Class actions in Europe and the United States

Preface

 

The publication contains a collection of articles describing the current state of the law in Europe and in the United States regarding class actions and other procedural tools for collective litigation. The majority of the articles have been written by members of the LIBRALEX association. 

 

Group litigation in general is a field of the law where the national traditions have been quite different. The collection will show that some European states have rules on class actions with some resemblance to the modern class action known from the United States; not quite similar to the traditional representative claims known from England, and that some states have procedural tools only allowing collective litigation similar to class actions whitin specific areas, e.g. in regards to the protection of consumers. A distinction from these class actions can be drawn in regards to procedural rules on joinder of claims and types of representative litigation where an organization represents the interest of a group but does not derive legal interest from specificly affected individuals. The national rules however, vary widely, and an exact categorization can be difficult to deduce. 
    

A note should be made that the future might hold further developments in the member states of the European Union based on recommendations from the European Commission.

 

March 2014

 

Edited by 
Georg Lett and Sofie Vang Kryger 
LETT Law Firm P/S

 

 

Austria

By RA Mag.Dr. Karlheinz Klema

Current legal situation and practice concerning multiple claims

There exists no specific form of legal action similar to a (real) class action in Austria.

Proposals had been made by legislative service of the Ministry of Justice in a draft of law presented in 2008 already, which should provide the opportunity for an opt-in-system as well as the possibility for a later opt-out of a plaintiff including the difficult solution of the problem of compensation for fees in case of a later opt-in or an early opt-out of an individual (strict rules for full or partial cost refund according to a party’s success is an integral part of the Austrian civil procedure law). This sophisticated model was believed to be one offering the most possible opportunities for individuals to use the system of a class action but was not accepted by the Conservative Party being a partner in a government coalition with Social-Democrats at that time as well as today after the last elections in 2013.

 

The employers’ and manufacturers’ association feared the possibility of a strategic misuse of such an instrument and the economic pressure on their members resulting from such procedures or their mere announcement and the proposal was therefore buried as a long term project waiting for a political change.

 

Nevertheless thousands of plaintiffs with identical contractual basis went to court in the meantime, seeking compensation from their advisors and banks, due to the financial crisis. Especially at the Commercial Court of Vienna some judges have been blocked for a very long time by such multiple claims. Notwithstanding the fact, that many claims arise out of the same contractual basis, each investor has to be heard considering his personal circumstances (experience, oral advice before the investment, individual clarification before investment decision, intellectual capacity to understand the condition of sale etc.).
To reduce costs and risks, consumer protection organisations, mainly financed by the public, have organized a collective assignment to them and cooperated with some litigation-financers, who demand a certain percentage in exchange for taking over the risk and costs of litigation in court, so that many people could afford to bring their claim to court before those became statute-barred. 

 

The defendants argued, that this kind of concentration of claims in connection with a professional financer, that takes a share of the amount claimed for, is a violation of the quota litis-interdiction being part of Austrian civil law, which makes such agreements void.

 

It took the plaintiffs two years till they got green light by a land mark-decision of the Austrian Supreme Court (Oberster Gerichtshof) in 2013, ruling that the quota litis-interdiction has its only reason to protect the client and not the defendant on the opposite side.
Soon after, the first settlements of a reasonable amount of claims had been achieved.

 

The key decision that an accumulation of different claims of different individuals in one legal action is admissible even by mere assignment in combination with the support of a litigation-financer seems to have delayed the efforts to establish a new way for pursuing a multiple or common claim of a class in civil procedure law.

 

The minimum compromise for a future solution of the problem considered quite reasonable by key members of parliament could be, that a class may be formed, but a decision in one case will not extend to others automatically or exclude individual litigation even in case one declares to become member of the class, nevertheless the effect would be a suspension of the running of time of limitation even without taking action at court individually, but only for a certain period after a decision of the highest instance in one case of a defined class member became final, so the other parties could consider later if their case is so equal, that similar payments will be made/accepted according to the prejudicial case or being just too different and sue afterwards. Nevertheless those changes in civil procedure law are not on the agenda of the government for the near future.

 

Existing forms of collective protection of rights or interests of a group:

 

Consumer Law

 

The right of specific consumer protection organisations – usually subsidized by the public (the Ministry responsible for consumer protection)- or the different Chambers (e.g. for Workers and Employees) or the Trade Union Federation to sue against unlawful practices (concerning B2C-business), e.g. using standard terms which violate consumer law or to follow claims according to Directive 1998/27/EU exists for a long time already. Those actions (“Verbandsklage”) had been very successful in the past years and surprised a lot of legal departments of banks, telecom, mobile and real estate leasing companies etc. The legitimation to sue in the interest of consumers is set by law expressively. 

 

In these cases the “Oberster Gerichtshof” rules that the defendant has to accept the most unfavourable interpretation of a clause in general which could be much stricter than in a law-suit brought to court by an individual plaintiff in regard to his personal approach to specific terms of a contract.

 

Usually the consumer protectors demand from companies to drop specific clauses in advance and to oblige themselves in executable form not to use them anymore, otherwise to pay a high penalty in case of breaking the rules. Companies tried to avoid the risk of being sued in many cases by offering slightly changed clauses, arguing that the plaitiffs therefore should lack a reasonable interest to sue, having in mind to put more (cost-)risk on the back of the consumer organizations. Recently the highest instance decided in favour of the consumer protectors that the companies have only the choice to surrender unconditionally by offering a penalty and an executable title which obliges them never to use a clause again to avoid a procedure or being sued and possibly sentenced. In the early cases the legal departments of big companies seemed to have believed that consumer protectors had gone too far, but the outcome was often surprising even for the plaintiffs, because the Oberster Gerichtshof interpreted consumer protection law very extensive in the last years.

 

Those actions by specific plaintiffs do not cover individual claims of third parties and do not require specific rules of civil procedure law therefore; decisions unfold no direct force between other parties and are not extended automatically to other possible claimants or defendants (a clause regarded as unclear and therefore being unlawful in general could be valid in an individual case).

 

Competition Law

 

Beside the Chambers and federations mentioned sub lit. a) there exist also private business associations being legitimized by their members’ interest to sue against unlawful practices violating competition law, but those actions are usually not considered as “class actions” but as a specific tool provided by competition law, having been used e.g. in connection with p.r.-activities of competitors regarded as unlawful in specific cases and including the demand of public announcement of the outcome of a law-suit ordered by the court which is usually the expensive part. 

 

Nowadays it seems that the bigger companies (like telecom-providers) prefer to sue their competitors individually under competition law. 

 

As far as consumer rights are concerned, e.g. in case of misleading p.r., those associations mentioned sub lit. a) are legitimized to sue in common interest under competition law too.

 

The latest extension of the rights of such associations legitimized by law took place in 2013 and concerns malpractices in B2B business in regard of severely detrimental payment conditions, following Directive 2011/7/EU.

 

Belgium

By Jean BORNET, Secretary General

 

1. The Belgian government finally tabled a bill in the Lower House on 17.01.2014 to introduce a Book 2 entitled “collective redress actions" into Title XVII of the Code of Economic Laws. 

 

It is strictly limited to providing in kind or cash redress for collective harm (i.e., all the individual incidences of harm incurred by the members of a group of consumers arising from a common cause) arising out of a fault committed by a business.

 

That fault must consist in that business’ breach of one of its contractual obligations or one of the European regulations or one of the statutes comprehensively cited in the enactment.

 

This particularly includes competition law, market practices, defective product liability, the Financial Services Act of 2 August 2002, and the gas and electricity market organization rules.

 

Wishing to avoid the excesses of the class action as found in US law, the Belgian legislature set guidelines for the procedure established by this bill.

 

Firstly, an action will be admissible only if the representative who introduced it on behalf of the group is an association for the defence of consumer interests that has legal personality and is represented on the Consumer Council or is an association of at least three years’ standing which is approved by the Minister for the Economy and is not permanently operated for the purpose of financial gain, or the Consumer Mediation Service where it (the Mediation Service) is seeking to negotiate a collective redress agreement with the defendant business.

 

It must therefore be concluded that this excludes commercial companies, trade unions and law firms as well as (although this is arguably inconsistent with EU law) qualified entities from other Member States within the meaning of Directive 98/27/EC notwithstanding their right to seek an injunction in the Belgian courts.

 

2. Another "guidelines” is the court’s discretion to apply an “opt-in" (only consumers who expressly join the action will benefit from the outcome) or "opt-out" system (all consumers will be bound by the outcome unless they have opted-out of the group).

 

However, "opt-in" is mandatory for bodily and non-pecuniary harm for consumers who are not habitually resident in Belgium.

 

To preclude manifestly inadmissible or unfounded actions, the procedure will commence with an admissibility stage to ascertain whether the group’s representative fulfils the statutory requirements and is the right person to pursue the proceedings but also to ensure that a collective redress action is more efficient than an action under general law.

 

This stage will be immediately followed by a mandatory negotiation stage of between 3 and 6 months to allow the parties to attempt to agree on a form of collective redress which, if approved by the court, will be binding on the members.

 

Even if the parties have concluded such an agreement before the action is brought, they can submit it to the court directly for approval.

 

3. The court must respect the principle that harm must be fully redressed and may not grant punitive damages.

 

4. The redress may be in kind (e.g., forced performance of a contractual warranty) or cash (payment of damages).

 

5. The court may fix aggregate damages for the entire group or an individual amount owed to each applicant-consumer who makes a claim in the execution stage of the decision.

 

The compensation amounts will be allocated by a liquidator under the supervision of the court.

 

6.   Personal comment:
This is not a felicitous bill and is open to differing interpretations. 

Reimbursement of the group representative’s expenses (incompletely and inconsistently addressed) is a glaring example of this: whereas the intention was to allow him to recover only any costs of publicising the action (and, obviously, disbursements) of successful proceedings, certain provisions and even some passages from the explanatory memorandum in the parliamentary history could arguably suggest that he can obtain reimbursement of his full expenses.

Personally, I find it regrettable that collective redress should be reserved exclusively for consumers (as prescribed by EU law, cf the Commission Recommendation of 11 June 2013 on collective redress) and unavailable to seek redress for harm suffered collectively by small and medium-sized enterprises for breach of competition law in particular.

 

7. This collective redress action is assigned to a Division of the Court of First Instance to be heard by a judge sitting alone, whereas this is precisely the kind of action that should be heard by a full bench of three judges specially trained in "redress of collective harm"

 

 

 

Bulgaria

By Georgi Toshev, Ninov&Toshev Law firm

 

Introduction

 

In the year of 2007 a new Civil Procedure Code /CPC/ was adopted by Bulgarian parliament and entered into force as of March, 1st  2008. The amendments to procedural legislation provide an utterly new system of group representation for the first time in Bulgaria. The class action mechanism was introduced as a separate procedure in the new Code, which shall be within the competence of the District courts. The Bulgarian Civil Procedure Code governs class actions in a specific Chapter 33, articles 379 to 388. 

 

Class action rules

The class action rules are procedural rules and are applicable to all areas of law. Moreover, art.379 is a substantive rule, which provides grounds for class action without any limitation as regards to the area of law. There are also two specific substantive provisions in sector-related acts, which govern the right to bring class actions on specific grounds:

 

1/ Art.74, para.4 of the Commercial Act which deals with the right of shareholders to repeal the resolution of the general meeting of:

a) a public company (joint-stock company) with issued bearer shares; or
b) an open investment company. 

 

2/ Pursuant to art.186 of the Consumer Protection Act (CPA), associations for the Protection of Consumers which are listed in an approved list under art.164, para.1, item 7 of the CPA have the right to bring an action for the suspension or prohibition of actions or commercial activities which are in violation of the collective interests of the consumers. The provisions of para.2 of art.186 define as a violation of the collective interests every action, which damages the collective interests of the consumers and which contravenes explicitly listed laws, as well as other laws related to consumer protection. In addition, the Consumer Protection Commission, which is a state authority, is also provided with the right to bring the claim under s.186 CPA.

 

The general rules of the CPC are applicable for all stages of the class actions proceedings. They govern all relevant issues subject to the exceptions provided in the following Acts – the Commercial Act and the Consumer Protection Act notwithstanding on which ground the claim is brought. They set out specific requirements in relation to the claimants’ eligibility and consequently derogate the general rules of the CPC regarding the determination of the collective interest (e.g. the proper claimants under art.74, para.4 of the Commercial Act are shareholders only) as well as the remedies, which could be awarded, etc. In other words, they are specific and derive from the particular interest affected – the shareholder’s claim, if found grounded, will lead to the repeal of the resolution of the general meeting.

