Class action

The European Commissioner for Consumer Protection, Meglena Kuneva, has recently published her programme for the coming year which includes the introduction of class actions to improve consumers’ access to courts throughout the EU. This follows proposals from the European Commissioner for Competition, Neelie Kos, that US-style class actions should be introduced throughout the EU for the purpose of encouraging private enforcement of competition legislation in the courts.

Commissioner Kuneva has to a large extent adopted the proposals in the Competition Commissioner’s green paper, Damages, Action for Breach of the EC Antitrust Rules, which spelt out the adoption of US-style class actions in some detail. The green paper followed an earlier consultation paper, Study on the Conditions of Claims for Damages in case of Infringement of EC Competition Rules (2004), which reviewed systems for private redress in competition law throughout the EU and highlighted recognised gaps in the regulatory regime.

The European Commission and our own Office of Fair Trading have made it quite clear that they do not have the resources either to monitor all breaches of competition legislation or to regulate all breaches discovered. The lack of resources requires the regulator to establish priority policy areas in which they will seek to monitor and enforce the legislation. This means that many who are subject to unlawful activity find that the regulator is unable or unwilling to assist them.

ALTERNATIVE ACTION

The alternative for the victim is to commence private proceedings to enforce their rights and seek recompense. The Competition Commissioner identified the substantial difficulties presented to the would-be claimant in that enforcement process. These difficulties are also recognised in the paper, Questions and Answers on EU Consumer Policy Strategy 2007–2013, Memo/07/100, published by the Consumer Protection Commissioner.
The proposals from both commissioners are to adopt an US-style litigation process. This would include an opt-out class process rather than the standard European model of opt-in. This adoption of the US model would mean that the class would consist of all possible claimants who would automatically be included unless they opt out of the process.
The commissioners also propose contingency fees for lawyers, no costs awarded against the losing party and, in the case of the Competition Commissioner, double damages. All these proposals present difficult questions throughout the EU.

CLASS ACTION PROCESS

Some jurisdictions within the EU are starting to introduce court procedures that allow a class action process. The Netherlands, Germany and France are making changes to ease the process for large groups of claimants. In this jurisdiction we have our own group litigation process that was introduced with the Woolf reforms. The common feature, however, throughout the EU is that even these developments do not contemplate an opt-out process and maintain the principle that to include a claimant in a claim, the claimant must have endorsed it with their consent. The concept of contingency fees is also alien to European sensibilities on potential conflicts between lawyers and their clients.

PENALTY DAMAGES

It is, however, the concept of penalty damages which is most alien to European traditions. Throughout the EU, the principle stands that claimants may recover their losses but nothing more. This principle dictates that a judgment for penalty damages in a US court is generally unenforceable in European jurisdictions. Part of the rationale for the Competition Commissioner’s proposals for damages to be subject to a multiplier, is that the award of pecuniary damages is not sufficient deterrent for the wrongdoer, neither is it sufficient reward for claimants to entice them into the litigation (or regulatory) process. Similarly, to make contingency fee systems work, damages have to be relatively high to ensure that a contingency fee is sufficiently attractive for the lawyer.

There is no doubt that it will be difficult for the Competition Commissioner and the Consumer Protection Commissioner to introduce a uniform system of US-style litigation as proposed throughout the EU. It may be said that this jurisdiction has procedures most closely associated with the US model but there are significant procedural and cultural gaps between the two. The concept, for instance, of penalty damages will struggle against judicial conservatism here.

While it may be unlikely that a full US-style litigation process will be introduced throughout the EU, it seems quite possible that a system of representation for consumer protection will be adopted. The UK already has a system in relation to competition law by which recognised consumer bodies may commence proceedings on behalf of consumers for events such as price-fixing. This is, however, an opt-in process and the claimants have to be collected together by the consumer body and then included as claimants. This is a fairly new process which has been used on one occasion only. Recently proceedings were commenced by Which? on behalf of those consumers who lost as a result of price-fixing in relation to replica football shirts. In that case the solicitors acting for Which?, Clyde & Co, advertised for potential claimants in the football press.

It seems likely that the EU will eventually adopt a system of representation by recognised consumer bodies on an opt-out process. This will make enforcement significantly easier for those bodies.

Ensuring access to justice is a cornerstone of individual rights. It is of the utmost importance that if the regulator is unable to assist the victim then rights should be properly enforceable before the court. The adoption, however, of the whole package of proposals for US-style class actions across Europe seems unlikely. To do so would rail against many long established and common principles in our respective legal systems and culture.

David Greene is a partner at Edwin Coe and a member of the London Solicitors Litigation Association

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