Global group claims risk – navigating a rapidly evolving landscape
December 2018 | SPECIAL REPORT: INTERNATIONAL DISPUTE RESOLUTION
Financier Worldwide Magazine
December 2018 Issue
The US, which has long been a hotbed for class action litigation, is no longer the only country seeing significant group claims across multiple sectors. Whatever their label or origin, actions involving multiple claimants are on the increase in Europe and elsewhere, as are the ways they are funded.
Group claims are a means of bringing mass claims in one action rather than individually. One of the mechanisms used to do this is class actions. There is no universal definition of what constitutes a ‘class action’, but the rationale behind the various mechanisms is enabling claimants to access justice in circumstances where they might not otherwise have been able to do so. Class actions are most established in the US and Canada.
Class actions can arise from product failure, cyber hacks, stock drops, employment issues, regulatory breaches or competition law infringements, and other incidents giving rise to mass torts. So, any business might have to defend such actions. The mechanism can be opt-in or opt-out. There is usually a class certification hearing before the claim can proceed on a class basis.
US class actions: well-established but facing increased scrutiny
Class actions have been around in the US since the 1960s, so are in the DNA of the US system. 2017 statistics indicate the largest number of class actions since 1995, when the US Congress took steps to reduce class actions. The percentage of listed companies sued was the largest ever, the increase being driven primarily by M&A litigation.
But for those outside the US, the Supreme Court has stepped back from extraterritorial application of jurisdiction over non-US citizens. The reining in of cases continues, for example, through scrutiny of whether certain presumptions can be relied on (e.g., ‘fraud on the market’) and on the appropriate scope of a requirement that members of a proposed class be readily identifiable.
Legislative changes have been proposed through the Fairness in Class Action Litigation Act of 2017. If it passes, the Act will dramatically curtail US class actions and impose large hurdles in bringing such cases, which would be of benefit to defendant corporations.
Class actions are spreading from North America to Europe
Class actions have sprung up and are evolving in Europe. Over recent years, there has been an increased desire to facilitate mass claims in Europe at both national and EU level, with relevant governmental policy weighing heavily in favour of promoting such claims. This has been done by introducing new procedures or proposing them or by developing existing regimes.
In the UK, group litigation orders which provide for the case management of claims which give rise to common or related issues of fact or law have been around for a while. In 2015, a ‘collective proceedings’ regime was introduced for antitrust damages claims. As at October 2018, two collective proceedings have got to a certification hearing before the Competition Appeal Tribunal (CAT) which hears these cases: Pride Mobility (relating to mobility scooters) and Mastercard (concerning bank interchange fees). Neither has gone any further, although in Mastercard there is an application to the Court of Appeal for permission to appeal and to the Administrative Court for permission to apply for judicial review of the CAT’s decision.
The results of these cases, however, do not mean that the mechanism will not be used further. Both of these claims were difficult ones given the nature of the infringements and the broad classes proposed. Through its judgments declining a collective proceeding order in each case, the CAT has provided guidance for future claims brought under the regime. Indeed, at the time of writing, two further applications for collective proceedings have been brought in relation to a European Commission (EC) infringement decision against a number of truck manufacturers relating to anti-competitive conduct in the trucks market.
In France, the areas covered by class actions have been steadily growing. They began with competition and consumer law claims in 2014 under the Loi Hamon and progressed to healthcare claims in 2016 under the Loi de Santé. Since last year, the scope of class actions in France has been further extended to discrimination, environmental and personal data protection claims.
In relation to data claims, there has of course been the recent implementation of the General Data Protection Regulation (GDPR) across Europe, which has introduced a collective redress regime for the exercise of data subject’s rights under the GDPR. It remains to be seen what impact this will have in practice.
In Germany, the civil procedure rules do not currently allow US-style class actions but there are mechanisms by which collective action can be taken. The most notable is the introduction of the Declaratory Model Action (DMA) which will allow certain entities to seek collective redress on behalf of consumers in circumstances where mass individual claims have been perceived to be a struggle for the German courts to deal with. The introduction of the DMA was accelerated by the Volkswagen NOx emission issue and even a topic of the most recent federal election campaign.
Only a few months after the formation of the current coalition government, the DMA was adopted in June 2018 and will come into force on 1 November 2018, just in time before alleged damage claims against Volkswagen arising from the NOx emission issue will become time-barred. The DMA marks a significant shift in approach by the German government and a perception that the previous mechanisms were not up to the mark.
The Netherlands has long been known for its Mass Settlement Act which facilitates settlements entered into by parties to be declared binding by the Amsterdam Court of Appeal. The Dutch parliament is reviewing proposals to introduce a single collective actions regime that, if implemented, would introduce significant changes, including the possibility of recovery of monetary compensation, which is not currently possible.
Class action regimes entitling consumer associations to assert claims on behalf of consumers are available in Portugal, Belgium and Italy. National consumer associations increasingly cooperate when pursuing claims against the same defendant, for example by running joint advertisement campaigns.
At EU level, the EC has encouraged member states to adopt class actions regimes for some time. Most recently, in April 2018 the ‘New Deal for Consumers’ was published which provides for the approximation of the laws of Member States concerning consumers’ collective interests to obtain injunctive relief when rights under certain EU Directives are infringed. ‘Qualified entities’ would be entitled under the proposed new regime to bring representative actions before national courts or administrative bodies on behalf of classes of consumers where a trader has breached or is accused of breaching specific consumer protection laws. There has been a mixed response to the proposal, so we will have to wait and see if it comes to fruition.
Class actions in Asia
The spread of class actions does not stop at Europe. For example, China has three forms of class actions which allow a limited number of parties or, certainly at the filing stage, no fixed number to be involved. Japan has two forms: one resulting only in injunctive relief and the other in monetary damages.
Increased access to funding for mass claims is a further driver behind the increase in prevalence of this type of litigation generally (whether brought within or outside of a formal regime). The third-party funding landscape is not uniform across the world but there has recently been a general increase both in terms of appetite and funder availability. There is no sign that this will slow down and will remain a key factor in the continued expansion of group litigation.
The group claims landscape is evolving. There is sector growth. Some countries, such as France, may start with group claims in one sector then gradually expand to others. Where no regime previously exists, we see, as in Germany, governments responding to public demand for such mechanisms. And with the involvement of funders and use of technology to access potential claimants, we see this area only increasing, although perhaps less so in the US.
Martina de Lind van Wijngaarden is a partner at Freshfields Bruckhaus Deringer LLP. She can be contacted on +49 69 27 30 80 or by email: firstname.lastname@example.org.
© Financier Worldwide
Martina de Lind van Wijngaarden
Freshfields Bruckhaus Deringer LLP