Champions of collective redress: is Europe catching up with the US?
Hausfeld & Co, London
Historically, English courts have shown reluctance to encourage what have often been referred to as ‘US-style’ opt-out class actions. Before 2015, the only option for multiparty litigation in England and Wales was to bring an opt-in action on behalf of an identified group of claimants with the requirements that they must share the same interest in the claim and actively choose to be involved in the litigation. Frequently, however, for practical and financial reasons, there has been little or no incentive for private individuals to become involved in such claims: either the loss suffered has been too insignificant to warrant the effort required, or the costs of bringing a claim exceeded the amount an individual might hope to recover in damages. This has meant that legitimate claims have seldom been pursued, and corporate wrongdoers have been given carte blanche to continue to act with impunity.
In other jurisdictions, notably Australia, Canada and the United States, opt-out class actions have filled this void by enabling claims to be brought on behalf of a class of claimants, without the need for them to opt in. Claims, which might be low value or not cost effective to run on an individual basis, are capable of being pursued under such a system, providing access to justice for consumers on the one hand, while deterring corporate misdeeds on the other.
In recent years, encouraging progress has been made in promoting collective redress in the English and Welsh courts. Many practitioners and consumer rights groups suggest that the jurisdiction is emerging as a leader in Europe in terms of facilitating collective redress and access to justice, notwithstanding recent efforts by the European Union legislature to develop collective redress procedures in the Member States. We explore these developments further below.
The current landscape in England and Wales
Collective actions in the CAT
The Consumer Rights Act 2015 amended the Competition Act 1998 to introduce an opt-out procedure which is limited to breaches of competition law and can only be advanced in the Competition Appeal Tribunal (CAT), a specialist tribunal with United Kingdom-wide jurisdiction over cases involving competition or economic regulatory issues.
Only nine applications to bring opt-out collective actions have been commenced since 2015 and none has yet succeeded in being certified as a claim suitable to proceed as a collective action. Certain of those claims, in which the question of suitability had not yet been decided, were stayed as questions as to the mechanics of the certification process, and the operation of the regime as a whole, made their way to the UK Supreme Court in the case of MasterCard v Merricks (Merricks), a claim which, if certified, will be brought on behalf of 46 million UK consumers with a potential value of £14bn.
On 11 December 2020, the Supreme Court handed down its decision in Merricks, with the leading judgment of Lord Briggs providing a resounding endorsement for the opt-out collective action procedure. The judgment has come as welcome news to practitioners, consumer rights groups, and campaigners for access to justice, as the Supreme Court’s endorsement of the collective regime will now enable the progress of numerous stayed proceedings seeking damages for harm caused to large groups of consumers. This recent development will also give consumers confidence in the procedure, paving the way for good claims to be made in respect of losses suffered as a result of breaches of competition law.
Representative actions under CPR 19.6
Claimants must still rely on opt-in procedures for matters outside of the competition sphere. The closest mechanism to class proceedings is found in r.19.6 of the Civil Procedure Rules (CPR 19.6), which provides that a claim can be brought by a representative party who has the ‘same interest’ as the other parties being represented. The scope and operation of CPR 19.6 in relation to representative actions is currently under judicial consideration by the Supreme Court in the case of Lloyd v Google, a claim brought on behalf of more than four million Apple iPhone users, who are said to have been subjected to a ‘Safari Workaround’ – a programme deployed by Google which enabled it to track the internet use of the iPhone user, without the user’s knowledge or consent. In 2019, the Court of Appeal overturned an earlier High Court decision and confirmed that members of Mr Lloyd’s representative class did share the ‘same interest’ in the claim, and so could therefore proceed with the claims under the auspices of the procedural mechanism provided by CPR 19.6(1).
In what has been considered a landmark judgment in the development of opt-out collective actions in England and Wales, the Court of Appeal reasoned that the prospective class members each suffered a loss of control of their browsing information and so shared the ‘same interest’, and thereby suffered the same damage, as a result of the data breach occasioned by the Safari Workaround. The Supreme Court’s decision will be key to clarifying the scope of the Court of Appeal’s decision and, in particular, whether representative actions may be used in respect of similar data protection claims in future.
As we wait for the Supreme Court to hand down its judgment, there has been further first instance judicial consideration of the applicability of the ‘same interest’ test in the recent High Court judgment in the case of Jalla v Shell. In this case, a claim was brought on behalf of various Nigerian individuals and communities seeking compensation for loss which was said to have been caused to land and water by an extensive oil spill. The claims sought to invoke the CPR 19.6 procedure, and the defendants applied to strike out the collective proceedings on the basis that the ‘same interest’ test was not met. The defendants were successful: while the court concluded that the cases raised extensive common issues of fact and law, Mr Justice Stuart-Smith found that such commonality was not enough to enable the claims to be tried as a representative action. In its judgment, the Court provided further guidance as to the application of the test, including helpful analysis of the Court of Appeal’s reasoning in Lloyd v Google. The judgment highlights the potential limits of the applicability of CPR 19.6 as a means to redress collective loss and the care that must be taken when considering whether CPR 19.6 is available and appropriate. It remains to be seen whether the Supreme Court’s decision in Lloyd v Google may provide more authoritative clarity as to the broader application of this procedure.
