3 January 2008
The subject of class actions or class litigation is a provocative and emotive one. For some commentators, the subject conjures images of greedy lawyers chasing after the sick and needy, and cajoling them to the door of the court whereupon a handsome settlement is reached - a large chunk of which the successful lawyers then take as their fee and ride off into the sunset.
On the other hand, as those in the UK legal profession will be aware, that picture is not a true one, not least because the realities in this country are very different. Class actions in this England are, as a general rule, difficult to get off the ground. This is not least because of the simple fact that, unlike the position in the US, the funding of them has to come from the claimants themselves or possibly third party funders, and there is always the risk of an adverse costs order. It is these funding and cost implications which understandably force many people not to seek the redress which they might otherwise have been entitled to.
Whilst the declarations of Marx and Engels on class struggle may not be what most people have in mind, it is clear that there is an ever growing pressure from groups within society. There is also pressure from European regulators to ensure that there are effective and readily available procedures for individuals to allow them to group together to seek redress, be it out of court or by legal process, where they might otherwise be unable to.
It is right that this should be so. The law needs to evolve to meet the demands of society, and this process is gathering momentum. For example, the Office of Fair Trading (OFT) focussing on competition law said it will be issuing a consultation paper early next year on the subject. At a European level, the Commissioner for Consumer Protection, Meglena Kuneva, outlined earlier this month (NOVEMBER) her own strategy for ensuring there is effective and harmonised consumer redress throughout Europe.
And it is not just law firms that consider that there will be an increase in such claims. The results of a recent survey of general counsel from major corporations confirms that a predominant part consider there is likely to be an increase in class actions in the next three years, involving claims relating to product liability, cartel and price fixing, and shareholder rights disputes.
What further changes are likely to emerge to enable groups of litigants to pursue claims where they previously were unable? Well, on the corporate side, shareholders will now be able to band together to take advantage of the simplified rights of action afforded to them under the Companies Act 2006 (into effect since 1 October this year), and which enables derivative style claims to be brought when it was previously virtually impossible to do so.
It is, however, in the realm of funding where there needs to be most change to enable group or class claims to be successfully mounted. The question of third party funding for litigation is subject to public policy considerations designed to prevent litigation from becoming merely a way of money making. Set against this is the conflicting policy consideration of allowing access to justice for all which is likely to mean that there will be further lessening of the risks that third party funders expose themselves to if they support litigation.
Attempts at early capping of litigation costs are also likely to be more frequently attempted and favourably received by the courts. The limit on the uplift on recovery of legal fees by the successful party under conditional fee agreements, at least for competition cases, is also likely to be permitted to allow more than the current uplift of 100 per cent for costs in certain cases so as to make the commercial risks taken by the lawyers more attractive.
The one thing that I cannot foresee changing is the attitude in the profession in general against the introduction of contingency fees, where the lawyers take “a cut of the winnings” as their reward for their gamble. That is something that society here simply is not ready for yet.
Nick Cherryman is head of the class action group in London at Bryan Cave