21 April 2008
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Historically the Italian legal system did not permit class actions or similar lawsuits. In recent years a number of attempts were made to introduce such proceedings, but the bills were never approved by the Italian Parliament. A new bill allowing class actions, effective from 30 June, was recently introduced by the Financial Act 2008, which enacted modifications to the existing Italian Consumer Code.
According to the new article, only specific consumer protection associations (presently there are 16 accredited associations) and associations and councils that duly represent collective interests will be allowed to bring class actions for claims of reimbursement or damage compensation. These can be with respect to infringement of certain contracts, tort liability, unfair commercial practices and unfair competition practices affecting a group of consumers.
Each individual will maintain their own right to access the courts either by joining the proceedings in the traditional way or by way of separate proceedings. This provision, which is one of the main differences from US class actions, may cause confusion.
The class action must be brought before the court in the jurisdiction where the defendant has residence or a registered office. No criteria are set out in the event that the defendant's business has no registered office in Italy.
The law provides for an opt-in system, meaning that the court decision will be binding only for opting-in consumers. This provision provides a further element of uncertainty. The new provisions allow consumers to opt in late in the proceedings, such as on the final hearing of the appeal proceedings. As a consequence, many consumers might decide to opt in only if the action succeeds in the first instance of the proceedings, producing a critical chain reaction. This will make it very difficult to establish an appropriate contingency allowance in a company's balance sheet.
The commencement of a class action will be subject to a preliminary authorisation of the court, which will have to determine that the action is not spurious, that no conflict of interest exists and that there is a collective interest that can be suitably protected by the class action. If the judge declares the admissibility of the class action, the party that promoted the action is ordered to advertise the content of the claim to enable class members to opt in.
The judge is also entitled to postpone the assessment of the admissibility of the claim if an independent authority is carrying out preliminary investigations concerning the same subject matter. This provision gives great importance to discovery activities carried out by independent authorities, such as the Antitrust Government Body, which in cases of sanctions imposed against the enterprise would probably influence the opinion of the judge adjudicating the class action.
If the court accepts the claim it will also set the criteria to be used in order to calculate the amount payable to individual consumers and users who have participated in the proceedings. Unfortunately, there is no indication of how such criteria should be established. This leaves a great deal of room for court discretion. However, it must be noted that punitive damages are prohibited by Italian courts.
Within 60 days of the service of judgment the company should make its offer of payment. If the company fails to make its offer, or if its offer is not accepted within 60 days of its service (the legislation does not clarify whether it is possible to finalise a payment agreed by a percentage of the consumers), then the president of the court will appoint a conciliation committee to determine the amounts payable to consumers and users who have joined the class action or who have intervened.
A conciliation committee is composed of three lawyers - one appointed by the promoter, one by the defendant company and the third, who acts as chair, by the president of the court.
The president of the court will order an out-of-court settlement before one of the conciliation bodies included in the special register of the Italian Ministry of Justice, if both the plaintiff and the defendant request such an action together.
The new class action provisions lack the clear guidance needed to assure transparency and predictability and present a number of flaws. Clarification, either from lawmakers or the courts, is needed to avoid a panic situation for businesses targeted, as well as to limit the length of time of the proceedings, as even without an appeal process proceedings might last between two and four years.
Stefano Modenesi is a litigation and regulatory partner and Giorgio Grasso is an associate at DLA Piper Italy