Merricks v Mastercard Inc : Collective Actions Re-invigorated...
This section provides a comparative overview on litigation procedures in eleven European jurisdictions.
General v Sectoral Collective Redress Mechanism
General collective redress mechanisms exist in Austria where the Austrian practice has developed a form of group litigation based on a combination of joinder of claims and litigation finance ("Austrian model of group litigation"). Under this scheme potential claimants assign their claims to an association (typically a consumer association) which then files a complaint on its own behalf.
Further, in Portugal, popular action is regulated by Law 83/95. This law regulates several types of popular action: preventive popular action, popular action to contest administrative decisions, and popular action for compensation of damages, including collective redress. Mass processes are regulated by article 48 of the Code of Administrative Court Procedure, approved by Law 15/2002. In this mechanism, whenever more than 20 cases are initiated, and they relate, for instance, to the same material or legal relationship, only one or some processes (depending on judicial decision) are referred to for judgement. The final decision may, with certain requisites being verified, be applicable to other cases that were suspended.
In Sweden, on January 1st, 2003, the Group Proceedings Act 2002 (GRL, the Act) came into force in Sweden. The Act provides the possibility of binding together a plurality of claims against the same defendant into one group action, which are based on the same or similar circumstances (commonality) and when the claims cannot be equally well pursued through other procedural forms (superiority).
The Netherlands has two specific collective redress regimes: WCAM and collective action. A third option is the use of common procedural law with a special organisation collecting individual claims, often a Stichting (foundation). The Netherlands does not have a sectoral approach.
Italian Law provides for the "azione di classe" (Art. 140-bis Consumer Code). It establishes that consumers with homogenous interests have the right to file the azione di classe against a private corporation in (1) breach of contract, (2) unfair or anticompetitive commercial practice, or (3) product or service liability. Sectoral collective redress mechanisms can be found in Italy, where collective redress mechanisms exist in consumer, competition, financial market, product liability and, finally, other areas such as inefficiencies of the public administration.
Hybrid systems of collective redress also exist in certain European nations. For example, Poland introduced a class actions procedure: the Act on Class Actions of December 17th, 2009. It was meant to be a generic mechanism covering all types of liability, but was amended in the Senate (upper house of Polish Parliament) to apply only to consumer law, product liability and tort liability. Consequently, one may deduce that the Polish Class Actions Act is generic as it covers consumer, product liability, and applies to tort claims across sectors. However, this is not correct and can thus be considered as a hybrid.
In Spain, collective redress mechanisms exist from both a general and sectoral approach. The most relevant cases fall under the Consumer and Product liability Law spheres, which have proven to be the most effective in protecting consumers and users in relation to damage caused by the consumption or use of defective products. In 2000, the Ley de Enjuiciamiento civil (Civil Procedure Act, LEC) introduced a specific procedural standing for the protection of rights and interests of consumers and users in Art. 11 LEC (based on Art 51 of the Constitución española; Spanish Constitution; CE). Spain permits (in Arts. 56-62 RD 231/2008) the use of arbitration in dealing with collective claims that concern a certain or determinable number of consumers. Despite the lack of any legal rules about proper collective settlements, these are legal.
Opt-in or Opt-out?
An opt-in approach is followed in Italy, Austria, Poland and Sweden. By contrast, Portugal, Spain and the Netherlands follow an opt-out approach.
In Austria, there are no restrictions as to the available remedies. In most actions, claimants ask for money, although a declaratory judgment would also be possible.
In Italy, no "punitive damages" are allowed which means consumers may only seek compensation for damages and restitution.
In Portugal, when acção popular is used for collective redress, the remedies includes civil liability for the compensation of damages. This liability may be based on fault (negligence or dolus), but also can be effective regardless of fault, when the conduct derives from a dangerous activity. Further, conservatory and temporary measures, under the general rules of the Civil Procedure Code can be awarded.
In Spain, before the LEC in 2000, collective redress devices were available only for the purposes of cessation or prohibition and by means of a cluster of special provisions. Compensatory or injunctive relief is available following the enactment of the LEC in 2000 and, since 2007, in consumer or equality law proceedings. In other areas like environmental protection, the Act 26/2007 does not rule the compensatory effect for individual or supra-individual losses (Art. 5).
In Sweden, the Act does not set any limitation on the civil law remedies that can be obtained. Typically the main remedy that would be relevant in group actions would be compensation for damages, on the basis of contractual or non-contractual liability. A group action can also be employed for getting a court order obliging the defendant to perform an act (eg terminate a contract).
In The Netherlands, under the WCAM, all possible sorts of compensation for the damage can be obtained. The usual form is a fixed fund from which monetary compensation is paid to the victims. It is possible to obtain a declaratory judgement of breach of contract/breach of duty of care (e.g. VEB/World Online). The award of damages is only possible for the claims on which the procedure is based.
