A framework for collective redress (class actions)

KEY POINTS

The main principles are laid down in a European Commission recommendation, published in parallel with a communication which suggests that all EU Member States introduce collective redress mechanisms based on agreed principles. These principles are as follows:

• Claimants should be able to seek court orders to cease violations of their rights granted by EU law (‘injunctive relief’) and to claim damages for harm caused by such violations (‘compensatory relief’) in a case where a large number of persons are harmed by the same illegal practice.
• Collective redress procedures must be fair, equitable, timely and not prohibitively expensive.
• Collective redress systems should be based on the ‘opt-in’ principle. Under this principle, potential claimants who have not directly expressed their consent are not members of the group and therefore, may not benefit directly from a favourable outcome of the collective redress proceedings.
• There should be procedural safeguards to avoid abuse of collective redress systems such as:
  • a ban on punitive (i.e. excessively high) damages and interest;
  • entities representing claimants should not be profit-making;
  • a ban on the payment of contingency fees to lawyers.
• The losing party is required to pay the winning party’s legal costs.
• The judge has a key role in the collective litigation² to effectively manage the case and must be vigilant against any possible abuses.
• Claimants should be able to settle the case by means of collective consensual dispute resolution mechanisms (i.e. procedures whereby parties reach consensus on a solution).