Developments in the Europe Union: Representative Actions Directive
Turning to developments in Europe Union, the new EU Directive on representative actions for the protection of the collective interests of EU consumers, Directive 2020/1828 (the Directive), was approved by the European Parliament on 24 November 2020.
The Directive is intended to enable EU consumers to better assert their rights, including through the facilitation of cross-border collective actions in the EU. In addition to claims arising from data protection issues, the Directive covers a wide range of breaches of EU legislation including: financial services, environment and health, the rights of passengers travelling by air, sea and rail, as well as general consumer law issues. Such procedures will provide a variety of remedies too, including injunctions, compensation, and specific product liability redress mechanisms, such as product repair, replacement and/or refund.
The Directive seeks to improve access for consumers to class actions across the EU, as it will require each Member State to establish (if it has not already) a mechanism for collective action, as well as permitting cross-border claims. While the cross-border claims will be run on an opt-in basis, the Directive grants each Member State discretion as to whether they introduce an opt-in or an opt-out system. Many countries in Europe already operate opt-in systems – CPR 19.6 is such a procedure and has been available in England in Wales for many years – but the Directive may provide a catalyst for EU Members States to develop their collective action regimes.
Each Member State will also be able to dictate the procedural elements of claims, such as the admissibility of evidence, means of appeal and the minimum number of consumers required to bring a claim. At a national level, the extent to which consumer justice is championed will therefore depend greatly on each Member State.
Consumer protection is at the core of the Directive and requires each Member State to have at least one ‘qualified entity’, that will be permitted to launch actions on behalf of claimants.
The Directive provides criteria for the qualified entities (which may be public bodies), who will be permitted to issue cross-border proceedings. This includes:
- demonstrable activity in protecting consumers’ interests, for example, in the previous 12 months;
- being not-for-profit; and
- proving that they are independent from third parties with opposing economic interests to consumers.
The international model affords parties a choice as to the jurisdiction of the claim. While this is subject to restrictions, the Directive provides for the consolidation of actions across the EU. For example, qualified entities in Germany, Ireland and Belgium could combine their claims and bring an action in the courts of one of those Member States. However, while the theory of cross-border collective redress is laudable, the singular limitation on the entities that may bring such claims, and the restrictive criteria that any qualified entity must meet, suggest that it will be practically difficult to put such claims together.
One such difficulty is likely to arise when claimants seek funding of such claims. The Directive emphasises the need to ensure access to justice for consumers and permits financial support for qualified entities, and Article 20 of the Directive requires Member States to take measures aimed at ensuring the costs of proceedings in representative actions are not prohibitive to qualified entities seeking redress. However, there are no concrete provisions as to how funding is intended to be made available, and restrictive provisions precluding the funding of claims where there is an ‘opposing economic interest’ is likely to cause third-party litigation funders to approach such claims with caution. Together, these issues suggest that the claims offered by the Directive may simultaneously be taken away by the practical constraints that are likely to be faced.
There is no doubt that the need for, and precise formulation of, collective redress, is in the judicial and political consciousness of jurisdictions across Europe, as the picture continues to evolve at pace in favour of promoting the rights of consumers and access to justice. The mechanisms already available in England and Wales and attitudes of the English judiciary, as well as an increasingly active ‘claimant bar’, suggest that it is the jurisdiction leading the charge across Europe, although it remains to be seen how EU Member States will react to the Directive, and how quickly.
In England and Wales, the Supreme Court’s decision in Lloyd v Google is eagerly awaited – and it is hoped that the Court will adopt an expansive approach to CPR 19.6, making it easier for groups of consumers to use their collective weight to seek redress for widespread corporate wrongdoing, and giving clarity and efficacy to this mode of collective redress. Furthermore, such an expansive approach may provide a platform for the consideration of a wider application of the opt-out process available in the CAT. The EU Directive specifically isolates sectors in which this kind of consumer harm is likely to be suffered, and an expansion of opt-out procedures would help cement England and Wales’ position as one of the leading jurisdictions for access to justice in Europe.
 Richard Lloyd v Google LLC  EWCA Civ 1599.
 Harrison Jalla & Ors v Royal Dutch Shell & Ors  EWHC 2211 (TCC).
 Some European jurisdictions are already well advanced. For example, a specifically-formed consumer group has recently launched Portugal’s first opt-out antitrust damages claim, in relation to MasterCard interchange fees. The Portuguese system is also open to individual claimants and, while actions can be launched by consumer associations, this is not a requirement. Opt-out claims are permitted in the Netherlands as well, by virtue of new legislation which took effect earlier this year. While the legislation covers a broad range of causes of action and allows non-Dutch domiciled victims to opt in to claims, there is provision for the parties to request that procedure for non-Dutch victims is changed to an opt-out one so as to create a truly opt-out claim.