who possess long-term experience in huge class action litigation and the very particular challenges that such cases give rise to for litigators and clients alike.

Editor: What impact might factors such as disclosure, interim remedies and level of damages have on choice of forum within Europe?

Shankland: Disclosure regimes differ significantly across Europe, as do the regimes for interim remedies. No European country has adopted a punitive multiplier-type approach to damages. Accordingly, forum shopping - which is so prevalent in the U.S. - is at a modest stage in Europe. Nevertheless, there are differences from jurisdiction to jurisdiction that can be taken into consideration in choosing where to bring an action: for example, England has a wide-ranging and expensive discovery process; France less so; and Germany even less.

I do not believe that, as a consequence of some fundamental shift in public policy, a preferred jurisdiction in terms of what can be recovered by way of damages is going to emerge. And I think that is a good thing. The element of certainty continues to exist in Europe, and that is a comfort to those sitting in corporate board rooms.

Editor: Have there been any significant proceedings brought to date in Europe?

Craig: Which?, a major consumer association in the UK recently brought a representative action against JJB Sports under the 1998 Competition Act following an adverse finding by the Office of Fair Trading in connection with price fixing on the sale of replica football shirts. At the moment, the proceedings have been stayed pending settlement negotiations, but everyone is waiting to see what happens.

Cohen Milstein have stated that they intend to bring cases in connection with two recent OFT findings of price fixing to date, one against supermarkets and dairies in relation to dairy products and the other against British Airways with respect to fuel surcharges.

In Europe, we have seen the settlement of a large class action brought against Royal Dutch Shell in relation to securities fraud. Shareholder actions are also on the increase in Germany. There is every indication that we will be seeing more proceedings of this kind across Europe.

Editor: As you know, our readership consists of general counsel and the members of corporate legal departments. What should we be calling to their attention with respect to collective redress in Europe?

Shankland: General counsel of corporations coming into Europe should be aware of the fact that there are regulators seeking to enhance the rights of consumers, and lawyers, who have previously generated mass litigation in the U.S., seeking to establish a similar model in the EU. It has the makings of a perfect storm.

People already in this market need to become educated about the risks. As a European regime emerges, general counsel might develop a checklist for the jurisdictions in which the company is to operate: Am I sure about the quality of my products? Where am I sourcing them from? Do I have exposure to any sort of price-fixing allegation? And so on. It is essential that general counsel understand the regulators, the regimes under which they operate and their own businesses. Most American general counsel already have extensive experience along these lines and should, in my view, be well placed to manage the increased risks of this type of litigation in Europe.

Please email the interviewees at matthew.shankland@weil.com or lianne.craig@weil.com with questions about this interview.