 

Scope of the class action

The CPC provides two options for class actions:  i/ an action for non-monetary relief and ii/ class actions for mass tort. The first option stipulates that the class seek only declarative judgment on the ground whereof each member is entitled to an individual proceeding. The other option given is damages for all members of the group in a common trial to be claimed.

 

Eligible claimants

Class proceedings under art.379 of the CPC can be brought by individuals and organizations. The latter could be either such for the protection from the above mentioned violations or organizations of the persons who suffered the damage, pursuant to s.379, para.2 CPC. 

 

Only shareholders in a public company (joint-stock company) or in an open investment company can bring the action under art.74 para.4 of the Commercial Act. As regards to class actions under art.186 of the Consumer Protection Act (CPA), there are several categories of entities which are eligible to bring the class action: associations for consumer protection, which are enlisted in the list under art.164, para.1, item 7 of the CPA; the Consumer Protection Commission; consumer’s associations; and “qualified organizations of member-states of the EU on which territory the consequences of the violation occurred”. The qualified organization could bring the claim under art.186 CPA if the violation harms the interests which are within the scope of the protection provided by the organization and the latter is included in the list approved by the EC and published in the Official Journal of the EU.

 

‘Opt-out’ procedure

There is an “opt-out” procedure since the court has authority under art.383, para.1, item 2 of the CPC to exclude individuals and entities, who requested to do so and declared that they will carry out their defense in separate proceedings. 

 

Notification for the class action

Potential claimants have to be informed of the initiation of the class action, pursuant to art.382 of the CPC. In an open hearing the court determines the following details explicitly listed in art.383 of the CPC:

• An appropriate method for announcement of the claim – the number of messages to be published / broadcasted, the media which will be used and the period of time during which the messages should be released. 
• A reasonable term after the announcement, during which the damaged persons could declare that they will participate in the proceedings or will carry out their defense independently.  

 

It could be concluded that the advertising of the class action is required and there are no  specific restrictions on the advertisement of the class action. 

 

Remedies

The types of remedies depend on the grounds of the class action. Under the general procedure on art.379 of the CPC, the remedies are exhaustively listed in art.385 of the CPC – the court may hold that the defendant should: 

• conduct a certain act; 
• restrain from conducting certain acts; or pay a certain amount of money. 

 

The specific grounds for class action provided in s.186 of the Consumer Protection Act falls within the second category mentioned above, since the claim under art.186 CPA is for the suspension of, or prohibition of, actions or commercial activities, which are in violation with the collective interests of consumers. Consequently, the remedy consists of restraining from certain behavior.

 

If the class action is brought by shareholders on the grounds of art.74, para.4 of the Commercial Act, the abolition of the resolution of the general meeting is the only result, which could be achieved by the claimant.

 

Defining the class of claim

The group of the class action is defined by the plaintiff, subject to subsequent revision by the court. Pursuant to art.379 CPC a class action could be brought by a group of persons who are damaged by one violation, where according to the characteristics of the violation their category cannot be precisely defined but is possible to be defined.  

 

It is the obligation of the claimant to provide with clear criterion for the definition of the group of interested persons, pursuant to the case-law (Ruling №380 of 03.05.2011 on private commercial case №298/2011, Commercial Division, second chamber of the Supreme Court of Cassation). This conclusion is widely held in the case-law and is supported by the provision of art.380, para.2 CPC, which stipulates that in the statement of a claim, the plaintiff should indicate which circumstances define the category of the damaged persons.

 

Since the approach of the regulation in the CPC is to apply the “opt-out” principle, the court can not impose a cut off date by which the claimants must join the litigation. 

 

Determining preliminary issues

The Courts determines preliminary issues such as whether the claim is admissible and whether the statement of a claim is in order, which are general requirements for all types of actions, not only for class actions. Pursuant to art.381, para.1 CPC in addition to the above mentioned issues the court ex officio conducts another preliminary act – the court ascertains the abilities of the claimant/s who brought the action to “seriously and in good faith protect the interest damaged and to bear the encumbrances in relation to proceedings, including the fees”. The court shall apart from the provided evidence, officially investigate the eligibility of the representative, including their financial steadiness. The adequacy of representation is a prerequisite for certification of the class action. 

 

Determining the scope of the case

After verifying if the criteria mentioned above have been met by the claim, the court either admits the class action to examination or refuses to examine it. Only the latter decision can be appealed. Once the court has decided to admit the class action to examination, it decides on how to announce the class action to the public. The announcement, apart from informing the public of the class action, sets the deadline for other affected  parties to join the claim and for class members who want to pursue their claims individually to file a request for their exclusion from the class (i.e. to opt out). The court verifies the motions of parties being included in and excluded from the class, and issues a decision in this respect. A party can appeal against a court decision dismissing the above motions. If the decisions on excluding certain persons from the class are final and binding, the court issues a list of persons who are excluded from the class. 

 

Settlement agreements

In addition to the requirements of art.234 of the CPC for court approval, the settlement of a claim is applicable to all types of actions – namely, if the settlement is in compliance with the law and the bona mores, art.384, para.2 in fine is imposed furthermore. The court also has to assess whether the settlement will provide with remedies and measures, which will protect to a sufficient extent the interest damaged. The court approval is a prerequisite in order for the settlement to become binding and valid.

 

At the request of the claimants, the court may also decide on adequate interim measures,  necessary for protecting the harmed interests for the duration of the proceedings.  Any of the parties may appeal against the court decision on interim measures.

 

The court’s final judgment is binding on the defendant and persons/entities, who brought the action. Moreover, it is also binding on anybody who did not opt out of the proceedings by making a statement to this effect in the time limit set by the court in the public announcement of the class action. A list of persons who opted out of the proceedings is to be attached to the judgment. 

 

Appeal options

The first instance judgment of the district court is subject to appeal before the court of appeal and the latter’s judgment is subject to appeal before the Supreme Court of Cassation. It is noteworthy that pursuant to art.386, para.3 of the CPC the appeal before the Supreme Court of Cassation is not restricted by the prerequisites for access under art.280, para.1 of the CPC. These prerequisites are applicable as a general rule to all judgments and in order for a judgment to be reviewed by the Supreme Court of Cassation it has to meet one of the requirements of art.280, para.1 of the CPC as well as to be for a value of not less than 5,000 BGN (where one EURO equals, approximately, 1.95583 BGN) for civil cases and 10,000 BGN for commercial cases.

 

However, the latter requirement regarding the value of the claim should be satisfied in order for the review by the Supreme Court of Cassation to be allowed. Furthermore, the judgment on the class action cannot be repealed under art.304 of the CPC, pursuant to art.386, para.4 of the CPC. The former provision states that repeal of the judgment could be requested by the person on whom the judgment has effect, although that person was not a party to the trial. This solution could be explained with the specific nature of the class action and its res judicata and the opt-out principle described above.

 

Quantification of damages. Managing the funds awarded as damages

The CPC does not govern this issue. Pursuant to art.51 of the Law on Obligations and Contracts the damages are owed for all damage, which are a direct and immediate consequence of the injury. Furthermore, art.52 of this act stipulates that non-pecuniary damages are determined by the court by application of the principle of justice. Consequently, it is within the discretion of the court to quantify the damages taking into consideration the collective interest, not the aggregate of the interests of each of the individuals involved in the class action. 

 

However, art.387 of the CPC governs, to some extent, the disposal of the damages awarded. The district court may convene a general meeting of the persons damaged by the violation by publication of invitation in the manner in which the initiation of the claim was announced, The judge chairs the general meeting and the could passes a resolution in case at least six persons, who are damaged by the violation subject to the class action, attend the meeting. Тhe general meeting is entitled  to elect a committee which will be authorized to manage the funds awarded as damages which are deposited in a special account. The general meeting could also determine certain actions and  direct the committee to conduct them.

 

Costs

The successful party can recover the court fees, as well as its own legal costs and other expenses in proportion to the amount for which the claim granted, pursuant to art.78, para.1 of the CPC. The “one who loses pays” rule applies but the “losing party” could also request cost recovery in proportion to the amount of the claim, which was not grounded.

 

Claims brought by residents from other jurisdictions

There are no specific provisions of the CPC which govern conflict of laws rules applicable to class actions. Consequently, the Bulgarian International Private Law Code (IPLC) is the relevant Act, which regulates the ability of residents from other jurisdictions to bring class actions in Bulgarian courts.  

Pursuant to the general rule of art.4 of the Code, the Bulgarian courts will have jurisdiction when the respondent has his place of residence, registered seat or place of business in Bulgaria. When the class action is based on contractual liability and the place of performance is in Bulgaria or the respondent’s place of business is in Bulgaria, the residents from other jurisdictions are able to bring the class action before Bulgarian courts, pursuant to art.15 of the IPLC. 

 

In case of tort liability the residents from other jurisdictions are able to bring the claim when the tort is committed in Bulgaria or the damage or part of it is suffered in Bulgaria. In addition, art.186a of the CPA stipulates that a class action under art.186 CPA could be brought by a qualified organization of a EU Member-State, within the meaning of art.186a CPA, on the territory on which the consequences of the violation of the collective consumers’ interest, committed in Bulgaria, occurred. Thus, eligible claimants are qualified organizations of other EU Member States. 

 

 

Czech Republic 

By Mgr. Pavel Piňos and Mgr. Jakub Hlína

 

Act No. 99/1963 Coll., Civil Procedure Code which governs the civil court proceedings does not allow a group of persons to file a Class action although many other legal systems provide the plaintiffs with such legal instrument. 

Although the class action is not regulated in general, still there is a possibility of bringing an action in specialized fields of law. 

 

Protection of Consumer´s rights 

One possibility of “special” class action is regulated in the Act No. 634/1992 Sb., on the Protection of Consumer. According to Art. 25 Para 2 the associations and professional organizations which have a legitimate interest in protecting Consumer´s claims can assert their claim for injunctive infringement at the court. 
Current legislation regarding this matter is very inconvenient and requires a thorough modification, since it does not provide adequate protection to the consumers (eventually competitors). In practice it often happens that the action of consumers organizations persist for a considerable time and bring no benefits to the consumers. In the legal systems of other countries is an institute class action connected with the concept of collective compensation, which Czech law does not allow in this form. According to current legislation the competent organizations can sue only for injunctive infringement, not for compensation for individual damaged persons. After then they have to file a separate lawsuit against entrepreneurs with a claim for damages. Most of the consumers are waiting for a result of a dispute of a consumer organization with an entrepreneur and only then according to the particular result they are deciding whether they bring their claim to the court or not.

 

Unfair competition 

Another “special” class action is regulated in Act No. 513/1991 Coll., Commercial Code. According to Art 54 Para 1 the legal entities which are entitled to protect the interests of competitors or consumers can bring an action against the violator to refrain from its unlawful conduct and to remedy the defective state in the matters of unfair competition. 

 

Future development 

The topic concerning class actions was widely discussed among professional community in connection with unauthorized banking fees. 
There were also several discussions on the parliamentary ground about introduction of the Class action institute into Czech legal system but they always ended up as a failure. 

With regards to the turbulent political situation in the Czech Republic (early elections are planned in October 2013) any major development in the area of class actions cannot be expected. 

 

 

Denmark

By Georg Lett, LETT Law Firm P/S

 

Introduction

The rules regarding class actions were introduced in Denmark on January 1st 2008 as a supplement to the existing procedural rules as chapter 23a of the Danish Administration of Justice Act. 

 

The background for introducing the new rules was among other things to make it possible to process similar claims as class actions and thereby process similar claims more efficiently. In addition the rules made it easier to process similar claims which under normal circumstances might not be litigated because of lack of resources if they were to be made as individual claims. 

 

Conditions for filing a class action

When filing a class action there are a number of requirements that must be fulfilled in order for the Court to grant that the class action rules shall apply. According to Article 254 a (1) the claims shall be made by more than one person, Denmark shall be the correct venue for all the claims and the Court, where the case is filed, shall have jurisdiction for one of the claims. In addition the Court shall be substantively competent regarding one of the claims and it shall be possible to appoint a representative of the group. 

 

In addition to the abovementioned conditions the claims are required to be similar. It is up to the Court’s discretion to decide when a series of claims are to be regarded as similar. According to the preparatory work, claims can be regarded as similar when the claims are based on the same factual circumstances and legal grounds. The claims do not have to be identical though. The Western High Court has in two cases  considered this question. Both cases concerned investors who claimed that the information that was given in connection with the investments was insufficient and misleading. The Western High Court reached the conclusion that the claims were sufficiently similar in both cases, despite the fact that the group of investors in U 2012.1561 V consisted of both firms and private individuals. However, the Western High Court found that although there were individual differences in the circumstances under which the investments were made, this did not exclude the claims of being similar. 

