UK firms gear up as class action culture hits Europe
7 February 2005
UK law firms are preparing for a potential deluge of work if the floodgates to class actions across Continental Europe are opened.
Sweden, the Netherlands, Germany and France have all tabled proposals that in the next few weeks are likely to lead to a new culture of class actions on the Continent. Russia and Ukraine are also getting their first taste of multi-party disputes.
If the programme proposed by Ministers of Justice across Europe is implemented, claimants will be able to reach settlements binding the whole group rather than just an individual. They are also considering making it easier for a single litigant to involve others by publicising their claim.
UK lawyers will be able to take advantage of the changes by advancing claims on the Continent. To date they have largely been unable to do so because of the absence of a class action culture.
There are already signs of this happening. Michael Hausfeld, a veteran class action partner at US firm Cohen Milstein Hausfeld & Toll, which last year teamed up with Irwin Mitchell to bring class actions against companies fined by the EU, said he is preparing to launch class actions across Europe once the rule changes are passed. “We’re preparing to bring them in the areas of cartels, securities and in the product liabilities field,” he said. “Jurisdictions we’re looking at are Germany, Italy and Poland.”
Hausfeld told The Lawyer that, as a result of the changes, “the future in Europe for both law and society is good”.
Irwin Mitchell has also instituted claims in Spain. Litigation partner John Pickering said: “We’ve already dealt with certain cases in Spain that have the potential for a class action tort.”
Pickering is also considering whether breast implant cases in Spain could be pursued in other Continental countries.
Several UK law firms are investigating the potential for pursuing claims in Europe against Merck, the manufacturer of rheumatoid arthritis drug Vioxx, which was pulled because of possible links with heart disease in the US. Merck faces 14 class actions in the US from shareholders accusing the company of presenting misleading information.
Changes on the Continent also include the possibility of contingency fees, throwing up uncertainty about the future of funding class actions. The European Community is debating whether in principle they should be introduced. Next month is also the deadline for the Netherland’s Minister of Justice to decide whether this controversial funding scheme – in which lawyers get a large cut from claimants’ damages – should be implemented.
If the changes take place, it is expected that a number of boutique claimant litigation practices will spring up across Europe.
The Netherlands is the only country in Continental Europe boasting any sizeable number of such firms. However, Daan Lunsingh Scheurleer, a litigation partner at Dutch firm Nauta Dutilh, said their number is expected to swell as a result of proposals for groups of claims to be merged into a binding agreement. At present they are dealt with individually. “It is a tool for claimants who now think they may have an additional way of getting monetary compensation sooner by leading a group action,” he told The Lawyer.
He added: “They also know that by making a threatening claim, they will now have more chance of forcing the defendant to pay for it by settling early.”
Another effect of the Dutch reforms is that companies registered in both the Netherlands and the UK could have a class action judgment in one jurisdiction enforced in the other. Anglo-Dutch giants such as Shell could be affected by this.
Weil Gotshal & Manges’ head of litigation in Germany, Britta Grauke, anticipates that a rule change proposed by the German government to make it easier for groups of claimants with capital market grievances to bring actions is likely to “lead to growth of [class action] cases”.
She added that the legislative change, in which claimants can publicise their claim in order to attract other potential litigants in a class action, “will make it procedurally easier to bring claims”.
For Grauke this means an upturn in the volume of actions she defends on behalf of corporate clients and she said that the small number of firms specialising in securities litigation “are likely to quickly take up this opportunity [of bringing claims]”.
In Sweden, a government committee has proposed extending class actions to include consumer groups and victims of breaches of competition law. Also, at the beginning of this year, France’s President Jacques Chirac announced plans to adopt a rule change that will open the way for class actions.
Class actions are also underway in Russia and Ukraine, offering opportunities for UK firms such as SJ Berwin, which is already heavily involved in Russian litigation.