One phenomenon I have been tracking over the years is the rise in jurisdictions outside of the U.S. of procedural mechanisms for collective redress, particularly in the U.K (as noted, for example, here) and the E.U. (as noted here). While I have always been careful to note the important differences between these collective action mechanisms and the U.S.-style class action approach, it may be the case that as time has passed and as procedures have developed and evolved, the mechanisms many jurisdictions are adopting increasingly are coming to resemble the U.S.-style class actions model.
As an October memo from the Jones Day law firm puts it, class action litigation “is no longer a US-specific phenomenon.” The law firm memo, which is entitled “The Rise of US-Style Class Actions in the UK and Europe,” states that the growth in the UK and EU of group litigation has been “exponential” and the rise of these actions is a “key corporate risk that will only continue to increase.” The law firm’s memo can be found here.
According to the memo, group claims are being brought “against businesses across all sectors, for a wide variety of alleged wrongdoing.” To track the growth of group actions in the UK, the memo’s authors surveyed claims being advertised in mass and social media by the most prominent claimants law firms. The survey shows that claims relating to employment, product liability, financial products, antitrust and personal injury are “mainstays of group litigation,” but more recently there has been a significant growth in data-related and ESG-related class actions. The memo notes that “similar trends are being seen across Europe,” including in particular the rise in actions involving data privacy allegations or ESG-related allegations.
The memo identifies three factors that are driving the growth of group claims in the UK and the EU: first, evolving legal frameworks; second, the growth in litigation funding; and third, the rise of claimant focused law firms.
With respect to the evolving legal frameworks, the memo notes that the introduction of tailor-made class action mechanisms across the UK and the EU has been accompanies by an “increased judicial openness to existing procedures” and the “broader acceptance of so-called ‘opt out’ mass claims.”
As evidence of the evolving legal framework in the UK, the memo cites the 2015 introduction in the UK of collective proceedings order (CPO) as part of an opt-out class actions regime specifically for antitrust claims. As discussed here, the first CPO was certified in 2021 in the MasterCard case (as discussed here). Since that initial success, increasing numbers of claimants are seeking new CPOs, with thirteen new CPOs sought in 2022. Claimants are also “pushing the boundaries” of what constitutes a competition claim. In addition, outside the realm of competition law, claimants increasingly are seeking to use representative actions to pursue “opt-out” type actions and group litigation order to pursue “opt-in” collective actions. In both cases, the courts, according to the memo, have demonstrated an increased willingness to take a more flexible, pragmatic approach to facilitate collective procedures.
With respect to the EU, the memo cites as evidence of the evolving legal framework the EU’s 2018 adoption of the New Deal for Consumers (discussed here), a measure meant to modernize and enhance consumer protections. As part of this initiative, the EU adopted a Representative Actions Directive (discussed here), requiring all 27 member states to put in place mechanisms to allow consumers to bring class actions related to EU law infringement. Currently, 10 countries have adopted local laws instituting the directive. While it remains to be seen how these new mechanisms will operate, the experience of the Netherlands, which already had a class action regime in place, suggests that the mechanisms could be a source of increased numbers of collective redress actions.
In addition to the evolving legal framework, the memo cites the rise of litigation funding as a second factor driving the rise in collective actions in the EU and the UK. The memo notes that the litigation funding market is “booming” in the UK and in the EU, with UK litigation funder assets growing from £200 million in 2011/2012 to £2.2 billion in 2020/2021, and the value of the litigation funding market in the EU estimate in 2019 to be €1 billion, and expected to reach €1.6 billion in 2025. The funders, working with claimant law firms are pursuing “novel claims that previously would not have been economically feasible.” The rise in collective action mechanisms that allow claims to be grouped together “can make it easier for third-party litigation funders to invest in.” The funders, the memo asserts, “plainly have the appetite to deploy these vast funding resources to back class actions across the UK and the EU.”
A third factor contributing to the rise of collective action litigation is the increasing presence of US claimant law firms having the particular expertise in pursuing class actions in the US. These firms are working closely with litigation funding firms to build “books” of claimants, using mass media and social media advertisements. In some cases, the firms are seeking to build on the success of claims in the US, seeking to export case theories and arguments directly to the UK and the EU on behalf of claimants in those jurisdictions. The process, including the use of advertisements and social media, not only raises awareness among prospective claimants but also applies pressure on defendants for early disclosure or settlements.
The memo concludes by asserting that group claims “increasingly pose a very real threat to businesses across a broad range of sectors.” Mass claims are now “affecting almost every industry sector” and the claimant law firms “continue to develop innovative case theories to impose liability in new areas.”
There is a sense in which the availability of a group action mechanism is an increasingly necessary artifact of a complex global economy. The fact is that complex economies require sophisticated tools to allow large numbers of related claims to be addressed and resolved efficiently. There is also a sense that the absence of these kinds of efficient mechanisms can be detrimental to consumers and other claimants. Indeed, a large driver in the move toward the adoption in the EU of collective redress mechanisms was the VW dieselgate scandal, in which US-based claimants quickly received compensation while German and other EU claimants found themselves struggling to obtain redress. The law firm memo quotes a statement from a UK justice in a high-profile collective action as saying that “In a complex world, the demand for legal systems to offer means of collective redress will increase not decrease.”
But while the goal of efficiency and arguably even fairness may argue in favor of the adoption of collective redress mechanisms, those of us with long experience in the U.S. know that the availability of these procedural mechanisms can produce excesses as well. In some instances, class actions in the U.S. can prove to be hideously expensive for companies to defend, in ways that put economic pressure on companies to settle contrary to the merits of the dispute. The mechanisms can sometimes lead to out-of-balance outcomes, where the attorneys reap sizeable fees while harmed claimants receive little compensation. The test for the UK, the EU, and other jurisdictions as they try to adopt collective procedural mechanisms will be whether they can realize the efficiencies the collective mechanisms afford without creating the opportunities for excess.
One particular insight the memo offers that is worth noting is the role of U.S. plaintiff law firms in the rise of collective actions in the UK and in the EU. This is a phenomenon I have seen with my own eyes, as I have attended events in Europe and elsewhere sponsored by US law firms in an effort to create awareness and demand for the initiation and maintenance of collective actions outside the U.S. These law firms are skilled, creative, and opportunistic, and together with the litigation funding industry they have been driving the growth in this type of litigation outside the U.S.
The law firm memo does not specifically discuss or address the rise of collective investor actions in the U.K. and the E.U. However, the rise of collective investor actions outside the U.S. clearly is an important part of the overall rise in group or collective actions. As discussed here, the growth of collective investor actions is an important development of critical importance to companies and to their insurers. And as discussed here, there are a number of important collective investor in process that merit watching.
I will say this as a long-time observer whose observational perch includes an extensive opportunity to watch developments both within and outside the U.S. that probably the single most important thing I have observed over the years I have been watching has been the increasing rise of collective action mechanisms outside the U.S. When I first started traveling outside the U.S. for professional meetings years ago, I was often the only American in the room. I was very accustomed to hearing the U.S. class action procedures being vilified as excessive and distortive. The funny thing that has happened over time is that while the U.S. system is still ritualistically condemned, the tools and processes that many countries are adopting increasingly look like – or at least resemble in many of the key details – the U.S. class action system. Of course important differences remain. But the fact is that an increasing number of jurisdictions have found it necessary to adopt and implement mechanisms that allow for collective redress for large numbers of claimants. I expect that this evolutionary process will continue to develop in the months and years ahead.