 

The class action rules are an alternative to the ordinary procedural rules and it is therefore also a requirement that the class action rules shall be deemed to be the best way to process the claims. In this regard it can be favourable to file a class action if it is deemed likely that the claims will not be litigated individually because of the size of the claims and/or due to lack of resources. This consideration was taken in U 2012.1561 V were it was assumed that many of the claims would not be made if the Western High Court did not grant the class action. 

 

Determining the scope of the case

When the Court has granted a class action, the scope of the case is determined by the Court according to Article 254(e)(1). The Court is given a broad discretion in this regard. The Court can discuss the scope of the case with the representative of the group and the scope can thereby be narrowed down and finally determined in accordance with the group’s wishes. Once the scope of the case has been determined, the members of the group shall register with the class action in order to be a member of the group. 

 

Representative of the group

According to Article 254(c) a class action shall be led by a representative of the group, which shall be appointed by the Court. The group representative can be a member of the group, an association or a private institution. In the cases U 2011.1596 V and U 2012.1561 the members of the class actions formed an association in each case, which was then appointed as the representative of the group. The representative can hire legal aid and let the case be led by a lawyer in court. 
It is also possible for a public authority to be appointed as the representative of the group if it is authorized by law. The only public authority so authorized is the Consumer Ombudsman. In class actions that are based on claims that are so small that individual litigation would not be initiated, the Court can as an exception decide that the class action is based on the claims of all the members of the group unless they have withdrawn from the class action. In such cases all the members of the group will automatically be registered for the class action and must therefore actively withdraw their registration, if they do not wish to participate. It is only the consumer ombudsman that can be appointed as the representative of the group in such a class action according to Article 254(c)(2). 

 

Although the final judgment in a class action has legal consequence for all the members of the group, it is only the representative of the group and the opponent that are parties to the proceedings.  

 

Legal costs

According to Article 254(e)(2) the Court can request that the representative of the group submits a deposit with the Court as a security for the legal costs of the case. The Court can also request that each member of the group shall submit a deposit with the Court as a security for the legal costs in order to be allowed to register with the class action according to Article 254(e)(7). However, if the member has insurance for legal expenses or is able to obtain free legal aid according to Articles 327-329 of the Danish Administration of Justice Act, they are not required to submit a deposit with the Court. 

 

Should the group members be ordered to pay legal costs to the opponent or the group representative, the members cannot be ordered to pay an amount larger than the deposit they have submitted according to Article 254(e)(7) added to the amount they may have received during the trial. This means that the group member before joining the class action will be able to calculate how much he risks losing, should the action be unsuccessful. 

 

Appeal

The representative can choose to appeal the case according to Article 254(j)(1). If the representative does not appeal, anyone who is eligible as a representative of the group according to Article 254(c)(1)(1-2) can appeal the case. A member of the group, who is part of the class action but has a claim that is not included in the appeal, can appeal the judgment with regard to that claim and have the case tried through individual proceedings.

 

Settlement agreements

According to Article 254(h) a settlement agreement entered by the representative of the group is valid when the Court has approved the agreement. The Court shall approve a settlement agreement unless it discriminates members of the group or is clearly unreasonable. 

 

 

Germany

By Dr. Moritz Becker, Freshfields Bruckhaus Deringer LLP

 

Introduction 

Under German law, there are no general provisions for class actions in the formal sense of this term. Therefore, even if cases involve (very) similar legal and factual issues, they will usually be tried in multiple proceedings and lead to multiple judgments which are only binding on the individual parties of the case.    

 

The KapMuG

The only exception to this rule is the German Capital Market Investors’ Model Proceeding Act (Kapitalanlegermusterverfahrensgesetz, KapMuG), which came into effect in 2005. In essence, the KapMuG’s stipulates that certain factual and legal issues in capital-market related actions can be decided collectively in model proceedings concerning a model claim, which is chosen from several individual claims involving similar issues. 

 

Due to a ‘sunset clause’ the KapMuG was scheduled to expire by 31 October 2012. However, German lawmakers have recently decided to continue Germany’s only experiment with class actions at least for some time and have extended an amended version of the KapMuG until 31 October 2020. 

 

The KapMuG’s scope of application 

The KapMuG’s scope of application was and still is limited to specific types of claims. The 2005 version of the act only applied (i) to claims for compensation of damages due to false, misleading or omitted public capital markets information and (ii) to claims for fulfilment of contract, which are based on an offer pursuant to the Securities Acquisition and Takeover Act (Wertpapiererwerbs- und Übernahmegesetz). 

 

The amended KapMuG 2012 has an extended scope of application which also includes cases where capital market related information has been used in the sale and distribution of financial products, see section 1 (1) KapMuG 2012. Thus, the KapMuG now also applies to certain misselling claims brought against banks or brokers. 

 

Initiation of model proceedings under the KapMuG

The claimant or the defendant can apply for initiation of model proceedings by submitting model questions with a court of first instance, which have “significance for other similar cases beyond the individual dispute concerned.”, see section 2 (3) KapMuG 2012. This application will then be entered into the Complaint Registry. 
If at least nine additional applications for model proceedings are filed in similar cases within 6 months after announcement of the application, the competent Court of Appeals, i.e. not the court of first instance, will open the model proceedings, see section 6 (1) KapMuG 2012.

 

After the Court of Appeals has selected a model claimant, it will decide on the model issues raised by the case of the model claimant. Pending the resolution of the model proceedings, all other proceedings whose outcome depends on the decisions rendered in the model proceedings are stayed, see section 8 (1) KapMuG 2012. The claimants in the stayed proceedings, however, can join the model proceedings as “interested parties”. ”Interested parties” are vested with far-reaching rights whereby they are entitled to make submissions  and to introduce additional issues into the model proceedings, the latter subject to the court’s approval.  

 

The model order and its application in individual cases

At the end of the model proceedings, the Court of Appeals renders a model order with  uniform answers to the factual or legal issues raised by the model proceedings. The model order is binding upon all courts in which the proceedings have been stayed after the model proceedings commenced, see section 22 (1) KapMuG 2012. However, the model order does not resolve the individual cases, but is only binding with regard to the joint issues covered by the model order. Hence, each individual case will still have to be tried and decided on an individual basis by the courts of first instance. 

 

The model order may be appealed by all parties, including “interested parties”.

 

Legal costs

In principle, the allocation of legal costs is determined in accordance with the German “loser pays”-rule. However, in light of the participation of multiple claimants in the model proceedings significant modifications to the general rule apply. If the model claimant loses the model proceedings, the legal costs will be shared pro rata by all the claimants (depending on the value of the respective claims). 

 

Court-approved settlements

One of the most important amendments of the KapMuG 2012 relates to the requirements for court-approved settlements in the model proceedings.
Under the KapMuG 2005, a settlement between the model claimant and the defendant could only become binding if all “interested parties” consented to the settlement, see section 14 (3) KapMuG 2005. As a result, it was virtually impossible to conclude settlements in model proceedings.

 

The amended KapMuG 2012 now provides that a court-approved settlement will become binding, unless at least 30 percent of the “interested parties” opt out from the settlement within a month after the settlement has been concluded and served upon the parties, according to section 17 (1) and section 19 (2) KapMuG 2012.

 

 

England & Wales 

By Richard Harrison, partner at Laytons Solicitors LLP

 

Introduction

The English system makes little specific provision for collective litigation. We do not have “opt out” class certification as in the states and we do not, as yet, have workable percentage based contingency fee agreements although we are working on means to provide such an option.
What we do have is ad hoc arrangements for specific circumstances and a labyrinthine system of costs shifting and costs recovery. With the right case, and with lawyers with appropriate skills, the system can nevertheless be made to work.

 

Classification

The main types of collection action can be categorised as follows:

• Multiple parties joined to a single Claim Form
• Multiple claims (and separate Claim Forms) managed under a “group litigation order” (“GLO”)
• Representative proceedings (including investor or derivative actions)

 

All procedures are governed by provisions in the applicable Civil Procedure Rules 1998 (as amended and various Practice Directions (“CPR” and “PD” respectively).

 

Multiple parties: Single claim form 

The rules regarding the single claim form are found in CPR 7.3 and 19.1-19.5.

 

There is no limitation on the type of claims which can be commenced by a group of parties with the same interest. There is no restriction to consumer protection claims: all that is needed is a common interest in seeking appropriate relief against a defendant or group of defendants.

 

Such an action will depend on the class of claimants being identified, managed and consenting to be parties. The Court will decide, in the exercise of its extensive “case management” powers whether the claims can be disposed of “conveniently” in the same proceedings. The Court will have regard to the “overriding objective” which requires that cases be disposed of “justly and at proportionate cost.”

 

“Proportionate cost” is not one of the most precise phrases in the English language and our “Civil Procedure Rules” and recent amendments to them promise to spread the debate yet wider.

 

The Court uses its case management powers to determine whether the addition, removal or substitution of parties is desirable in accordance with the overriding objective.

 

The most significant risk involved in a multiple party claim is exposure to an order that the claimants pay the costs of the defendants if the claim is unsuccessful. The whole group is in theory jointly and severally liable for all the costs incurred which, in a large claim, will be significant.

 

It is possible to lay off much of this risk with suitable insurance policies but the market is presently in a state of flux since recent reforms have prevented the premiums for such policies being recovered from an unsuccessful defendant.

 

In summary, once common interest is established the issues involve project management, communication, funding and risk.

 

GLO’s 

The group litigation order is a case management tool which enables the common issues in separate claims to be heard together and disposed of in one set of proceedings. The GLO is codified in CPR 19.10 -19.15; PD 19.

 

It is a matter for the court’s discretion and not the parties’ right to have proceedings managed under such an order. The court will make its decision based on an analysis of the extent and overlap of the “common or related issues” of fact and/or law.

 

Such an order provides for directions about the establishment of a group register on which the claims to be managed are entered. It will specify the issues which a claim must raise in order to be dealt with under the order. It will select particular claims as test claims to deal with generic issues.

 

There is no obligation on a claimant to join a GLO. However, if he does choose to bring proceedings in parallel, the court can use its case management powers to manage the separate proceedings in a way that takes account of those whose claims are being managed under the GLO.

 

Costs are dealt with on a more flexible basis: “common” costs are divided between the group and charged on a “several” (not a joint) basis and individual costs are payable by the party who caused them to be incurred.

 

Representative claims 

The rules regarding representative claims can be found in CPR 19.6 and 19.7

 

Procedures exist for one or more claimants to represent a number of others.

 

The main provision in CPR 19.6 enables a claimant or several claimants to be nominated to represent others who have the same interest. This is to avoid multiplicity of proceedings. A judgment or order in such a case is binding on all those represented. However, to prevent injustice and to ensure an unwilling representee can challenge the position, a judgment cannot be enforced against him or her without a court order.

 

Once again, there is no restriction in the type of claims which may be made subject to the overall control and management of the court.

 

There is a separate procedure in CPR 19.7 enabling representative claims in relation to (a) the estate of a deceased person, (b) property subject to a trust and (c) the meaning of a document in circumstances where the person or people to be represented are difficult to ascertain. Under this procedure, a court order is necessary.
Those represented are not individually liable for costs incurred by a successful defendant unless the court is persuaded to make a third party costs order against them in the interests of justice.

 

Any settlement agreement will need to consider the position of unnamed represented parties.

 

The future

A movement toward full US style class actions and contingency fees is unlikely. The Companies Act 2006 (Part 11, section 260-264) has introduced scope for derivative actions by groups of shareholders on behalf of a company which has been mismanaged but such claims will require permission from the court and be subject to tight control, cf. CPR 19.9 and PD19C.

 

Recent legislation has opened the way for a type of contingency fee known as “damages based agreements” (DBA’s). These follow the “Ontario model” whereby a proportion of costs is shifted to the unsuccessful party and recovered in the usual way; the balance of the valid contingency (which will be tightly regulated) will be paid out of recovered damages.

 

The precise regulations are under discussion and it remains to be seen how attractive such a regime is going to be. The government is presently proposing to ban DBA’s in collective competition actions.

 

The entire issue still remains under discussion on a European level and the timing of any progress is of course, in the usual European way, uncertain.

 

 

Greece

By Sotiris Felios, FELIOS & ASSOCIATES 

 

Introduction 

Class actions, in principle, are not allowed in Greece.

 

According to art. 68 of the Greek Code of Civil Procedure, individuals cannot sue on behalf of a class. In other words, judicial protection is granted only to a person with direct legal interest.

