Class Action Mechanisms in the European Union
Jun 22, 2010 QuickCounsel Download PDF
By ACC Legal Staff
Europe's laws on collective damages suits are in a state of transition. For its part, the E.U. has taken steps to soften the rigor iuris of the Roman civil law damages concept with the intent of benefitting consumers, customers, and competition, perhaps making it easier for parties to initiate class actions.
In April 2008 the European Commission published a White Paper, "Damages Actions for Breach of the EC Antitrust Rules," proposing a framework that would help individual consumer claimants group together. Furthermore, the Commission is in favor of allowing more collective actions. Whatever the E.U. decides upon, the process of legal and procedural harmonization it will require will be complicated and protracted.
The E.U.'s current system of decentralized enforcement under Regulation 1/2003 allows a lack of uniformity in procedural laws. This has resulted in substantial differences between countries with respect to the possibility of group litigation. The White Paper hopes to minimize differences so as to create a level playing field for European industry.
The E.U.'s decisions in antitrust law are especially significant, given that whether or not the introduction of collective actions into antitrust in the E.U. is successful may pave the way for class action litigation in other areas of law in Europe.
European Commission's Regulation
According to the European Court of Justice, any citizen or business that suffers harm as a result of a breach of the E.U. antitrust rules (Articles 101-102 of the TFEU) should be able to obtain reparation from the party who caused the harm. To date, it has been too difficult for parties claiming harm in antitrust disputes to bring private actions for alleged infringements of the Commission's competition law. As a result, private claimants are seeking relief via national courts, in accordance with national procedural rules. Companies that breach competition law are punished through public enforcement by competition authorities.
European Commission's White paper
The April 2008 White Paper proposes changes designed to implement an effective private enforcement system in Europe and covers a broad range of topics, including: standing; access to evidence; applicable law; fault requirements; damages; passing-on defenses; funding arrangements; and collective redress mechanisms.
Notwithstanding the White Paper, collective redress mechanisms remain sources of great suspicion in Europe. As explained in the White Paper: the overall effect of specific legislation concerning group litigation will depend not only on the regulations that directly concern the group litigation mechanism, but also on related law of civil procedure and the way regulations are interpreted and legal standards are applied by the courts.
The E.U. has responded to criticisms of the American class actions system and attempted to distance itself from that approach by emphasizing the central role of the public authorities in the overall enforcement of E.C. competition rules. In keeping with this theme, the White Paper makes clear that its aim is not to substitute public enforcement, repeatedly noting that the E.U. and U.S. systems have different fundamental objectives.
In considering the most appropriate form of collective actions, the White Paper focuses on four different mechanisms: joinder, representative actions, opt-in collective actions and opt-out collective actions. The E.C. evaluates these four options in terms of information (i.e., transparency), deterrence, compensation, and uniformity. Of the four policy options, the White Paper recommends two collective redress mechanisms: representative actions brought by qualified entities and opt-in collective actions.
With respect to the deterrence goal, the White Paper points out that stand-alone cases generate greater benefits than follow-on cases as far as detection. The White Paper notes that deterrence "may remain far from optimal due to three remaining problems: the rational apathy on the side of individual victims (in particular, those who suffered trifle damage), problems to finance the law suit and the risk of free-riding, which may equally reduce the number of claims brought below the efficient level."
European Parliament's Response
In March 2009, the European Parliament adopted a resolution reflecting its comments on the European Commission's 2008 White Paper.
In sum, the European Parliament favors: settlement procedure for mass claims, clearly delimited groups of claimants in collective claims, avoiding abusive litigation, and recognizing the "passing on" defense (if proved), giving victims access to Commission documents. (However, the EP acknowledges the need for guidelines on leniency applications.)
The European Parliament opposes: decisions of National Competition Authorities being automatically binding on the courts of other Member States, and severing joint and several liability for cooperating witnesses
The European Parliament's continuing concerns include: the legal basis for any harmonizing legislation; the consistency with other non-contractual claims and with collective redress mechanisms in other fields (e.g. consumer law); and that harmonizing measures might lead to arbitrary or unnecessary fragmentation of procedural national laws.
The European Council has tried to make it easier to initiate competition tort litigation in the E.U. To that end, competition damages claims can be heard by one court applying one single law, even where more than one defendant is involved and damages occurred in several Member States. (See Regulation 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.) More recently, a new regulation provided that in competition damages matters the claimant may choose among the laws of the countries affected. (See Regulation 864/2007 (Rome II), on the law applicable to non-contractual obligations.)
The recent legislative acts and policy pronouncements of European lawmakers indicate companies should take a holistic, multinational approach to mitigating risk and to formulating legal-defense strategies.
In the near term, expect plaintiffs to continue to sue in the U.S. in order to take advantage of contingency fees, punitive damages, jury trials and no-fee shifting. If Europe's transition continues, corporate counsel may be faced with collective actions in European forums in the coming years.
Additional ACC Resources
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ACC Resource Library - ACC Docket
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