France: In The Wake Of France's Adoption Of A Class Action Model, Companies Domiciled And Doing Business In France Should Ensure Insurance Coverage Is In Place To Respond To These New And Uncertain Risks
In the wake of the institution of class action claims in France,
where, unlike the U.S. class action model, liability and damages
are assessed prior to "massification" of the class,
corporations should prepare for these new risks by guaranteeing
that insurance coverage is in place for defense costs and potential
losses arising from class-based claims in France.
Following years of tense discussions, France adopted a class
action proceeding known as "action de groupe" to resolve
mass claims. The reform was a response to overburdened judges and
major scandals involving large-scale claims that stemmed from
either personal injuries sustained from various pharmaceuticals or
global awareness of injuries caused by breast implants. Since its
adoption in October 2014, five group actions have been filed based
on claims arising from undue fees, unfair contractual terms, breach
of contractual obligations and misleading information against
telecommunications companies, banks and insurance companies.
Although class action proceedings in France to date have been
restricted to claims involving consumer and competition law, they
can be used exclusively to claim compensation for material damage
sustained by a group of claimants and the group action may soon be
extended to include health-related claims and discriminatory
In contrast to the U.S. model, the French group action is
comprised of a three-step approach. During the first phase, a group
claim is filed by an association before High Courts of First
Instance. According to the French Consumer Code, only authorized
associations for the defense of consumers can bring class actions,
in both competition and distribution law. After the claim has been
filed, the High Court of First Instance issues a declaratory ruling
on liability in which judges establish liability on the basis of
the model cases brought by the filing association. During this
phase, judges determine the scope of the defendant's liability,
ensure the publicity of the case in the media at the expenses of
the defendant and may determine the amount of damages awarded to
each individual plaintiff.
In the second phase, the plaintiff group is constituted through
judicial oversight of an opt-in system whereby individuals must
step forward to be included in the plaintiff class. In the third
phase, parties who have opted-in can obtain compensation based on
the amount of damages previously set by the judge.
In contrast to the U.S. class action model, where class
certification is the first phase in the process, under the French
system liability and damages are determined prior to
"massification of the dispute" – i.e. a
determination of the number of claimants entitled to compensation
from the defendant. By way of further contrast with the U.S. model,
the second phase of the class model in France, the opt-in phase, is
not contested by the defendant but is at the election of the
Although the French class action model was designed as an
alternative to and improvement upon the U.S. class action system,
the French model has been portrayed as a "procedural
monster" potentially fraught with uncertainty where the role
of lawyers and available defenses have been limited in contrast to
the U.S. model. As a result, corporations domiciled and operating
in France face a new set of risks and an uncertain and potentially
heightened exposure from class action claims. In response to these
new risks and uncertainty, corporations domiciled or operating in
France seeking to mitigate or avoid such risks posed by the new
class action model should reassess risk management strategies and
ensure appropriate insurance coverage is in place to provide for
payment of defense costs and indemnification in the event class
action claims are brought against them under the new French
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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