 

However, a kind of class action is permitted and more specifically art. 10 of Law 2254/1994 grants consumers’ associations the right to sue for protection of collective rights. 

 

Protection of consumers

Actions of this nature are used by consumers’ associations to protect their rights in areas such as consumer credit, terms and conditions of contracts, organized trips, advertising, distance selling etc.

Not all consumers’ associations have the right to sue but only those who have at least five hundred active members and have been registered with the Registry of Consumers Union for at least a year. 

 

The consumer association may file any kind of action for the protection of the general interests of consumers. The interests of consumers do not concern one sole consumer but entire categories of them-indefinite number of persons- who are holders of the same legal goods or interests.  As a result, consumer organizations may seek legal protection aiming to protect collectively an indefinite number of persons and not the personal judicial protection of individuals. The judgment issued regarding class actions is res judicata for every person even if they did not participate in the procedure. 

 

Classification 

Under the above mentioned framework, there are four types of class actions that can be brought by the consumers’ associations. 
a)  action in order to stop any supplier behaving unlawfully. Such an action, may take place even when the supplier plans his unlawful conduct.
b) action requesting reparation for moral prejudice. In such case, the court in order to award indemnification, takes into consideration for each amount the extent to which public order is harmed due to the unlawful conduct, the size of the defendant supplier’s business, the annual turnover, as well as the needs for the general and specific prevention (of such behavior).
c)  interim measures(injunctions) in order to secure consumers’ interests until an enforceable decision has been granted.
d)  action in order to  recognize the right of restitution of the damages that the consumers had suffered due to the supplier’s unlawful conduct. This last type of class action was entered into force in accordance to Law 3587/2007. 

 

The class action must be filed within a six month period from the date the unlawful conduct has occurred. The procedure which follows the filing of the class action is a procedure governed by easier rules of proof. 

 

The Court of First Instance of the residence or the seat of the defendant has exclusive jurisdiction for the hearing of the class action.

 

Joinder of claims (collective class actions)

In the Greek legal system there is no necessary joinder of claims. Joinder of claims is necessary only in small claims. 

 

However, the Court on its own motion may order the joinder of more pending claims according to art. 46 of the Code of Civil Procedure.

 

Joinder of claims may appear in the following forms: joinder of self-standing claims, joinder of claims in the alternative, subsidiary joinder and is allowed in cases when: the joined claims are not incompatible, when they belong to the subject matter or territorial competence of the seized court, when all the joined claims can be adjudicated through the same type of proceeding, when they do not unduly delay, inconvenience, or embarrass the proceeding.

 

The above claims aim to achieve a total regulation of many personal-individual claims with the same legal or substantial ground. In such cases, one person or more of a wider group that are connected due to the same legal or substantial ground, may proceed to trial without the necessary participation in trial of the others. The res judicata applies to all persons included in the group. 

 

 

Hungary

By Sándor Németh, SZECSKAY Attorneys at Law

 

Introduction

Class actions, as forms of collective lawsuit, within the common law meaning of the phrase, are not known and acknowledged in Hungary, however, tools that are similar to class actions in their aim and rules are known and used. 

 

Public actions aim the protection of all consumers by ensuring that in case a term in a general terms and conditions is found invalid within the framework of a public action, all consumers are protected against that term, while the joinder of actions makes it possible to handle together claims that are closely related. 

 

Public action (Actio Publicis)

The legal tool which is the closest to the idea of class action is the public action (actio publicis), in the framework of which organisations and authorities may challenge unfair terms and conditions used in contracts (to be) concluded with consumers. Authorities and other bodies entitled to initiate such actions are expressly empowered by law (e.g. consumer protection authorities, chambers of commerce). These actions usually aim to serve the protection of the interests of the consumers. 

 

Please note that based on law no decision of the contractual parties is needed for the filing in of a public action as the authority or other entity has the right to initiate the public action irrespective of whether any consumer would consent to it or not. The decision rendered by the court (e.g. with regard to the unfairness of a term) has a binding effect, and the decision shall be followed in relation to all consumer contracts of the defendant containing the unfair term. 
In case of public actions there is usually only one organization or authority as claimant, and one specific service provider (e.g. bank, common utility provider, etc.), or other actor of the market, who uses general terms and conditions with its consumers, as defendant. However, the relevance of these public actions is that the result usually affects thousands of consumers. 

 

The question of effectiveness of public actions grew with the recent economic trends. Currently financial service providers are in the focus of class action-like joinders due to the high number of disputes relating to consumer loans granted on the basis of foreign exchange (in particular CHF loans). It is a critique against public actions, that the system was unable to protect the consumers (at least partly) from the risks of foreign currency-based loans.

 

Joinder of actions   

The joinder of actions primarily aims to help the effective and fast decision making process of the courts, but in some of its features it is similar to the class action.
Detailed rules of the joinder of actions can be found in Sections 51-53 of Act III of 1952 on the Code of Civil Procedure. Beside the conditions of initiating or creating a joint action, the effects of the participating parties' conduct on the situation (rights and obligations) of the others and on the outcome of the procedure, are also regulated. 

 

It can be stated that the joinder of actions is only possible if the outcome of the procedure affects all parties who are to be involved in the action, or the claims to be determined are closely connected.  According to the rules applicable, two or more plaintiffs may unite in an action and two or more defendants may be jointly charged if 
(i)     the subject matter of the litigation is a common right or a common liability that can only be resolved in unity, or if the ruling would affect all defendants, even those not appearing in court; 
(ii)       the claims under litigation originate from the same legal relationship; 
(iii)     the claims under litigation involve the same cause of action and legal basis, and the same court is recognized to have jurisdiction with respect to all defendants.

 

Please note that the joinder of claims is mandatory in some cases, while in other cases the court decides on the possibility of joinder on a case-by case basis.  

 

The conduct of the participating parties during the procedure may have different effect on the situation of the others involved, depending on the type of the joinder of action. In case of a joinder falling under point (i) the actions of any co-defendant (other than settlement, recognition and waiver of a right) shall be binding upon any co-defendant who is in default with regard to any deadline, time limit or act, provided that he/she has not made up for his/her omission subsequently. However, if the actions or arguments of the co-defendants differ from each other, the court shall assess them in light of other data and information from the proceedings.
In other cases (points (ii) and (iii)) any action or omission on the part of either co-defendant may not serve to the benefit or detriment of the other co-defendants, but any co-defendant who is not directly affected shall be advised where a writ of summons is issued for a specific deadline, as well as of any decision on the substance of the case.

 

Notwithstanding the above, the participating parties act independently of each other, they usually have their own legal representatives, but in case the parties expressly agree, it is not excluded to give a power of attorney to the same legal representative and thus unify their representation as for the claim or defense. 
The outcome of the procedure for the participating parties may vary, meaning that a decision rendered with respect to one claimant/defendant does not automatically determine the legal fate of the other participant's claims and/or defenses. The court makes its decisions on a case-by-case basis, thus there is no binding precedent. However, please note that it is likely that the court – in case the facts are the same or similar – will decide in the same manner in similar cases. 

 

 

Spain

By Roldán Martinez Castejon 

 

Class actions* 

Collective actions are fundamentally regulated in articles 6.1.7º, 7.7, 11, 13.1, 15, 76.2, 78.4, 221, 222.3, 256.1.6º and 519, all of the Civil Procedure Spanish Law (LEC) 1/2000, of 7 January.

 

Protection of consumers

Class actions can be defined as the type of actions that allows for an association of consumers and users, a group of affected, or a legal entity formed to protect consumers and users, to apply to the court for compensation for collective damages by the same damaging event.

 

Scope of applicability 

LEC regulates class actions to compensate the damages suffered by consumers and users as a result of damaging acts, cf. art. 15.1 LEC. Therefore, the only collective who can benefit from the procedural system of class actions are those that meet the legal requirements to qualify as a "consumer" or "user", that is: to be final recipient of goods or services not integrated in a subsequent processing or commercialization. 

 

Damaging Event or Act

The term "damaging event" used by the LEC, should be interpreted broadly. In this way, class actions may be exercised to obtain compensation or indemnity for any kind of damages: economical and personal, including moral damages. There is not a quantitative limit for its exercise. 

 

Basis of liability 

It may be contractual responsibility (e.g., an amount illegally charged by the company providing telephone services), or non-contractual responsibility (e.g., damage caused by a defective product to people who did not acquire it).

The question of civil liability ex delicto can be part of a class action even though the action is part of a criminal process. The question regarding damages based on civil liability can be postponed to be dealt with in a civil process by itself. 

In the case of a damaging event caused by the Government Administration, (State patrimonial liability) the provisions of articles 139-142 of the Law 30/1992, of 26 November, on the Legal Regime of Public Administrations and the Common Administrative Procedure shall be applied. 

 

Accumulation of Actions 

In Spanish law, the class action is compensatory in nature; however, in many cases it may be preceded by the application for annulment. For example, of unfair terms, or declaration of disloyalty of an act, or declaration of illegality of advertising. This raises the question of the possibility of accumulating the claims in the same process. As long as the claims fulfill the procedural requirements of the law (articles 71-73 LEC), accumulation shall be considered viable. In the case of accumulation of different types of claims, each action will be governed by its own rules.  

 

Legal standing 

The legal standing of affected groups is subject to two requirements:

1. The individuals who form the group should be determined or easily determinable which the group has to prove. To obtain the determination of the collective to prepare the trial it is possible to exercise the preliminary diligence referred to in Article 256.1.6 ° LEC, asking the judge for the determination of the group.
2. The group has to be constituted by the majority of those affected people. The group has the burden of proving its constitution as the majority. The constitution of the group is pre and extrajudicial, i.e. before the process and out of it.

The collective has no legal personality. Moreover, the affected group can bring a class action only if members of the group are perfectly determined or easily determinable, cf. art. 11.2 LEC, i.e., only in case of collective or defined interests.

 

Consumers and User Associations 

Consumer and users associations, as legal persons, have adequate legal standing, cf. art. 6.1.3° LEC, and they can initiate a class action whether the damages are determined or easily determinable, cf. art. 11.2 LEC. If the plurality of damages is indeterminate or difficult to determine, cf. art. 11.3 LEC, the interests protected, are legally denominated as diffuse or undefined interests.

 

The legal standing of consumer and user associations, in the case of article 11.3 LEC, (diffuse interests) is, first, exclusive, in the sense that affected groups and entities legally constituted for the protection of consumers and users are not entitled to the exercise of a class action on defense of a plurality of consumers indeterminate or difficult to determinate. Secondly, in the case of diffuse interests (consumers indeterminate or difficult to determinate), legal standing is restricted to associations that "in accordance with the law, are representative", according to art. 11.3 in fine LEC.

 

Entities Legally Constituted for the Defense and Protection of Consumers and Users

If the collective damages are determined or easily determinable, the article 11.2 LEC gives legal support to exercise class actions to "legally constituted entities whose purpose is the defense and protection of consumers and users." Legal support is recognized to these entities concurrently with the affected groups and associations of consumers and users, representatives or not.

 

Concurrence of Legal Standings 

The legal support conferred in favor of groups, associations and entities to exercise class actions does not preclude the individual exercise of an action for damages by the individual who has suffered harm, or by several of them that, cumulatively and in the same process, request its compensation. That is, there is no litis pendens between a class action and an individual action.

 

Announcement of the process

The article 15 LEC provides an advertising mechanism for class actions, in order to join the process concerning to the same damaging event. So, in general, in any process initiated by the exercise of a class action, and whoever has been the promoter, it will be called to take part in the process to those who have the status of damaged. This announcement will be made by the Court publishing the admission of the claim in media with diffusion in the territory in which the damage of those rights or interests occurred, cf. art. 15.1 LEC.

 

The effects of this announcement are different depending on the class action exercised, cf. art. 15 LEC:

 

1.    Action regulated in article 11.2 LEC (damages determined or easily determinable): 
Damages may act at any point in the process, although they will not make the procedural acts that have been completed, according to art. 15.2 LEC. The announcement does not suspend the proceeding. Article 15.2 LEC also requires the presentation of the claim to all concerned. This communication does not exclude the announcement, but are compatible and successive operations: first, communication, second, the announcement.

 

2.    Action regulated in article 11.3 LEC (damages indeterminate or difficult to determine): 
The announcement suspends the proceedings for a period not exceeding two months to be determined by the Court. The process will restart after this period with the participation of all consumers or users that, in response to the announcement, appear in the process. The individual appearance of consumers or users shall not be allowed subsequently by the judge, notwithstanding the fact that these may ask for their rights or interests in accordance with the provisions of articles 221 and 519 LEC, cf. art. 15.3 LEC.

