UK: Government’s Response On Proposed US-Style Collective Actions: A Class Act?

Last Updated: 10 August 2009
Article by Tim Strong and Julie Maslin

Would-be corporate defendants and their insurers have had cause for concern in recent times that the UK could see the introduction of US-style class actions. However, the Government's recent response on the issue offers comfort that wholesale revamping in this area is unlikely and instead that the desirability of collective action rights will be considered on a sector-by-sector basis. In December 2008, the Civil Justice Council (CJC), a body charged with advising the Government on the modernisation of the civil justice system, released its formal report on collective actions. In its report, the CJC stated that existing mechanisms in the UK for collective actions do not provide sufficient or effective access to justice for a wide range of citizens and that meritorious claims which could be brought are not being pursued.

The current mechanisms are twofold. First, there is a Group Litigation Order (GLO) whereby each claimant must "opt in" by issuing its own individual claim before it can be entered on the Group Register. Secondly, there is a "representative action" under Part 19 of the CPR whereby a claimant may continue in its claim as a representative of any other person who has the "same interest" (which is interpreted narrowly by the courts) in the claim. Neither of these mechanisms is common.

The CJC's proposed solution was the introduction of a new generic collective action which could operate on an "opt-out" basis. The system in the US operates on this basis, meaning that lawyers may bring a class action on behalf of multiple claimants without needing to be retained by, or even having to identify, each of them individually. All potential claimants are bound by the result of the litigation unless they have taken positive steps to opt out of the class.

Not surprisingly, the CJC's proposals have attracted significant attention. US-style class actions are seen to have some benefits for defendants in that they offer finality in respect of all potential claimants unless they have opted out. However, the concern long held by many is that the availability of the US model could lead to a litigation culture whereby businesses are plagued by a proliferation of claims without merit. A rise in the number of class actions would also be likely to lead to headaches for insurers dealing with aggregation of claims.

As well as controversy at a domestic level, the European Commission continues to debate whether a directive which would allow consumer collective actions to be brought in all EU states should be introduced in order to harmonise the position across the EU.

The Government's response

The Government responded to the CJC's report with its own formal report on 20 July 2009. The Government's overarching conclusion was that the creation of a generic collective right of action would not be appropriate in the UK.

Instead, the Government is of the view that collective rights of action should only be introduced where policymakers for a particular sector are satisfied that there is a genuine need. In addition, the Government has indicated that the policymakers would need to be satisfied that collective actions would achieve access to justice more costeffectively than other alternatives, such as separate claims by individuals or increased intervention by regulatory bodies.

The role of regulatory bodies

It may be, therefore, that sectors such as public utilities and finance, where there are already formal regulatory frameworks in place, will be less susceptible to the introduction of class actions. The Government also suggests in its report that regulatory bodies who are in a position to act on behalf of consumer or other groups could be given increased powers, for instance the ability to order compensation. This "regulation plus" model could simply mean class actions by another name and without the benefit of judicial impartiality. On the other hand, the scarcity of resources available to regulatory bodies is likely to mean that only strong claims would be brought under such a model.

Implementation of new collective rights of action

Where collective actions are to be made available in a particular sector, the Government envisages the Government department responsible for that sector introducing the changes by way of primary legislation. The Government department might also choose to identify in the legislation which specific bodies may bring collective actions on behalf of individuals or the criteria against which other applicants might apply to court to be authorised as the group representative in a collective action.

Opting in or opting out?

Although much emphasis was placed by the Government in its report on the necessity for a sector-by-sector consideration of whether or how best to cater for collective actions, the Government did express a preference for a "hybrid opt in" process rather than a full "opt out" model. Two possibilities for a hybrid process were discussed by the Government in its paper.

Under the first hybrid process mooted by the Government, a minimum number of optin claimants would be required, with additional members of the class able to opt in at any time before a decision on liability were reached. All those who opted in would be bound by the liability decision. Any who opted out before the decision or those who had done nothing would not benefit from or be bound by the decision. They could bring their own separate claims but the class action decision would operate as a precedent.

Under the second hybrid process mooted by the Government, claimants could opt in at any time before quantification of damages. Once a decision on liability had been reached, any claimants who had not expressly opted out beforehand would be bound by it. But those class members who had not opted in or out could still bring separate claims for damages if the liability decision was favourable.

These hybrid processes seem to offer little to defendant businesses who would wish to manage litigation and reach a final position in relation to all potential claimants as the quid pro quo to there being more scope for claims in the first place.

Certification

However, the good news for would-be corporate defendants is that the Government in its report recommended that, where collective actions were introduced, a strict certification process should be an essential element of the procedure. That is, the Government is of the view that prospective collective actions should be vetted by the court before permission to bring them is granted. The Government envisages that the court's considerations should include whether the claim has legal merit, whether the claim can be resolved more cost-effectively by a non-court mechanism (for instance, through regulatory action or an ombudsman) and whether the representative body or party is likely to be able to meet the defendant's costs if the claim is unsuccessful.

Cost shifting

In addition, the Government, in common with the CJC, is in favour of retaining the usual "loser pays" principle in relation to class actions. The principle (also known as "cost shifting") means that the loser of litigation pays the winner's costs. The Government described the principle as a significant deterrent to "blackmail litigation" which occurs in the US, whereby claims with little merit are brought simply in order to induce a settlement. The Government's support for the retention of cost shifting does, however, fly in the face of comments by Lord Justice Jackson in his May 2009 Preliminary Report on civil litigation costs. In that report, Lord Justice Jackson indicated that a no cost shifting rule in the context of collective actions merited serious consideration. (Lord Justice Jackson's final report is due in December 2009.)

Future developments

The Government concluded its report by signalling the next steps that it proposes to undertake in relation to the reform of collective actions. Although leaving the development (or otherwise) of collective actions to the Government departments responsible for various sectors, the Government intends, over the second half of 2009, to develop a policy framework document. It is envisaged that the framework document will assist Government departments in considering all of the relevant issues and adopting consistent conclusions where appropriate.

The Government does not intend to impose a timetable for the various Government departments to consider collective actions. However, the current climate provides fertile ground for them to do so promptly. Lord Justice Jackson's ongoing costs review has focussed attention on the high cost of litigation in the UK and issues of access to justice. In addition, there are now large classes of claimants with recession-based claims against their financial advisers and others. The issue of collective actions may therefore be near the top of many Government departments' "to do" lists come early 2010.

So, while the Government's refusal to endorse collective opt-out actions across the board may provide some comfort, the end result may differ widely, sector to sector. Given the serious repercussions that could ensue, those concerned may wish to make the most of any opportunities to influence the policy-making process in their sectors.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.