European Parliament softens stance on EU class actions

In a resolution adopted on 2 February 2012 in response to the Commission’s 2011 consultation “Towards a coherent European approach to collective redress”, the European Parliament has taken a markedly less negative approach to the question of EU action on collective redress than had been expressed in its Committee for Legal Affairs' draft report last July. The draft report stated that the Commission had not put forward convincing evidence that action was needed at EU level to ensure that victims of unlawful behaviour were compensated (see post). In contrast, the final version approved by the Parliament simply asks the Commission to demonstrate in its impact assessment that action is needed at EU level, pursuant to the principle of subsidiarity, and the overall tone is much more welcoming of a possible EU instrument on collective redress.

Importantly, however, the European Parliament continues to oppose an "opt-out" class action mechanism stating: "a collective redress system where the victims are not identified before the judgment is delivered must be rejected on the grounds that it is contrary to many Member States' legal orders and violates the rights of any victims who might participate in the procedure unknowingly and yet be bound by the court's decision".

The resolution

Like the draft report, the resolution calls for any proposal to take a horizontal approach to the question of collective redress, rather than having different approaches for different sectors. The resolution envisages a "horizontal framework including a common set of principles providing uniform access to justice via collective redress within the EU".

Unlike the draft report, the resolution does not call for any scheme to be limited to cases where there is a cross-border element, though it states that the horizontal framework "would deliver the most benefit" in cases where victims and defendant are not domiciled in the same member state. The draft report had also suggested limiting the application of any instrument to cases alleging infringement of EU law; in contrast, the resolution calls for further examination of how to improve redress for infringements of national law "which may have large, cross-border implications".

The resolution does however continue to stress the need for strong safeguards to avoid unmeritorious claims if a horizontal instrument is introduced, including that claims could brought only on an "opt-in" basis, with group members having to be identified before the claim was brought, and with only compensatory (rather than punitive) damages available.

ADR

The resolution also encourages the setting-up of ADR schemes at European level "so as to allow fast and cheap settlement of disputes as a more attractive option than court proceedings". It suggests that judges performing the preliminary admissibility check for a collective action should have the power to order the parties first to seek a collective consensual resolution of the claim before launching court proceedings (in contrast to the draft report, which had called for a legal obligation across the board to attempt ADR before bringing proceedings).

Next steps

The European Commission's work programme for 2012 lists "An EU framework for collective redress" for the fourth quarter of the year. It states that the potential initiative will ensure that the European approach to collective redress is coherent and consistent. It will be a horizontal initiative covering several policy areas, with the aim of improving "the enforcement of EU law and access to justice for citizens and companies in situations where shortcomings exist under the status quo". It is not yet clear whether it will take the form of legislative or non-legislative action.

The work programme also lists, for the second quarter of the year, a follow-up initiative to the Commission's 2008 White Paper on antitrust damages actions. This is described as "an EU legislative follow-up measure that aims at improving the conditions under which victims of antitrust infringements can obtain compensation, while avoiding the risks of abusive litigation". The work programme notes that the Commission will also ensure coordination between its ongoing initiatives with regard to collective redress.

In the UK, we are also expecting a consultation from the Department for Business, Innovation and Skills (BIS) on competition law private action, including whether a new form of collective action should be introduced for competition claims. We understand that this is likely to be published in March.