 

In both cases, consumers and users may, instead of intervening in the process opened by the exercise of a class action, exercise their claims for compensation outside the collective process.

 

Enforcement of judgment

The judgment issued in a process of class actions, that recognizes specific compensation to a consumer or user individualized and determined, shall be enforceable, according to article 517.2.1°. If the judgment has not determined individually the damage, but has only indicated "the data, characteristics and requirements necessary to demand payment", cf. art. 221.1.1 ª, second paragraph, it will be regulated in the enforcement process by article 519 LEC when damages will be individualized and will set the corresponding compensation. Article 519 LEC allows the application in favor of third parties not litigants (also damaged), the beneficial effects of a judgment issued in the process of class actions.

 

* Notes obtained from the study conducted by Mr. Juan José Marín López, Professor of Civil Law at the University of Castilla-La Mancha: "Class Actions in Spanish Law" (Barcelona, July 2001).

 

 

France

By Bernard Cahen, Cayol Cahen & Associés

 

Regarding the "class action", the situation in FRANCE is the following one: the Minister of the Consumption presented, on May 2nd, 2013, a project of bill which should balance the relations between consumers and companies.  

 

This project was not presented to the Parliament yet.

 

It stretches out the creation of a group action by which consumers can initiate a collective action before the civil justice in the style of the American "class action" to obtain reparation, in case of damage linked to contracts of consumption or anticompetitive practices.

 

The procedure will be led by one of the 16 approved associations of consumer’s protection, except the Lawyers, and will aim exclusively at the repair of material damages. 

 

The Judge will establish the responsibility of the Company questioned as well as the modalities of compensation. 

 

The Minister mentioned that this action exists in 7 European countries.

 

It will exclude the reparation of ecological, moral or physical damages.

 

The text plans that, only the consumers which will clearly have expressed the wish, will be represented within the framework of a procedure initiated by the group action.

 

The procedure would be the following one:

• The consumers' association approved at the national level would act in justice for a group of consumers victims of a breach of the same professional;
• The Judge would establish the responsibility of the questioned professional and would define the modalities of the compensation and would order the measures of information of the consumer potentially concerned towards the professional;
• The damaged consumers would signal themselves to the condemned professional or to the Association of consumers and would obtain each repair;
• The consumer would keep the possibility of introducing, on his own, a direct action.

 

This action makes the subject of numerous criticisms, because there is already, in the French Code of the Consumption, a collective action for reparation of damage to which consumers' Associations resort very rarely.

 

The monopoly given to consumers' Associations is in opposition with the projects of the European Commission.

 

Besides, the only reparation of material damage seems completely insufficient.

 

Naturally, the Bars reacted thoroughly against the exclusion of Lawyers to introduce these actions.

 

In reality, the text was presented on June 27th, 2013 to the Assembly “en première lecture” with a very little ambitious text.

 

It will be advisable to check what will become this text in front of the Senate.

 

Currently, the situation is thus not absolutely settled in FRANCE.

 

 

Italy

By Studio Legale Scassellati Sforzolini – Mazzi (Perugia), Studio Legale Giorgio Tarzia e Associati (Milan), Studio Legale Valobra Cherchi (Rome)

 

Introduction of the class action in Italy

The class action (defined in Italian “azione collettiva risarcitoria”) was introduced for the first time in the Italian legislation by the Law No 224/2007, but the entering into force of the class action was postponed and, thereafter, the law was modified several times.

 

The modifications of the law were aimed to make easier the filing of said action.

 

The applicable provisions is, at present, article 140bis of the Consumer Code (said article was included in the Consumer Code by the Law No 99/2009 and was recently modified by the Law No 27 of March 24, 2012): the inclusion of the rule in the Consumer Code immediately clarifies that the purpose of the law is to better protect consumers’ rights and to make easier for them getting compensation for damages.

 

Protection of consumers and user

 

Persons entitled to file class actions
a) Consumers and users (“consumatori ed utenti”);
b) Consumers’ and users’ Associations.

 

Even though the law refers to consumers and users, the meaning of said terms is the same, as clarified in Art. 3 of Consumer Code: namely natural persons, who act as private persons and outside the scope of business activities (“any individual who is acting outside trade, business or professional purposes”).

Art. 140 bis does not specify the minimum number of consumers needed to proceed with a class action.

 

Conditions for filing a class action

The class action is aimed to ascertain the responsibility and to determine the damages to be assessed or the reimbursement to be made in favour of consumers.

 

The cases for which the class action is provided are the following:

1. contractual rights of a plurality of consumers, who have an identical position towards the same enterprise;
2. uniform (or homogeneous) rights belonging to consumers of a product or service towards the same enterprise (independently from the existence of a direct contractual relationship);
3. uniform (or homogeneous) rights for clarifying damages suffered by consumers in consequence of unfair or unlawful commercial practices.
4. In short, the class action is mainly established for claiming damages arising from contractual relationships, while damages from tortious acts are limited to damages caused by defective products or damages caused by unlawful competition or commercial practices.

Class action against Public Bodies

The Legislative Decree No 198/2009 introduced in Italy a special class action, which may be filed against all Italian Administrative Authorities (Central Government, Regions, Local Municipalities, etc.).

 

The purpose of this class action, however, is more limited than the ordinary class action, because it is aimed to create a non-judicial way to notify to the Public Authorities possible defaults in the services supplied to consumers for the purpose of inducing the Administrative Authorities to intervene and eliminate said defaults.
Such actions towards the Administrative Authorities are available to Consumers having Italian nationality and to Italian Consumers’ Associations.

 

In short, said action is like an official notice to the Administrative Authorities about a default in rendering services in order to allow said Authorities to cure such a default.

 

If the Administrative Authorities do not eliminate the default within 90 days, a formal appeal may be filed before the Administrative Court, which at the end of the proceedings may order to the Administrative Authorities to cure the default.

 

The above mentioned procedure does not provide the possibility for the claimants to obtain damages, which, however, can be petitioned by filing a different action before the ordinary Court.

 

Modalities for joining the class action

Once the class action is instituted, the consumers may join the proceedings in a very simple way, namely by a written statement, send to the competent Court also by certified e-mail or fax, without the need of a lawyer: the appointment of a lawyer is not requested because the persons who join the class action do not have powers in the legal proceedings, the conduct thereof being in the hands of the promoter, the promoter being the person who started the class action. The promotor is the only person entitled to exercise all procedural powers in the proceedings, so that the legal strategies are decided exclusively by the promoter and also the right of appeal against the Court decision belongs to the promoter.

 

The filing of the request to join the class action implies the waiver to file a separate individual claim. The consumer may also delegate to a Consumers’ Association his defense in the class action.

 

Italy, therefore, choose the so called “opt in” system and, accordingly, the decision on the claim action is binding only for those who formally joined the class action.

 

Filing the class action and related procedure

The writ, by which the class action is filed, must be served upon the defendant and also to the Public Prosecutor (who is entitled to intervene at the hearing in which the admissibility of the action is discussed) following the ordinary procedural rules.

 

The Judge at the first hearing must decide if the class action is admissible (saving the possibility to suspend the proceedings in case of investigations pending before an Administrative Authority or before an Administrative Court).

 

The Judge may dismiss the class action in the following cases:

• If the claim is clearly groundless;
• If there may be conflict between the person who filed the class action and the persons who should join the class action;
• If the claimant, who filed the class action, is deemed not qualified to properly defend the interest of all concerned parties.

 

The decision of the Judge may be appealed within 30 days before the Court of Appeal and the latter decision may be appealed before the Supreme Court.

 

In the event the class action is considered admissible, the Judge shall issue an order establishing the following:

• terms and modalities of the most appropriate form of notice to communicate to the public the admission of the class action, so that those belonging to the class might join the action. Compliance with the above requirements about the notice to the public is a condition for the prosecution of the class action;
• a final term, not longer than 120 days (starting from the date in which the class action is communicated to the public) within which the persons falling into the category of the consumers qualified to join the action must file with the Court their application to join the proceedings (“opt in”).

 

For the promoter, the effects of the prescription (namely, the interruption of the term to exercise the right) begin to run from the date of notification of the claim, but for those who joined the class action (the claimants) the effects of the prescription begin to run from the filing of the adhesion to the class action. Claimants who choose not to join the class action keep their rights pursuant to the general rules of law and can start an individual action in any time before the expiration of the term of the prescription. This means that their individual claim will not be affected by the term fixed by the court; they will only be prevented from joining the class action. 

 

Decision of the Court

If the action is granted, the Court may either determine immediately the amount of damages due to each person who joined the class action or may establish the criteria for assessing the damages, granting to the parties a term not longer than 90 days to reach the agreement on the amount of damages.

 

At the expiration of said term if no agreement has been reached, the Court itself determines the amount of damages due to the concerned parties.

 

The decision of the Court is enforceable after 180 days from its publication. The ratio of this rule is to give time to the defendant to pay all claimants who joined the class action. The decision is binding only for those who joined the class action: those who refrained from joining the class action are free to file individual claims within the deadline of the prescription. The decision of the First Degree Court (Tribunal), may be appealed following the ordinary procedural rules, before the Court of Appeal and the decision of the Court of Appeal may be appealed before the Supreme Court.

 

Settlement agreements

Settlement agreements and waivers are binding only for the persons who expressly accepted them. In other words, a person who joined the class action is not obliged to accept a settlement, even if the latter was accepted by the majority of the persons participating at the class action.

 

 

The Netherlands

By Bergstoop & Sanders

 

Introduction

Recently in the Netherlands, public scandals involving Royal Dutch Shell, World Online, DES and the DSB Bank have brought to the attention the importance of the need for collective redress. The Dutch legislator has provided for two models in order for people affected by infringements and wrongful acts to no longer have to file claims individually but to be able to join forces with other affected individuals. 

 

Under Dutch law there are two separate, independent procedures to file a collective action. 

 

One is the collective action procedure in which one or more organizations which represent a group of individuals with a common interest to whom damage was allegedly caused, file a claim on their behalf. This procedure does not, however, allow for the representative organizations to file a claim for damages.

 

The other procedure is based on the Wet Collectieve Afwikkeling Massaschade – Collective Settlements Act. This Act provides for collective redress in mass damages on the basis of a settlement agreement concluded between one or more entities, which represent a group of affected individuals, and one or more allegedly liable parties. 

 

First, the procedure of collective action will be discussed, second that of the Collective Settlements Act. Third, the two procedures will be compared and fourth the jurisdiction of the Amsterdam Court of Appeal will be discussed.

 

Collective Action Procedure

Regarding the collective action procedure, the background of the rules will be discussed, the conditions for filing a collective action, the possibility to object, the types of legal claims that can be filed and the scope of the Court’s decision.

 

Background

The rules regarding the collective action procedure in the Netherlands were incorporated into the Dutch Civil Code (“DCC”) by law of 6th April 1994 and came into force on 1st July 1994. The rules of the procedure can be found in Article 3:305a DCC.

 

The rules were introduced so that representative organizations could act in situations where an individual may have little interest in the matter, but where as a whole severe interests are at stake. Additionally, the underlying idea was that representative organizations have a lower threshold for accessing justice than individuals do. 

 

Conditions for filing a collective action

When filing a collective action a number of requirements must be fulfilled in accordance with Article 3:305a(1) DCC. Firstly, the representative organization which files the claim may be a foundation, cf. Articles 2:285-305 DCC, or an association, cf. Articles 2:26-52 DCC, but it must have legal capacity. Under Dutch law, a foundation has per definition legal capacity, whereas an association only has legal capacity if its articles of association are embodied in a notarial deed. 

 

Additionally, although the organization acts on behalf of a group of affected individuals, the organization must file the claim on its own behalf, not as a representative of – or on behalf of – others. The organization must thus have its own interest in the collective action: It cannot start a procedure with the sole purpose of protecting the interests of others. It must also be clear from the articles of association of the organization that the entity aims to protect the interests which are at stake in the collective action procedure. 

 

Under certain circumstances, for the claim of the representative organization to be admissible, it must first attempt to attain its goal by way of consultations, cf. Article 3:305a (2) DCC.

 

The interests of the group of affected persons must also be similar. This similarity of interests allows for the bundling of actions into one lawsuit, and thus for an efficient and effective protection of legal rights. In a Dutch Supreme Court case it was decided that even if certain individuals, whose interests are protected in a collective action, do not consent to the claim or even adopt an opposing view, the claim can still aim to protect similar interests. 

