Among the features of the U.S. legal system that foreign observers often single out for concern is the availability of class action litigation procedures. The fact is, however, that many countries around the world have adopted some form of class action procedure, at least for consumer-oriented litigation. According to a recent report, Latin America is among the regions where many countries have adopted differing local versions of class action procedures. However, in adopting class action procedures, these Latin American countries have not followed the U.S. class action litigation model, but rather have tended to model their approach on the procedures first adopted in Brazil.
According to a second recent report, the fact that the Latin American countries have in the past looked to Brazil may be a cause for concern in light of certain proposed legislative revisions to the Brazilian procedures that are now pending.
The first of these two August 2014 reports, which is entitled Following Each Other’s Lead: Law Reform in Latin America, and which provides an overview of class action procedures in Latin America, can be found here. A Spanish language version of the report can be found here. The second of the two reports, which is entitled Class Action Evolution: Improving the Litigation Environment in Brazil and which takes a look at the development of class action procedures in Brazil and analyzes pending legislative proposals to revise those procedures, can be found here. A Portuguese language version of the report can be found here.
Together these two reports, issued by the U.S. Chamber of Commerce Institute for Legal Reform “highlight the growing danger of litigation abuse in Latin America,” according to the Institute’s August 5, 2014 press release describing the reports.
According to the first of these two reports, several Latin American countries, following the Brazilian model, have adopted some form of class action procedures. Legislation allowing class actions for damages has been enacted in Chile, Colombia, and Mexico. What the report describes as “de facto class actions” exist in other countries, such as Argentina and Costa Rica. There is legislation pending now in several countries to create a new class action system or to modify existing legislation, for example, in Argentina, Brazil, Costa Rica, Ecuador, and Mexico. The report reviews the current state of play in each of these countries.
According to the report, the pending changes in these various countries could impact the litigation risk environment in those countries for years to come. For that reason, the first of these two reports advocates that “businesses should take it upon themselves to monitor these developments as they arise,” and advocates further that as proposed changes are under consideration “private industry should express its concerns, not to hinder development of the law, but to ensure a level playing field for all members of society.”
While these reports are written as advocacy, they provide some balanced consideration of the role of class action litigation in a system of civil justice. The reports acknowledge that in some countries around the world, the need for greater access to justice is a fact. Accordingly, the first of the two reports states that “there is a strong argument in some countries that class actions … would improve access to justice,” adding that “in those places, it is simply not credible to oppose the creation of a class action mechanism.” However, the report also notes, “it is fair and appropriate to oppose class action systems that change the meaning of justice under the guise of creating access to it. If a claim is not viable individually, it should not become viable simply because it is joined with other claims.”
The system currently in place in Brazil, which has served as the starting point for the approach to class action procedures in other Latin American countries, has, according to the reports, its positive features, although the report notes that the addition some form of class certification procedure would be even more beneficial. The report notes that one of the positive elements of the U.S. class action system is that it provides a tool for settling mass claims. Without a class certification mechanism, the Brazilian model involves a two-step process wherein liability may be established on a class wide basis in the first phased, but damages must be established in the second phase in a series of individual cases, with no means to settle the cases collectively.
For that reason, there are good grounds for Brazil to look into reforming its procedures, and indeed there are proposals to reform the Brazilian procedures pending in that country’s legislature. However, as the second of these two report notes, rather than address the areas where legislative reform could introduce some improvements, the reform proposals now under consideration in Brazil are focused on “providing additional tools for plaintiffs to succeed rather than improving the existing law to make it more faire and reasonable.” The current reform proposal, known as Bill 282, “seems to be inspired not only by the assumption that class actions should become more popular, but that they should invariably result in judgments favorable to plaintiffs.”
According to the reports, the Brazilian reform bill and other pending measures if adopted would, among other things, essentially allow for nationwide class actions, grant standing to political parties, allow the judge to shift the burden of proof at any time before the decision, and allow for financial compensation to the class advocates as a stimulus for litigation. The proposals would create financial incentives for outside groups to file class actions by allowing them to receive legal fees no less than 20% of any award. As summarized in the Institute’s press release, these reforms, while intended to “expand fairness” in Brazil’s civil justice system ‘can lead to undermining it.” According to a statement by Lisa Rickard, the Institute’s President, “if implemented, current proposals could have costly unintended economic consequences.”
The reports unquestionably represent advocacy and must be read and understood on that basis. Nevertheless, the reports provide a thorough and interesting overview of the state of class action litigation in Latin America. Though possibly provocative for some readers, the reports will make interesting reading for anyone interested in developing an understanding of the current evolution of class action procedures in Latin American countries.