- If the EU adopts proposals for collective redress reform, the litigation risk for Australian manufacturers exporting products to the area could change.
"In this world you cannot give 100% guarantees. There is no such thing as zero risk. You can make sure the system is fit for purpose. You can ensure that all the links in the chain raise their game. You can ensure that producers, importers, retailers and governments and EU are ready to rapidly identify and tackle any new problems as they emerge. And I can assure you 100% of my commitment to keep the pressure on to ensure the highest possible level of safety for our citizens".
These powerful sentiments of Meglena Kuneva, the European Commissioner for Consumer Affairs, on 22 November 2007 encapsulate the European Union's ("EU") current drive towards reforming aspects of the consumer product safety system in Europe. Commissioner Kuneva's comments echo global developments prompted by a number of recent high-profile product recalls. It is clear that Commissioner Kuneva has a real interest in collective redress and group actions and that she has expressed a popular feeling in the EU that consumers should have the power to assert their claims via litigation.
Australian manufacturers who export products to Europe should be aware of the European Commission's Consumer Policy Strategy for 2007 to 2011. This is aimed at creating an improved consumer protection system across the EU by "empowering consumers, enhancing their welfare, and effectively protecting them". In other words, a system that is "fit for purpose".
This article addresses one significant aspect of the Consumer Policy Strategy, namely collective redress reform and the reaction to these proposals from Member States, including England and Wales. The development of a class action regime at European level, and also in England and Wales, similar to the Australian "opt out" regime which currently exists under Part IVA of the Federal Court Rules for representative actions, is currently the subject of hot debate.
If proposals for collective redress are implemented, this could change the face of consumer protection and product liability litigation in Europe. This, in turn, has the potential to alter litigation risk for Australian manufacturers exporting products to the area.
The move towards an EU collective redress system?
The European Commission has been examining the problems which consumers face in obtaining effective redress where there has been a breach of their consumer rights. This is largely because consumers who have small claims appear to refrain from bringing individual court actions due to the prohibitive costs involved, and the difficulty individuals have in sustaining claims.
In June 2007, the Commission held a brainstorming event where representatives of all stakeholders discussed the advantages, disadvantages and underlying problems of collective redress as well as the consequences of a collective redress mechanism at EU level. The next step was the Commission's "Consultation on the Consumer Collective Redress Benchmarks". Each benchmark should, in its view, be "respected by effective and efficient collective redress systems in order to ensure satisfactory redress for consumers". Responses to the consultation closed on 31 March 2008 after the deadline was extended twice. We await publication of the results.
Ultimately, the Commission is looking at the possibility of both a judicial and non-judicial collective redress mechanism. The rationale behind the proposed changes is the aim to harmonise rules across the EU, and give consumers increased rights when purchasing consumer goods across borders and address issues with e-commerce, telesales, mail order shopping and international sales. A further advantage of a uniform collective redress mechanism is the prospect of equal guarantees for EU consumers regardless of country or residence, or country of purchase, by simplifying access to courts to consumers who have suffered a loss to foreign companies.
Together with a number of studies conducted by the European Commission, the results of the Consultation on Consumer Collective Redress Benchmarks will inform future developments.
Class action reform is also being debated at Member State level. Most recently, we witnessed the introduction of class actions into the Italian legal system, with effect from 30 June 2008 following several unsuccessful attempts. There is also a bill before the French Parliament regarding the introduction of a class action procedure. So, what will happen in England and Wales?
England and Wales - Moves towards a class action regime?
In the December 2006 edition of Insights we considered the then Department of Trade and Industry's1 consultation paper proposing that independent bodies should be allowed to bring representative action law suits against rogue traders. Since then, there has been wide-ranging interest in the possibility of introducing a class action regime for pursuing class actions in England and Wales.
At present, England and Wales has no direct equivalent to the Australian model of an "opt-out" class action regime where one or more parties can bring an action on behalf of a larger class which includes unidentified parties. What does currently exist are group action procedures available under the Civil Procedure Rules ("CPR").2 Pursuant to Part 19 of the CPR, the court has the power to make a Group Litigation Order ("GLO") to manage cases on an "opt-in" basis where there are a known number of claims giving rise to common or related issues of fact or law (CPR 19.11). An alternative to the GLO model is the more general procedure for representative actions which can be made by or against one or more persons who have the "same interest" in every part of a claim (CPR 19.6). This is a more difficult test to fulfil and so the GLO procedure is more appealing to claimants.
In the region of 60 GLOs have been made since the procedure was introduced in the CPR in 2000. This small number raises the question as to whether consumers have sufficient access to justice in England and Wales, particularly given the scope of litigation funding available?
Against this background, the possibility of reform by adopting an "opt-out" regime similar to Australia and the United States has recently been the subject of a research paper commissioned by the Civil Justice Council3 (CJC), published in February 2008 by Professor Rachael Mulheron. Significantly, the CJC concluded that there is a clear need in England and Wales for a new collective redress system based on an "opt-out" regime. While the recommendations of the CJC are not always followed, its thinking reflects the current vibrant debate at a European level.
The big ticket question for those against reform in England and Wales is whether the introduction of an "opt-out" system could represent a move towards the compensation culture that is evident in the United States? This could no doubt influence whether any reform proposals are implemented, and if so, the legal framework adopted. Given the concern about the excesses of class actions in the US, reformers in England and Wales may look to the Australian class action model for guidance if the CJC's advice is followed. Another option being considered is whether the "loser pays" rule which currently applies should remain if a class action regime is implemented.
What is clear from developments in Europe is that we are at a time of change, but there is uncertainty as to where the changes will be seen. The regulation of consumer product safety however is firmly on the reform agenda and collective redress is one aspect of this. We will continue to monitor and report on developments in this area in future editions of Pharma Insights.
1 Now the Department for Business, Enterprise and Regulatory Reform
2 The CPR governs civil court procedure in the county courts, High Court and Court of Appeal of England and Wales.
3 The Civil Justice Council is an advisory public body established to provide advice on the effectiveness of aspects of the civil justice system in England and Wales and make recommendations to test, review or conduct research into specific areas.
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