Class actions: European Parliament sceptical of need for action at EU level

In its draft report published on 15 July 2011, the European Parliament's Committee for Legal Affairs has stated that the Commission has not put forward convincing evidence that action is needed at EU level to ensure that victims of unlawful behaviour are compensated. The draft report is a response to the Commission's consultation earlier this year entitled "Towards a coherent European approach to collective redress".

The draft report states that, if it is decided that an EU scheme of collective redress is needed, any proposal should be in the form of a horizontal instrument, rather than having different approaches for different sectors. It suggests that any such scheme be limited to where the value of individual claims is no more than 2,000 euros, where there is a cross-border element, and where infringement of specified EU legislation is alleged.

Significantly, the draft report stresses the need for strong safeguards to avoid unmeritorious claims if a horizontal instrument is introduced, including that claims could only be brought by designated representative bodies (not individual 'lead plaintiffs' as in the US system), group members would have to be identified before the claim was brought (i.e. it would be a purely "opt-in" procedure); only compensatory (rather than punitive) damages would be available, and national rules on cost allocation would apply (since the "loser pays" principle is seen as a safeguard against unwarranted claims).

The draft report encourages the setting-up of ADR schemes at European level, and goes so far as to call for a legal obligation on the parties first to seek a collective consensual resolution of the claim before launching court proceedings.

The Commission is currently analysing the responses to its consultation on collective redress and plans to issue a communication at the end of 2011 setting out its intentions. The three main options being considered are to: take no further action at EU level; issue a recommendation to member states; or introduce legislation.

The Commission (DG Competition) is also consulting on proposed draft guidance on quantifying harm in actions for breach of EU competition rules. Click here for a copy of the consultation document. Any comments should be submitted by 30 September 2011.

In the UK, the Department for Business, Innovation and Skills (BIS) flagged in its March 2011 consultation on reforms to the competition regime that it was "keen to promote private sector-led challenges to anti-competitive behaviour and will bring forward separate proposals on this in due course". We understand BIS is currently looking at this and we expect there may be developments in the coming months.