Proposal for EU-wide class action law finds no favour with UK practitioners

Proposal for EU-wide class action law finds no favour with UK practitionersUK lawyers have criticised a green paper from the European Commission that suggests EU member states should create a Europe-wide law on class actions.

The report, called the ‘Green Paper on Consumer Collective Redress’, puts forward three broad proposals for addressing consumer class actions (see box).

Introducing the green paper, Commissioner for Consumers Meglena Kuneva said: “Studies carried out by the Commission indicate that, when consumers are affected by a malpractice and want to pursue a case, they face substantial barriers in terms of access, effectiveness and affordability.”

Kuneva claimed that 76 per cent of consumers would be more willing to pursue a claim for a loss if they were part of a class action group.

The green paper suggests that EU member states should adhere to a “judicial collective redress procedure”, which would promote the legislature of an
EU-wide form of collective redress.

SJ Berwin litigation ­partner Stephen Kon said: “There’s a massive diversity between member states on class actions. [The ­Commission] isn’t very clear on what should happen to address this, and when it is it’s very light on detail.

It puts forward a variety of approaches, none of which are very effective.”

The Law Society has rejected proposals on an EU-wide framework for class actions. John Wotton, chair of the Law Society’s EU committee, said: “We feel a too prescriptive regime won’t work. It’s a very nuanced situation. On the one hand it’s very ­difficult for consumers to get collective relief. On the other, 95 per cent of consumers won’t look for compensation in low values.”

Consumer rights in the UK are well ahead of their European counterparts’, and any alignment, argued Wotton, could be detrimental to UK ­consumers.

Furthermore, as Lovells partner ;John ;Meltzer ­pointed out: “There’s no power in the Treaty of Rome to ­harmonise civil justice ­procedures.” Therefore any proposals to legislate on an EU-wide framework could be met by legal challenges.

On top of that, there appears to be a growing divergence between how the UK and the Commission propose to fix the system. Just last week a Civil ­Justice Council study rebuffed claims that the US contingency fees model encourages unmeritorious claims.

Consumer Class Actions

The statistics:
• One out of five European consumers will not go to court to seek redress for claims of less than e1,000 (£874).
• Half say they will not go to court to seek redress for less than e200 (£175).
• Only 13 member states have different national ­systems in place, providing the possibility of collective redress.
• Only four in 10-million ­people every year have ­participated in redress actions in Germany. This ­contrasts with Portugal, where the collective redress scheme reaches most people in a ­single case.
The proposals:
• Cooperation between member states extending national collective redress systems to consumers from other member states without a collective redress ­mechanism.
• A mix of policy instruments to strengthen consumer redress, including collective consumer alternative dispute mechanisms, a power for national enforcement ­authorities to request traders to compensate consumers and extending small claims to deal with mass claims.
• Binding or non-binding measures for a collective redress judicial procedure to exist in all member states.