 

The possibility to object

The representative organization cannot base its claim on certain conduct when one or more individuals, directly affected by the conduct, objects, cf. Article 3:305a (4) DCC. This objection, however, does not mean that the action is excluded from proceedings. There may be other cases in which the same wrongful act forms the legal ground, so that legal action can be based on such a case (provided that those involved in that case do not make use of the possibility to object). 

 

Types of legal claims

It is possible to institute almost any legal claim available under Dutch law: performance of an obligation, reversal of a decision, etc. According to Article 3:305a (3) DCC, this procedure does not, however, allow for the representative organization to lodge a claim for damages. As is stated in the parliamentary history: “the question if and to what extent a person against whom tort has been committed has suffered damages, can only be answered on an individual basis and is therefore not suitable for a collective action procedure”. 

 

Collective actions can be employed to obtain declaratory judgments, in which the Court confirms that one or more respondents committed a wrongful act and is liable to pay damages. The affected individuals will then still need to file damage suits in a follow-up procedure, in which the declaratory judgments obtained in the collective action can be relied on. The representative organization could also conduct legal proceedings on behalf of the individuals by virtue of an authorization or a mandate, provided that the affected individuals express their consent. 

 

Despite the fact that no damages can be claimed on the basis of Article 3:305a DCC, collective actions can be used to seek injunctions against conduct that is perceived to be harmful to a common interest, e.g. the environment and health.

 

Scope of the Court’s decision

The decision of a Court on a collective action procedure has no consequences for an individual whose interest was protected by the claim but who opposes its effect, cf. Article 3:305a (5) DCC. An affected party is only given this opportunity in case the performance is divisible. This means that the amount of performances must be equal to the amount of individuals whose interests are looked after in the collective action. When the Court’s decision is specific to a performance that affects all interests in the collective action, for example maintaining a clean environment, then individual withdrawal from the effect of the Court’s decision is not possible. Excluding the effect for one individual would in that case defeat the purpose of having a collective action procedure. 

 

Collective Settlements Act

Because collective actions cannot be used to obtain damages, the procedure is limited. This is why the Collective Settlements Act came into force on 27th July 2005. The Act led to the introduction of Articles 7:907-910 DCC and Articles 1013-1018 of the Dutch Code of Civil Procedure (“DCCP”).

 

Regarding the Collective Settlements Act, discussed will be its purpose, its procedure and the possibility to opt-out.

 

Purpose

The Collective Settlements Act presupposed that an understanding has been reached between one or more entities which represent the interests of affected individuals and one or more allegedly liable parties. The criteria for such an entity under Article 7:907 (1) DCC are similar to those under the collective action of Article 3:305a (1) DCC. If such a settlement agreement has been concluded, then the Collective Settlements Act may provide for collective redress in mass damages.

 

Procedure

The parties to the settlement agreement may petition the Court to declare the agreement binding upon all its members. According to Article 7:907 (2) DCC, the settlement agreement must describe as precisely as possible the group of persons who are a party to the agreement and are eligible to receive compensation, the common ground between the parties, the basis for the compensation offered under the agreement and how individuals can obtain payment under the settlement.

 

According to Article 1013 DCCP, the Court of Appeal in Amsterdam has the exclusive jurisdiction in this procedure. The Court will reject the request if the agreement does not fulfill these requirements. Furthermore, the Court will consider whether the compensation offered in the settlement agreement is fair, considering the amount of the damages, its possible causes and the simplicity with which the compensation can be obtained, cf. Article 7:907 (3) DCC. 

 

If the Court grants the request and the decision is irrevocable, the agreement binds all persons covered by its terms and represented by the representative organization, even those affected individuals that were not involved in the realization of the settlement agreement, cf. Article 7:908 (1) DCC. Such individuals bound by the agreement can then no longer file a claim against the settling party.

 

Possibility to opt-out

 

What differentiates Dutch law from that of other European Member States is that it expressly allows individuals the possibility to “opt-out” within a specific period of time, cf. Article 7:908 (2) DCC. If the Amsterdam Court of Appeal declares the collective settlement agreement binding, the decision must identify an entity which individuals must notify if they do not wish to be bound by the agreement, cf. Article 7:907 (2) section f DCC. The “opt-out” period is determined by the Court, but cannot be less than three months.

Any such person having opted out retains his right to initiate individual proceedings against the liable party. An individual that does not make use of the opt-out option can no longer file a claim for damages against the (alleged) liable party after the Court’s decision has become irrevocable. 

 

Comparison 

The collective action procedure of Article 3:305a DCC and the collective settlements procedure of Article 7:907 DCC are two separate procedures. Under the collective action procedure, entities representing large groups of affected individuals may obtain declaratory judgments in which the Court confirms that the individuals were victims of harmful conduct. Under the Collective Settlements Act, a settlement agreement is presupposed, whereby its parties may request the Amsterdam Court of Appeal to declare it binding on all persons to whom it applies according to its terms. 

 

Parties may use the collective action procedure in order to reach a settlement agreement. The Collective Settlements Act then creates an opportunity for parties to extend the scope of this settlement agreement to similarly situated claimants. A collective action can thus serve as a first step in the formation of a collective settlement, but it is not a prerequisite for it to do so. The procedures can also be used independently of one another. 

 

An important difference between the two procedures is that Article 7:907 DCC applies to all individuals that can be considered to be part of the collective action (unless use is made of the opt-out option), whereas the collective action of Article 3:305a DCC only applies to those affected individuals that have expressly joined the collective action. 

 

The most important difference, however, is that the Collective Settlements Act allows for a representative organization to file a claim for damages.

 

Jurisdiction of the Amsterdam Court of Appeal

In the Netherlands, the Amsterdam Court of Appeal has the exclusive jurisdiction in the Collective Settlements procedure. The Court has generally assumed jurisdiction in cases with close connections to the Netherlands.  The Court, however, also assumed jurisdiction in the Converium case on 17th January 2012 for a settlement where as little as 200 of the approximately 12,000 affected shareholders were known to be domiciled in the Netherlands.  The case thus had very little connection to the Netherlands. The Court based its jurisdiction on the fact that at least some of the shareholders were based in the Netherlands, cf. Article 6 (1) Brussels I Regulation and on the fact that the representative interest groups that were filing the claim were Dutch, so that the settlement agreement would be performed in the Netherlands by distributing payments from a Dutch bank account, cf. Article 5 (1) Brussels I Regulation.

 

The Converium decision confirms that the Amsterdam Court of Appeal not only has jurisdiction to declare an international collective settlement binding on all class members irrespective of their domicile, but can also assume jurisdiction if the parties only have a limited connection to the Netherlands.  This decision led to discussion regarding the jurisdiction of the Amsterdam Court of Appeal in cross-border mass settlements. Some suggested that this would stimulate international claimants to bring damage actions before the Dutch Court of Appeal.  Others disagreed as the Amsterdam Court of Appeal in the Converium case did not assume jurisdiction for the procedure leading up to the settlement, but solely for the purpose of approving a collective settlement and for declaring it binding. 

 

What the decision does confirm, however, is that for multinational situated abroad, the Amsterdam Court of Appeal is Europe’s most attractive venue for facilitating international settlements, regardless of whether the settlement is the result of a collective action. In this respect, the Netherlands has a unique position in Europe. 

 

 

Poland

By Adwokat Anna Masiota, MASIOTA – ADWOKACI I RADCOWIE PRAWNI

 

Introduction

The class action was introduced in Poland with the Class Action Act of 17 December 2009 (Journal of Laws of 2010 No. 7 Item 44). 

 

To be considered a class action, a lawsuit has to pertain to claims of at least 10 individuals asserting claims of the same kind, based on the same or common factual grounds. 

 

A class action may only be filed with regard to claims for protection of consumer rights, product liability, and tort, with the exception of claims for infringement of personal interests. Monetary claims may only be asserted in a class action if the value of claims raised by each individual member of the class action has been unified in the context of the common circumstances of the case. Claims may be unified for sub classes composed of at least 2 individuals.

 

In class action suits involving monetary claims, the lawsuit may be limited to the request for the ruling establishing the liability of the defendant.

 

The Act introduces the requirement of express accession to the group pursuing the class action (the opt in model). In order to become class members, individuals must manifest their will by submitting a class action opt-in statement.

 

A class action may be joined by an individual who had filed an individual lawsuit against the defendant prior to the date when the class action is filed, for a claim that can be included in the class action. Instigating a class action does not prevent individuals who did not opt in to a class action or opted out of it from pursuing their claims.

 

Class Representative

A class action lawsuit is filed by a class representative who conducts proceedings in their own name but for all class members (plaintiff). One of the members of the class, or a district (municipal) consumer ombudsman can act as the class representative.

 

The right to bring a class action arises from statements of will of the class representative and the class members. 

 

Per request of more than half of the class members, the court may rule to change the class representative. Changing the class representative does not result in voiding the powers of attorney granted for the proceedings.

 

The plaintiff is required to be legally represented by an attorney or counselor at law, unless the plaintiff is an attorney or counselor at law.

 

The aforementioned Act stipulates that the fee agreement of the class action attorney may set the fee in proportion to the amount awarded to the plaintiff; however, the fee is capped at 20% of the awarded amount.

 

Class Action Suit

The competent court to examine the case in the first instance is the regional court with local jurisdiction. 

 

A class action suit must meet the general terms applicable to drafting of pleadings as set forth in Article 126 and 187 of the Act of 17 November 1964 the Civil Procedure Code (Journal of Laws of 1964 No. 43 Item 296). Moreover, it should contain the motion for the case to be adjudicated as class action, and it should list the circumstances that validate the class action nature of the case; and, in case of monetary claims, it should set forth the value of the claim pursued by each individual class or sub-class member, as well as list the terms of claim value unification. 

 

The class action suit must include the plaintiff’s statement acknowledging that they act as a class representative, as well as class members’ opt-in statements and consents to be represented by the class representative. The agreement between the class representative and the class action attorney stipulating the class action attorney’s fee should be attached to the suit.

 

Deposit

Per request of the defendant filed no later than with the first action pertinent to the litigation, the court may require the plaintiff to make a deposit, within a deadline of no less than a month, to secure legal costs. The value of the deposit is set by the court, taking into account the probable total costs to be incurred by the defendant. The deposit cannot exceed 20% of the dispute value, and it must be paid in cash. 

 

The defendant may request an additional security during the course of the proceedings.

 

Once the deadline by which the deposit is to be paid expires without effect, the court will dismiss the lawsuit or appeal per request of the defendant. 

 

Course of Litigation

First of all, the court decides during a hearing whether a class action is admissible within the limits defined in the lawsuit, and whether the individuals included in the list submitted by the class representative can be certified as class members.

 

If the class action is inadmissible, the court dismisses the lawsuit. A complaint may be filed against the decision to try the case as a class action.

Once the decision to try the case as a class action comes into effect, the court orders a notice to be published in a popular national newspaper announcing the class action and listing the court hearing the case, the parties, and the subject matter of the lawsuit. The notice should invite individuals whose claims can be included in the class action suit to opt in to the class action, and it should contain information on the terms of the class action attorney’s fees. The court sets an absolutely binding deadline for opting in to the class action. The notice requirement may only be waived if all interested parties have already submitted their opt-in statements. 
The defendant may file a complaint regarding the membership of specific individuals in the class or sub classes, within a deadline (of no less than a month) set forth by the court. Class memberships are established by a court decision.

 

If the class action is allowed and the class membership is established by court, the proper discovery (fact finding) proceedings are carried out in line with the provisions of the Civil Procedure Code. 

 

The court may refer the parties to mediation at any point during the litigation. 

 

More than half of the class members must consent to the class action to be withdrawn or to the claim to be abandoned or limited. The admissibility of each of the aforementioned actions is assessed by the court; an action may be deemed inadmissible by court if the facts of the case indicate that it contradicts the law or good practice; is aimed at circumventing the law; or constitutes a gross infringement to the interests of the class members. 

 

The ruling must name all class members, and, in case of a monetary claim, the amounts awarded to individual members. A binding court decision is effective in respect of all class members, and an excerpt from the court decision pertaining to the individual member constitutes an enforcement title. In cases involving non-monetary claims enforcement actions are brought per request of the class representative. 

 

Court Fees

The proportionate fee in proprietary interest class action cases amounts to 2% of the subject matter of the dispute or appeal; however, not less than PLN 30 and not more than PLN 100,000.

 

In proprietary interest cases where the value of the dispute cannot be determined when the action is brought to court, the court determines a temporary fee of PLN 100 up to PLN 10,000.

