UNITED KINGDOM – A hot topic in recent months has been the introduction in England and Wales of a specific “opt-out” collective redress regime for breaches of competition law. A popular talking point has been whether the development will lead to an increase in collective action in competition claims. In this blog, we ask whether this domestic development, combined with potential European Commission action, could lead to an increase in collective action in other areas and, specifically, in the field of product liability litigation in England and Wales?
There are a number of reasons why England and Wales have historically taken a much more cautious approach to class actions than, for example, the US, despite many of the same issues arising or same products being sold here. Key reasons include:
- The principal means of collective redress in England and Wales (prior to the new “opt out” regime for competition claims), known as the Group Litigation Order (“GLO”), requires claimants to initiate and fund their own individual claims upfront before joining them with others. In addition, our equivalent of contingency fees (known as damages-based fees) have only been permitted since 1 April 2013 and even then, there is a cap of 25% of the damages awarded in personal injury cases and a 50% cap in other cases. Furthermore, success fees under contingency fee agreements are (subject to limited exceptions) generally not recoverable from the other side. The funding deterrent is compounded by a costs deterrent arising from our established “loser pays” principle, which differs quite substantially from the US position where each party bears its own costs.
- Another key difference between the two systems is that, in the US, an action may be brought on behalf of a class member even if that member is absent or unidentifiable. In England and Wales, on the other hand, not only must a claimant be identifiable from the outset to bring a GLO, but they must also be willing, and able, to initiate their own individual claim.
- There are cultural differences too. The availability of jury trials and punitive damages in the US encourages a more claimant-friendly litigation environment which, itself, encourages class action. In England and Wales, by contrast, civil trials are heard by judges and exemplary damages are very rarely awarded, thereby suppressing the collective action appetite.
On 11 June 2013, the European Commission (the “Commission”) issued a non-binding Recommendation 2013/396/EU which stated that Member States should, by 26 July 2015, have implemented a number of recommended “principles” into their national collective redress system – including having in place comprehensive collective redress mechanisms for both injunctive and compensatory relief.
The UK Government responded, stating that: “the general principles set out in the [the Commission’s] Recommendation are broadly in line with existing procedures in the courts in England and Wales“, and that it is not in favour of broader reform to its collective redress regime.
The enactment, however, of a specific “opt-out” collective redress regime for breaches of competition law, pursuant to which consumers will automatically be included in collective action unless they opt-out, represents a fundamental shift in the way that competition litigation is managed in England and Wales. If the new regime is successful, it could lead to crossover into other areas ripe for such reform, including product liability claims.
Given that the Commission is not due to review the implementation of their Recommendation until 26 July 2017, it will be some time before we know whether the Commission is satisfied with the reforms made (if any) by Member States in light of the Recommendation, or whether it will deem it necessary to introduce binding legislation instead.
If the Commission’s threat in this regard materialises, and/or if the changes to the competition sector prove successful, we may see the emergence of a product liability “class action” in England and Wales. While it is unlikely that such an action would adopt all aspects of the US model, the development of a product liability class action in this jurisdiction is certainly something that manufacturers and distributors of products in England and Wales will want to monitor given the potential cost of such claims, both financially and to a company’s brand and reputation.