Prospects for Reform
There are various prospects for reform of the collective redress mechanism within individual European states. These will now be outlined in turn:
In light of an increase in mass litigation, a draft for a group procedure has been promulgated by the Austrian Ministry of Justice in 2007. Under the draft, a new group proceeding will be introduced for cases involving 3 or more claimants, a large number of claims and similar questions of law and fact. However, a claimant is always free to pursue his claims as an individual instead of the group proceeding. Any questions not resolved in the group proceeding have to be determined in individual lawsuits. The draft was met with severe resistance and its implementation is unlikely in the near future.
In Italy, the azione di classe requires further legislative intervention. This is due to the fact that only a few azione di classe have been declared admissible. Indeed, there are several issues that need to be addressed, such as the adequacy of the representative and the costs of the action.
In Poland, many aspects of the Class Actions Act were heavily criticized by scholars and legal practitioners. These criticisms referred to the narrow scope of the Act such as the exclusion of both employment law claims and claims for the protection of personal interests which effectively prevents personal injury claims. Also, criticisms were raised against the limitation of the scope of persons who can be class representatives to class members and consumer ombudsmen, the lack of specific procedural mechanisms and tools for courts to facilitate smooth progress of the procedure. However, no reform proposals have appeared as of now.
On March 2013, the Spanish Ombudsman (Defensor del Pueblo) has suggested setting a special arbitration system (arbitraje universal) to compensate investors' losses in preference shares.
In The Netherlands, there is a legislative proposal to (further) simplify the collective settlement of mass claims. This involves simplifying the verification of insolvency claims in the case of a WCAM settlement. Moreover, a quality criterion for the representative associations' admissibility is added: the interests of the persons whom are being represented have to be adequately safeguarded.
However, the exception to calls for reform can be found in a report commissioned by the Swedish Ministry of Justice in 2007 which found that improved collective redress mechanism adopted by the Act had not been abused. Consequently, it can be argued that the Act actually augmented the accessibility of justice to the individual.
Costs and Funding
Most European states apply the "loser pays" rule to varying degrees. For example, in Italy, the courts tend to allocate the litigation expenses between the parties, or to apply the general principle of "who loses bear the costs". Austria has a "loser pays" rule. In recent years, commercial litigation finance became increasingly important. It is only available to relatively high claims - about 50,000 EUR. It is one of the major advantages of the "Austrian model of group litigation". Under this scheme, potential claimants assign their claims to an association which then files a complaint on their behalf.
In Portugal, preliminary costs are not demanded against the claimant. After the sentence, the claimant is exempted of any payment in cases of a favourable (even in a partially favourable) judgment. In cases where there is a no favourable judgement, costs are decided by the court, up to a maximum of 50% of regular costs, taking into account the economic situation of the claimant and groundings for the no favourable judgement.
Spain has a "loser pays" general rule. Contingency fees agreements are available and valid in Spain after the decision of the Supreme Court of 4 November 2008. Third party funding is not expressly regulated, although Spanish Consumer organizations can obtain legal aid (Art. 37 RDLeg 1/2007) to defend consumers' interests (both collective and diffuse interests). The Free Legal Assistance Act (Ley de Justicia Gratuita 1/1996, January 10th) provides the right to apply for free justice benefits for the associations declared to be in the public interest or foundations registered in the corresponding Administrative register (Art. 2 c).
In Sweden, for group actions, the ordinary rules on litigation costs (namely the "loser pays") apply in principle. The claimant in a group action bears the litigation costs (including those of the defendant) if he or she loses the case. Members of the group are in principle not liable for the litigation costs. According to section 38- 42 GRL, it is possible to enter into a risk agreement. This is an agreement between the claimant in a group action and the attorney, whereby they agree that the attorney´s compensation depends if the case is lost or won. This agreement is valid if it is inter alia deemed fair.
Generally, in a Dutch civil action, the prevailing party usually receives compensation for lawyers' and experts' fees based on a schedule reflecting the amount of the claim and the actions required to arrive at a judgment. This covers only a very small portion of the total lawyers' fees incurred. Court fees will also be awarded and depend on the amount involved. The winning party is entitled to recover legal expenses incurred in the pre-trial phase if they are reasonable and are not to be viewed as procedural costs. There is no requirement that lawyers' fees in collective actions be approved by court. Contingency fee arrangements are prohibited for members of the Dutch Bar.
In stark contrast, the court fee for class actions, in Poland, was set at 2% of the value of the case. The court fees are payable upfront, and there is no legal aid to assist class members. While the class representative bears the responsibility for payment of the fee, all class members are of course required to contribute. Consumer ombudsmen are not required to pay court fees if they act as class representatives. Further costs include expert fees. The Class Actions Act allows lawyers representing the class to conclude no-win-no-fee arrangements, with the upper limit of their total remuneration being 20% of the value of the case.