 

If a settlement is reached before a mediator during the course of the litigation, the court, ex officio, returns ¾ of the paid filing fee to the party. In the case of a consent judgment, the court repays 50% of the fee. 

 

The terms on which legal costs are incurred are governed by the Civil Procedure Code; whereas the terms pertinent to court costs, including court fees, are regulated by the Act on Court Costs in Civil Cases of 28 July 2005, as amended. 

 

 

Portugal

By Pedro Ghidoni de Pina, GDP – Advogados Associados

 

Introduction 

In regards to class action litigation a first distinction needs to be drawn between non- representative group litigation, the joinder of claims, and representative group litigation. The rules for non-representative group litigation, is set out in the Code of Civil Procedure and the Code of Administrative Procedure, while the rules for representative group litigation are set out in Law 83/95, of 31st August, which enacted Article 52 of the Constitution, known as The “Acção Popular” (Popular Action).
This type of collective or representative action for damages is available but not of very common use and it should not be compared to the somewhat different, but well renowned, class actions in the Anglo-American legal systems.

 

Joinder of claims (non-representative group litigation)

Within the cases where a joinder of claims is possible, a second distinction should be made between civil actions and administrative actions. As for the former, the joinder is the usual instrument of collective legal protection set out in Article 275 of the Code of Civil Procedure. It allows for the joining of actions when, having been proposed separately, these may be brought together in a single lawsuit where the conditions of the litisconsortium admissibility are confirmed.

 

The system of aggregation is limited due to the fact that the lawsuits must have identical grounds and requests. The measure allows the judge to practice “mass acts” so long as there is an element of connection between the actions and the combined performance of a procedural act or diligence simplifies the court’s task. This was the result of an increase in mass non-compliance such as debts of communication companies, consumer credit, etc.

 

It can also be set out as a claim under administrative procedure law. With regard to the special administrative action, the Code of Procedure in the Administrative Courts establishes that where more than twenty actions have been submitted regarding the same material relationship, or which may be decided by application of the same rules to identical situations, the court may determine, once the parties have been heard, that only one or some of these will be pursued and consideration of the others will be suspended. Once the decision pronounced and the test claim has been issued, the authors of the suspended claims may apply to the court for the effects of that decision to be extended to the case in which they are a party.

 

Class actions (representative group litigation)

Scope of Application 

The rules for representative group litigation, i.e. Popular Action, confer to any person or any association the right to claim the discontinuation or the prevention of infractions against inter alia public health, consumers rights, quality of life, environment or the public domain. Such right encompasses the right for the claiming parties to obtain compensation for the damages they have suffered, as a result of the violation of the above mentioned interests.

 

Popular Action includes, amongst other interests protected by the law, public health, the environment, quality of life, consumers’ rights, cultural heritage and the public domain. Basically, it applies when the protection of diffuse and collective interests, as well as homogeneous individual interests are at stake.

 

Any citizen, associations and foundations who defend the abovementioned interests, regardless of whether they have a direct interest in the claim or not are entitled to stand and submit such actions. Local authorities may also stand to defend the interests of all those who are officially resident in a determined district.

 

Models of claims

Popular action can take an administrative or a civil form. In the former there is a legal reaction to an act or omission of the Administration. In civil popular action, the injury or threat of injury is caused by a private individual, or by the State or other public body when acting without the power of authority. The law also recognizes the possibility of intervention in an action of a criminal nature.

 

Of particular relevance are liability actions. Rather like the damages class actions provided for in the American legislation, standing is granted in damages actions for harm caused to superior and indivisible rights (e.g. environmental matters), and harm caused to individual rights when the injury originates from a common source.
In terms of the compensatory function, the law also provides for collective protection regarding consumer protection. It is set out that consumers have the right to receive compensation for damages caused by defective products or services, and grants standing to consumers and consumers’ associations although not directly harmed where homogeneous individual interests and collective or diffuse interests are in question. Also, the Securities Code, sets out the possibility of use of the popular action for the protection of homogeneous individual interests or collective interests of investors in securities.

 

The classic scope of collective litigation relates to the exercise of injunctions. Whose aim is the prevention, correction or termination of practices which are harmful to the rights of consumers.

 

Furthermore, the Portuguese legal system has other forms of collective protection in specific legislation such as environmental law, cultural heritage protection laws, etc.

 

“Popular Actions” – Introduction

The law of popular action includes administrative and civil popular action, and takes the forms set out in the Administrative Procedure Code and in the Civil Procedure Code.

 

The law establishes a special regime of dismissal of the complaint, namely that it should be dismissed if the judge considers that it is highly improbable that it will proceed, having heard the Public Prosecutor and made the preliminary inquiries that may be considered justified.

 

Popular action corresponds to a form of representative litigation. The claimant represents on his own initiative, and without the need for a mandate or express authorisation, all the other holders of the rights or interests in question who have not exercised their right to opt out.

 

In relation to the effects, decisions pronounced in administrative or civil actions which have become res judicata, have erga omnes effect.

 

In consumer protection law there is the possibility to appeal to the Appeals Court and to the Supreme Court of Justice against an injunction decision. The injunction claim is a summary proceeding and is exempt from costs.

 

Within the scope of Environmental Law, collective litigation has special relevance regarding requests for compensation for damage attributable to an agent, or regarding requests for the immediate suspension of an activity which implicates damages to the environment.

 

 “Popular Actions” Proceedings and Costs

Once the writ for popular action has been received, the judge summons the other interested parties for them to state whether they intend to intervene in the case in their own name or whether they accept representation by the claimant.

 

The regime of popular action does not recognise a previous certification. The action is not submitted to the test set out for class actions like under U.S. law, nevertheless it should be remembered, that the law provides for a special regime for the dismissal of the case when there is no fumus boni iuris (reasonable grounds).
However the law of popular action has received some solutions within the family of common law. With regard to evidence in the popular action, the judge is responsible on his own initiative for collecting evidence, not being bound by the will of the parties.

 

Popular action seeks to protect the interest and repress attacks on such interest. Hence, there is a preventive and repressive scope.

 

The system of administrative popular action depends, strictly, on the applicable administrative laws, within the many regimes provided for administrative action in general. So it allows the use of provisional remedies that prove to be adequate in ensuring the usefulness of the decision pronounced in the administrative popular action.

 

Repair of mass injury is set out and separates compensation for damages to identified holders of interests, calculated under the general terms of civil liability, and the global determination of compensation for violation of the interests of unidentified holders.  However the law does not establish any system for sharing the global compensation between injured parties nor does it set out the possibility of payment of punitive damages, in line with the general rules of civil liability compensation in Portugal. 

 

The success of popular action in Portugal depends on the level of initiative of persons, both natural and legal, who are entitled to submit these proceedings. Despite having restricted the intervention of the Public Prosecutor, the law has provided incentives for the participation of interested parties, by establishing a special system of prepayment and costs, nevertheless it is not enough as legal costs and fees are not included in the compensation. 

 

 

Romania

By Bostina & Associates

 

Introduction

The Romanian New Civil Procedure Code which entered into force on February 15th, 2013, is the first enactment providing information regarding organizations acting for the interest of a group, by amendment of Law no. 193/2000 regarding abusive provisions of the contracts concluded between professionals and consumers. It establishes the new legal denomination in the Romanian legislation: collective action against professionals using abusive practice and proposing certain abusive provisions in the contracts concluded with their consumers.

 

As regards the legal provision, art. 37 of the New Civil Procedure Code states that: „In the cases and conditions provided exclusively by law, Court actions may be filed also by individuals, organizations, institutions or authorities that, without providing a personal interest, are acting for protection of legitimate rights and/or interests of individuals, having a special situation or, if case may be, in order to protect a general interest or a group one.” 

 

This newly created legal institution was enforced in the same time with other legal provisions regarding Court actions promoted for group benefits, being critically received by the banks’ professional associations and also by their representatives. The opponents’ main reasons were that such provisions infringe the banking systems stability, as the banking system was connected to such presumptive abusive provisions provided in the standard loan contracts. Regarding this matter, the International Monetary Fund also requested to the Romanian legislative issuance of an impact study. 

 

Primarily, Law no. 193/2000 regarding abusive provisions of the contracts concluded between professionals and consumers, as amended and republished (generally referred to as “Law no. 193/2000”) indicated two types of civil actions: consumers’ individual action (that we will not refer to hereinabove, i.e.) and the action promoted by the public independent institution responsible for protection of consumers collective interests, National Authority for Consumers Protection (in Romania, ANPC).
We are of the view that those two civil actions mentioned above must have been completed, inside the law, by a third category, namely the action granted to the benefit of associations’ representatives in the field of consumers protection. Such categories may be named “collective actions”, in spite of the fact that their denomination is not strictly in line with the original denomination, considering also that an instrument for actions publicity, in order to put such action in an opt-out or opt-in system, does not exist.

 

The procedure

As a previous step, notice is sent by the association’s representative to everyone that may qualify as a plaintiff.  In case the person does not wish to be bound by the action, the person may choose to “opt-out” of the class. Further on, in case a class action is filed and becomes a lawsuit, several plaintiffs will serve as representatives for the entire class of plaintiffs.  If the Court finds that these representative plaintiffs’ rights were violated, then the entire class of plaintiffs will be entitled to damages.  If the court finds that the representatives’ rights were not violated, the entire class of plaintiffs is bound by that judgment and will not be allowed to pursue individual claims regarding the substance of the class action suit.

 

Conditions for filing a class action 

In order to bring a class action lawsuit, typically, the following conditions must be accomplished. The class must be so large as to make individual claims impractical; there must be legal or factual claims in common among all the members of the class; the claims or defenses must be typical of the plaintiffs or defendants; the representative parties must adequately predominate the proceedings; the common interest between the class and the defendants will predominate the proceedings.  
As per art. 12 par. (1) of Law no. 193/2000, “in case the banks use contracts having non-negotiable abusive provisions, the control authorities (such as the National Authority for Consumers Protection) may apprise the Court in relation with the above, requesting obligation of the bank to amend the said contract, by elimination of the abusive provisions.”

 

Such collective actions of the representative associations are meant to stop the usage of adherence contracts, comprising abusive provisions, this being compelled to have a certain previous control, exercised by the Courts of law. Such control will not have as object the contract, but the draft of the above, namely the presumed abusive provisions, in order to assess on the accuracy and presumptive abuse possible to be generated. 

 

Intervention of the court

Limitation of the Courts intervention on standard agreements comprising abusive clauses implies by law a limitation of the judge’s appreciation, as invested with a collective action. The judge may perform a concrete control via which he decides on the abusive character of the provision, by analyzing the effects of the provision, including those related to conclusion of the agreement. 

 

The collective action filed by the representative associations for consumer’s protection meant to stop the usage of the adherence contracts comprising abusive provisions implies an abstract control, exercised by the Court over the standard contract used by the professionals, and not over the already concluded contract, under development. Such control will not have as object a determined contract, but the draft of the above.

 

The effects of the courts intervention

Regarding the extension of the effects of the Court’s intervention, the collective action for removal of the abusive provisions comprised by the standard agreements concluded between professionals and consumers, there were some critical reactions, mainly related to the effects of the above. To this extent, the reasons regarding regulatory aspects of Court decisions were debated, and furthermore whether (i) the effects of such decisions may be generalized, in connection with the Court decisions, and/or (ii) existence of the possibility and probability that such decisions may have erga omnes effects, and/or (iii) the risk of a non-unitary decision making system, but sometimes even contradictorial of the Court may be negative for consumers rights.

 

In reality, related to the individuals and contracts to be impacted by the Court intervention in such actions, as per the text of the law, the decisions issued in collective actions shall generate the minimum erga omnes effect, to the extent that these shall be exempted from the individual cathegory and shall be removed to the collective cathegory. At least three perspectives generate such oppinion:
(i)    the Court decision establishing the abusive character of such provision generates elimination of the said provision from all contracts concluded between professionals acting on the said market; in respect of the above, the competition between the professional using that provision and professionals non using of such might be removed;
(ii)    the Court decision shall limit its effects to a standard draft agreement, similar as regards the abusive provision in all legal relations between the professional sue in the Court and the consumers that accepted adherance to such model; in this respect, it may appear a secondary effect of draft contracts diversity, meant to limit the effects of a possible Court decision providing the abusive aspect of the provisions;
(iii)    the Court decision may not be extended to all provisions having the same effect, irrespective of their drafting, considering the abusive provision, and not its legal effects; a mechanism providing extension of the Court decision application must be enforced, meaning that the amended provision to generate a similar effect, not just amendment of the wording; moreover, a system of sanctioning the professionals using repetatively the abusive provisions must be considered. 

