The brand new Italian class action
Legance – Avvocati Associati, Rome
Legance – Avvocati Associati, Milan
Legance – Avvocati Associati, Rome
Legance – Avvocati Associati, Rome
After the failure of the consumer’s class action provided under the Italian Consumer Code, the reform of the discipline – to be in force in May 2021 – is expected to stimulate the utilisation of the collective redress instrument.
The pre-existing regulatory framework
Among the Member States of the European Union, Italy is certainly much ahead of many other countries as far as the implementation of collective redress mechanisms is concerned.
In Italy, these mechanisms date back to 1996, when Article 1469-sexies of the Italian Civil Code was enacted. This provision was the result of a European-wide debate on collective redress among legal scholars, and introduced a collective injunction action that could be brought in the case that general terms and conditions contained unfair provisions.
In 1998, a new type of collective action was introduced, with a broader scope, and together with the existing collective injunction action, it was subsequently included in the Italian Consumer Code (Articles 37, 139 and 140). In 2010, a third instrument – destined to become the most widely-known one – was introduced in Article 140-bis oft he Italian Consumer Code, that is, a specific type of class action to seek compensation for damage. This type of legal action was reserved for ‘consumers and users’ in the case of violation of consumers and competition law.
However, it is widely known that this instrument did not achieve the expected results. Looking at figures, only 48 class actions have been brought since the introduction of this legal remedy, of which only 23 passed the ‘admissibility test’ and only four were successful. Even the successful class actions, however, left doubts on their effectiveness in terms of damage compensation: the highest damages awarded amounted to EUR 100 in favour of the group members involved in the class action.
In light of the above data – which clearly shows the failure of this legal instrument – the Italian Parliament approved Law No 31, dated 12 April 2019, which provides for a brand-new set of legal provisions on class action, available not only to consumers.
The entry into force of the new provisions, originally scheduled for 18 April 2020, has been postponed to 18 May 2021, due to some difficulties encountered in setting up the necessary IT infrastructure as a result of the Covid-19 pandemic.
The new legal provisions
For systemic consistency, the new legal provisions are now part of the Italian Code of Civil Procedure (Articles 840-bis to 840-sexies decies), instead of other separate legislative deeds.
The novelties introduced concern every aspect of the class action instrument, particularly:
The new class action can be brought to seek redress for an infringement of any of the ‘homogeneous individual rights’ and is not subject to the existence of a contractual relationship between the parties. From a procedural perspective, the new class action can be brought to seek the ascertainment of the defendant’s liability and the consequent compensation for damage and/or the relevant restitution.
This is where major changes have been introduced. The new class action is available, collectively or individually, to all the group members – that is, all the individuals claiming the same homogeneous individual right, as well as to associations and non-profit organisations whose statutory purpose includes the protection of the right allegedly infringed. In addition, the new class action is also available to legal entities; this is a key change, as it means that collective redress mechanisms are likely to be resorted to in private antitrust enforcement proceedings. With regard to defendants, the new class action can be brought against companies and entities managing public services or public utilities. According to Italian legal scholars, professionals should also have standing to be sued in a class action, based on a broader interpretation of the relevant provisions.
Inclusion in the ‘class’ is regulated by an opt-in mechanism. According to the new legal provisions, opt-in can happen in two different moments: immediately after the court declares the class action admissible, or after a positive judgment is issued. The latter option – which is unique to the Italian procedural system – fits well in the new procedural framework.
The new legal provisions entrust the court with broad powers to coordinate and direct the main stage of the proceedings. Furthermore, a fundamental role is played by the lead plaintiff (or plaintiffs), who is chosen by the court to represent all of the people involved in the class action (known as group members) and perform a number of fundamental tasks for conducting the proceedings.
The new legal provisions stipulate a revised model of the summary proceedings provided for by Articles 702-bis et seq of the Italian Code of Civil Procedure. In particular, the first instance proceedings consist of three stages: the admissibility test stage, the dissertation and evidence-gathering stage, and the final stage.
This stage begins with the publication of the petition filed by the plaintiff on a specific online platform provided by the Ministry of Justice, in order to encourage potential claimants to join – this is the first opt-in window. The court will then rule on the admissibility of the class action, unless any of the following events occurs: (1) manifest lack of merits; (2) inhomogeneity of the individual rights claimed; (3) existence of a conflict of interests between the plaintiff(s) and the defendant; or (4) inadequacy of the plaintiff to protect the collective interests.
Dissertation and evidence gathering
Once the class action is declared admissible, the second stage begins where the court’s role becomes even more crucial, as it is entrusted with broad powers and has a set of instruments to manage the evidence-gathering phase. By way of example, the court may order expert assessments upon its own initiative (with the relevant costs being charged to the defendant, as the latter is presumed to be the stronger party). In this phase, the court may also require the defendant to provide relevant evidence that is in their possession, similarly to the provisions set forth in Legislative Decree No 3/2017, which implemented in Italy European Directive 104/2014 on antitrust damages. In this phase, the court may also propose the parties to settle the dispute, by submitting an agreement to be evaluated and accepted by the group members and the defendant.
Once the second stage is completed, the court will pronounce the judgment, thereby ruling only on the defendant’s liability (if any) for the infringement of the homogeneous individual rights claimed in the proceedings. The amount of the damages is assessed during the final stage, which begins with the second opt-in window. This stage revolves around the lead plaintiff acting as a representative of the group members. The lead plaintiff is required to submit a plan aimed at satisfying the individual rights of the group members. The plan will be briefly discussed between the lead plaintiff and the group members before being submitted to the court. The court will then rule on it, by issuing an order regarding each of the individual rights claimed, and quantify the lead plaintiff’s fees to be paid by the defendant. At this point, there will be three possible scenarios for the group members involved in the class action to have their claims satisfied: (1) voluntary payment by the defendant, (2) collective enforcement procedure, or (3) settlement agreement. It is worth noting that the new legal provisions also provide for a possible unsatisfactory end of the proceedings. Specifically, the court may conclude that there is no possibility of the group members’ claims being satisfied and dismiss the proceedings by way of an order detailing the reasons for dismissal.
As a general note, the Italian legislator paid particular attention to the average duration of court proceedings, setting tight deadlines in order to limit the duration of court proceedings to a few months.
In conclusion, the new legal provisions mark a break from the previous provisions in all respects. In particular, both the new objective and subjective scopes are expected to facilitate access to justice by a wider range of parties, including legal entities.
From a lawyer’s perspective, the new legal provisions are expected to give rise to new challenges. Considering the high bar set for the efforts to be made by the parties to the proceedings, law firms will be the engine of the new collective redress market. In light of the lawyers’ crucial role, the new legal provisions provide for additional fees to be paid to the parties’ attorneys in certain specific cases.
It is not unrealistic to expect full-service law firms to set up dedicated teams to handle the workload that a single class action may generate (consider, for example, the amount of work that may be required in order to prepare a plan to satisfy the individual rights of a multitude of group members involved in a class action).
Lastly, very recently the European Parliament and the Council have approved a new directive on consumers’ collective redress (as part of the ‘new deal for consumers’ package), which may lead the Italian legislator to enact new pieces of legislation in order to bring the current Italian legislation in compliance with the new European regulatory framework.