Balancing the redress

Over the past 12 months the European debate on collective redress has gained ;considerable momentum. At present, access to justice for consumers through collective redress is at best patchy across Europe. Indeed, the EU commissioner for consumer protection Meglena Kuneva recently described the situation as akin to a “passport lottery”.

Currently, each EU member state has its own national procedures for consumer redress. Some are more effective than others, and less than half give claimants the opportunity to seek any form of collective redress. Even where collective action nationally is possible, the efficacy of the process varies between member states for many reasons – not least the varying degrees of funding available to claimants.

Addressing current disparities

Against this backdrop, at the November 2007 European Conference on Collective Redress, held in Lisbon, Kuneva announced the launch of a consultation process that aims to examine and compare access to justice for consumers throughout the EU. She set out benchmarks against which mechanisms for collective redress are to be measured between states, with a view to addressing current disparities.

The factors to be considered include: availability ;of funding; costs-shifting rules; methods ;of distribution of proceeds of collective redress actions; opportunities for out-of-court settlements; proportionality between ;the ;economic ;impact ;of collective redress on defendants and the harm they have caused to consumers; and prevention of potential future wrongful conduct.

Kuneva stressed that any action taken at EU level would only tackle “real problems” amounting to a “common challenge for the EU as a whole”. She also made clear, not for the first time, that there would be no so-called “class action” in Europe, at least “not on [her] watch”. By this, she was referring to the hype and the unfashionable terminology associated with US-style class actions that have surrounded the debate and from which most people are keen to distance themselves. Indeed, it is this distaste that has given rise to the use of the term ‘collective redress’ in place of the perhaps more familiar (and arguably more inflammatory) ‘class action’.

In the quest for access to justice for consumers, the Health and Consumer Protection Directorate General has been collaborating closely with the Directorate General for Competition to ensure the cohesive and consistent development of collective redress mechanisms.

A European Commission white paper containing proposals to facilitate private damages actions in antitrust cases was published last week (2 April), further to the green paper published in 2005. It is in relation to this area of the law that the greatest leaps in the facilitation of collective redress are expected to be made in the short to medium term.

One of the primary reasons for this is that so-called ‘follow-on’ claims can be brought where there has already been a finding of liability by competition regulators, thus making private actions for damages more attractive.

Developments in member states’ domestic laws

In the meantime, significant developments are also taking place at the national level in various member states. In Italy class action legislation has recently been introduced to enable consumer associations to take collective actions to recover damages for consumers, including in relation to antitrust claims.

In Germany the development of a de facto class action seems to be taking place, despite the lack of a formal legal mechanism making provision for them.

In England and Wales recent months have seen the publication of papers by the UK’s national competition regulator, the Office of Fair Trading and by Professor Rachael Mulheron of Queen Mary, University of London, who has produced a lengthy research paper for the Civil Justice Council.

Both have shifted the spotlight back to the possible introduction of an ‘opt-out’ system in England and Wales. This apparent change in thinking might be seen as the clearest sign yet that collective actions will inevitably grow in number.

One may ask whether there appears to be a common goal in Europe in relation to group litigation. Certainly it appears that the avoidance of the perceived excesses of US-style class actions – characterised by opt-out, contingency fees, jury trials, an overactive plaintiff bar and punitive damages – is high on the agenda.

Nevertheless, there is clearly recognition of the fact that some of these elements may in fact be necessary for an effective system of collective redress for consumers.

In England there is growing evidence that some of those involved in the debate might be prepared to cherry-pick the elements of the US-style collective action that might lead to greater access to justice for consumers.

At the same time, it is clear that care will be taken to ensure that the scales do not tip so far as to create a disproportionate balance between the rights of consumers and the ability of businesses to function effectively and without fear of spurious claims being brought against them.

Matthew Shankland is a partner in Weil Gotshal & Manges‘ London dispute resolution group. He was assisted with this article by senior associate Lianne Craig