March 21, 2017

U.S. Chamber Report: Class Action Litigation Systems in Europe Are Open to Abuse

WASHINGTON, D.C. — A new report released today by the U.S. Chamber Institute for Legal Reform (ILR) shows collective redress litigation models, known as class actions in the U.S., are proliferating across Europe, but the systems are developing without safeguards to protect consumers and employers.

The report, The Growth of Collective Redress in the EU: A Survey of Developments in 10 Member States, examines the collective redress systems of 10 EU Member States that represent 79 percent of the EU population and 82 percent of its GDP. The findings reveal troubling trends in these countries’ collective redress litigation models, including the filing of multiple billion euro claims, the expansion of U.S. class action firms to the European market, and significant growth of the litigation funding industry without any government oversight.

“The same systems of incentives that have led to abuses of the civil justice system in other countries are now arising in EU Member states,” said ILR President Lisa A. Rickard. “These collective redress lawsuit systems are developing without the safeguards needed to protect the courts from being abused for private gain by lawyers and litigation funders.”

The report finds that in attempting to address a perceived deficit with access to justice, Member States are increasingly removing or reducing the traditional safeguards that have prevented abusive litigation in Europe. In light of these findings, the paper suggests a set of critical safeguards necessary to prevent litigation abuse from taking hold in the EU, such as implementing stringent class certification standards, preserving the “loser pays” principle, and restricting contingency fees and third party litigation funding for collective actions.   

The release of ILR’s report coincides with the European Commission’s review of the implementation of its 2013 Recommendation on Collective Redress. Based on its analysis, the Commission will report this summer on whether it thinks further EU legislation is necessary.

The report was prepared for ILR by Ken Daly, Partner at Sidley Austin LLP.

ILR seeks to promote civil justice reform through legislative, political, judicial, and educational activities at the global, national, state, and local levels.

The U.S. Chamber of Commerce is the world’s largest business federation representing the interests of more than 3 million businesses of all sizes, sectors, and regions, as well as state and local chambers and industry associations.

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