 

Critical reactions of the bank representatives regarding the new legal procedures comprising collective actions were also to the extent that the risk of issuance by the Court of contrary decisions does exist. In order to avoid such risk, a special competence of the Courts of Appeal was proposed, as first court, following that the appeal to be decided by the High Court of Cassation and Justice. The reaction came also to the extent that some legal abuses may occur and also the dockets of the Tribunals might be supercharged. The response appeared, namely association representatives answered that the risk of a contrary decision making system is mitigated, considering that the competence is granted by the law to be that of the professionals headquarters, and not of the association.

 

A special circumstance appears in case individual consumers did not obtain favorable Court decisions and thereafter, the action promoted by the representative association is admitted and the Court decides that “the contract comprises abusive provisions and compels the professional to amend the pending adherence contracts”.  

 

Such Court decisions shall extend its effects to all consumers’ contracts, even if they previously obtained contrary decisions. The collective action decision shall have, in this scenario, a veritable erga omnes effect, in case it is favorable to the consumers. A contrario, in case of a non-favorable decision for the consumers, such decision may not be used against them, considering the law provisions regarding collective actions stating that “they will not infringe the consumers’ rights to whom it is opposed an adherence contract comprising abusive provisions to invoke the nullity of such provision by way of Court claim or even as exception.”, cf. art. 12 par. (4) of Law no. 193/2000.

 

The future

Romanian legislation has in view two new proposals intended to make more efficient the mechanism of correction of the contracts comprising abusive provisions: 

 

First, the preparing of a data base to comprise abusive provisions, as declared at national level by the Courts of law, similar to CLAB data base (initiated by the European Commission for application of Directive 93/13/CEE for abusive provisions in the contracts concluded with consumers, that was meant to unify the Court decisions of the member states in this field);

 

Second, the creation of a more practical and applicable mechanism, a “positive” control system, in order to avoid implementation and application of contractual models comprising abusive provisions, and in case such provisions does exist, elimination from the contracts and applicability of the newly created drafts of such contracts. Moreover, in case of such a preliminary control, not excluded by a secondary Court control, shall definitely exclude a presumed bad faith of the professional.  

 

 

Switzerland     

By Cedric Berger 

Class actions in Swiss law – On the way towards adaptation ?
 

Traditional US system of class action doesn’t exist yet in Switzerland. However, it is likely  that  its softened European version , one which would take into account what has already been said on the topic by scholars, will come into being quite soon. 

 

The Swiss government (the Federal Council) has long refused that system, arguing that it was not only useless but also causing a severe breach to the right to be heard. The Swiss procedural law has indeed already systems such as the active consority (articles 70 ff. Civil Procedural Code), or the intervention (articles 73 ff. CPC), the first allowing parties vested with same interests and linked to the same facts to file proceedings jointly (articles 73 ff. CPC), the latter being allowing a third party to take part into a proceeding already pending if it has an incidence on its own rights and obligations. 

 

In addition consumer or wildlife protection organisations are already allowed to act in court in the name and on behalf of a precise group of persons (articles 89 and 90 CPC).

 

The main problem is that Swiss legal system has long had some difficulty integrating class action system because a judgement cannot be imposed and enforced on a party which hasn’t taken part in the proceedings as it would violate its constitutional right to be heard. 

 

The opting out rule, according to which the party not involved in the proceedings has to state, before the judgement, its refusal to have the judgement applied to it, is contrary to the very essence of the Swiss law system. 

 

However, the Federal Council very recently, and surprisingly, published a report  about collective law claims in Switzerland, which considers likely adopting such a system for reasons of economy in the proceedings.  

 

Said report recognizes that the class actions system would greatly relieve courts in terms of work load, there being no need anymore to deal with huge numbers of proceedings, proof evaluations or hearings for similar or even identical facts. 

 

This would result as well in lowering the costs of justice, since the evaluation of proof and justice would be reduced in consequent manner.

 

The Federal Council considers several variants to preserve the right to be heard, among which one is inspired from countries of Northern Europe: the organisation of so-called Test-class actions. In other words, a defendant corporation could propose a transaction to a distinct number of plaintiffs, and offer to others, in an identical situation, the possibility to settle once and for all their claims by acquiescing to the proposed transaction. 

 

This would be a so-called opting in procedure.

 

That said, in the purpose of granting the right to some not to have an inconvenient judgement imposed upon, the Federal Council insists on the necessity of also offering in different situations “opting out” rights in order to safeguard these people’s rights.

 

There are also deontological questions at stake as, in the class action system, fees are often depending on success. However, such a model of success fees for lawyers is forbidden by professional law in Switzerland. It is, in addition, of general opinion that a lawyer must not, individually, represent alone a variety of plaintiffs, who would entirely vest their powers in him. It is considered immoral, without even considering the fact that the result of his action could be imposed on others.

 

Despite all those criticisms, it is likely the class actions system shall come into application soon in Switzerland.

 

 

Sweden

By Mats Ingvar, Källén & Ingvar

 

Introduction

The rules regarding class actions were introduced in Sweden on January 1, 2003, with the Group Litigation Act (2002:599), “GrL”. GrL was as far as I know the first Class Action Act outside the Anglo-American legal system.

 

GrL makes it possible for individuals, organizations and authorities with identical or similar claims to process as a group.

 

Furthermore GrL makes it possible for a person without the power of an attorney to process for members of a group. The members of the group are not parties and do not take action in the lawsuit, but the judgment is valid and in force for and against all members of the group.

 

GrL is a supplement to the rules in the Swedish Procedure Code. The rules in the Procedure Code are applied in a class action as far as the GrL does not have special or divergent rules regarding the specific questions. 

 

The institute is expected to primarily be used in consumers and environmental disputes. The Swedish Environmental Code also has rules regarding class actions. 

 

Conditions for filing a class action

A class action can be filed for every claim that can be filed as a general civil dispute according to the rules in the Procedure Code. One district court for each county is appointed to be competent for class actions. 

 

A class action can be filed by a natural or a legal person. It can also be filed by a non-profit association with the aim to protect consumer or employees’ interests. A natural or a legal person or a non-profit organization shall be represented by a member of the Swedish bar association which is not a condition in a civil dispute according to the rules in the Procedure Code. 

 

A requirement for a class action is that the claims are identical or similar and are based on the same circumstances and grounds. Other requirements are that a class action from different point of views are more suitable than litigation for each group member individually, that the group from different aspects are suitably determined, and that the claimant is appropriate to represent the members of the group. 

 

An individual civil lawsuit initiated according to the rules in the Procedure Code can also under certain conditions be transformed to a class action according to the rules in GrL.

 

Determining the scope of the case and the group

The scope of the case is determined by the claimant in the application for a summons. If the court decides to grant a class action, the court shall inform each individual who is covered by the claimant’s definition of the group of the pending group litigation. Each individual shall within a decided time inform the court whether he wants to remain in the group. Should he not inform the court that he wants to remain in the group he is regarded as resigned from the group, since he did not “opt in”. A group member that has informed the court that he wants to remain a group member may not later withdraw his notification. 

 

Representative of the group

If the court decides to grant a class action the claimant in the application of summons is appointed to be representative of the group. The court has the possibility to dismiss the claimant as representative and appoint a new representative of the group if the court finds that the claimant is not appropriate to represent the group. 

 

Legal costs

The claimant does not have to submit a deposit as a security for the legal costs to be allowed to register with the class action. However the possibility for the claimant to finance the process can be taken in consideration when determining whether the claimant is appropriate to represent the members of the group.  
A risk agreement regarding legal fees entered between the barrister representing the claimant and the claimant has to be approved by the court to be valid for the group members. 

 

As it is the claimant and representative of the group and not the group members that is a party in the lawsuit it is the claimant that is responsible for the legal costs and the group members have no responsibility. An exception is if the defendant is imposed to pay legal costs to the claimant and the defendant does not have the possibility to pay the claimant these costs. Another exception is the claimants costs that a losing defendant due to a risk agreement is not imposed to pay. In these situations the group members have a responsibility for the mentioned costs. The group member’s responsibility is however limited to what each individual group member has received in the action. 

 

Appeal

Every group member can appeal the court judgment. The group members also have the possibility to appeal different decisions by the court. 

 

Settlement agreements

A settlement agreement entered by the representative of the group is valid if the agreement is confirmed by the court. The court shall confirm a settlement agreement unless the agreement discriminates members of the group or is clearly unreasonable. 

 

 

The United States

By Stephen L. Dreyfuss, Hellring Lindeman Goldstein & Siegal LLP

 

Introduction  

This article will summarize the rules for class actions in the federal courts of the United States under Rule 23 of the Federal Rules of Civil Procedure.  In addition, the various states have their own class action rules for actions brought in their state courts, but most often these follow the provisions of Rule 23 of the Federal Rules of Civil Procedure.

 

Conditions for filing a class action 

Under Rule 23, a civil action may be brought as a class action if the requirements of the rule are met.  In that event, “one or more members of a class may sue or be sued as representative parties on behalf of all members.”  Rule 23(a).  

 

In order to be maintained as a class action, an action must first satisfy all four requirements of Rule 23(a):

1. "The class is so numerous that joinder of all members is impracticable” (known as the “numerosity” requirement);
2. “There are questions of law or fact common to the class” (“commonality”);
3. “The claims or defenses of the representative parties are typical of the claims or defenses of the class” (“typicality”); and
4. "The representative parties will fairly and adequately protect the interests of the class” (“adequacy of representation”)

 

Even if all of the requirements of Rule 23(a) are satisfied, an action may not be maintained as a class action unless one of the three alternatives of Rule 23(b) is also satisfied:

1. “Prosecuting separate actions by or against individual class members would create a risk of (A) inconsistent or varying adjudications with respect to individual class members that would establish incompatible standards of conduct for the party opposing the class, or (B) adjudications with respect to individual class members that, as a practical matter, would be dispositive of the interests of the other members not parties to the individual adjudications or would substantially impair or impede their ability to protect their interests”; or
2. “The party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole”; or
3. “The court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.  The matters pertinent to these findings include:
   1. the class members’ interests in individually controlling the prosecution or defense of separate actions;
   2. the extent and nature of any litigation concerning the controversy already begun by or against class members;
   3. the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and 
   4. the likely difficulties in managing a class action.”

 

In practice, most class actions seeking damages fall within Rule 23(b)(3).  Such actions therefore require the plaintiff class representatives to satisfy the four requirements of Rule 23(a), plus the requirements of Rule 23(b)(3) as set out in Rule 23(b)(3)(A)-(D).  This is determined in a “motion for class certification”, by which the plaintiffs class representatives seek an Order from the Court that the action satisfies all of the requirements of Rule 23 and therefore can proceed as a class action.

 

The class certification motion and settlement agreements

Typically, after the initial class action complaint is filed, the parties conduct discovery limited to the issues relevant to motion for class certification.  Rule 23(c)(1)(A) requires that the class certification issue be determined by the Court “at an early practicable time” in the litigation.

 

In practice, the class certification motion is the watershed event in any class action.  Once the class is certified, most class actions are settled without trial.  In such an event, Rule 23 requires effective (and often very expensive) notice of the proposed settlement to be given to all class members so that those who wish to pursue their own claims without being covered by the settlement may opt out of the class settlement.

 

Arbitration under the Concepcion decision

The most significant development in American class action law in recent years is the decision of the United States Supreme Court in AT&T Mobility v. Concepcion, 563 U.S. 321 (2011), in which the Court decided that arbitration clauses in standard form consumer contracts will be enforced to prevent consumers from making claims against the companies in court, and that if the arbitration clauses also prohibit class action treatment, any resulting arbitrations must be solely on an individual basis rather than on behalf of a class of similarly-situated consumers.  After Concepcion, most consumer companies immediately revised their standard form contracts (which are imposed on consumers at the point of sale) to include clauses requiring arbitration and prohibiting class arbitration.  As a result, consumer class actions have been sharply reduced.  

 

Plaintiffs’ lawyers believe that the long-term effect of Concepcion will be to prevent any recourse by consumers against companies, because the requirement of individual rather than class arbitration will make claims too small to warrant the intervention of an attorney for the plaintiff consumer, and in any event the small amount of a given consumer’s claim will make it unlikely that he or she will pursue the arbitration at all —- with or without an attorney.  The effect, according to plaintiffs’ lawyers, will be to insulate consumer companies from any risk that their abusive practices will ever be challenged in any forum.

 

Defendants’ lawyers, on the other hand, believe that Concepcion will properly limit frivolous class actions that companies frequently settle, even though they have no real liability, to avoid the extensive defense costs of merits discovery and trial.