Business leaders warned Europe against following the US down the route of class action lawsuits on Tuesday as Brussels stepped up calls for consumers to gain the right of “collective redress” against companies that rip them off or provide defective goods and services.
The fear that Europe might adopt the litigation culture prevalent in the US, with the prospect of high punitive damages, has alarmed business but excited interest from law firms.
Meglena Kuneva, the European Union’s consumer affairs commissioner, said she wanted to “empower” consumers to pursue Europe-wide claims against companies that provided faulty goods or services.
“I want a citizen in Birmingham to feel as comfortable shopping for a digital camera from a website in Berlin or Budapest as they would in their high street,” she said.
Although Ms Kuneva stressed that any European model of collective redress would avoid the excesses of the US system, there is growing pressure from Brussels to beef up consumer rights. Neelie Kroes, the competition commissioner, last week stepped up her call for action to make it easier for consumers and companies to take “collective action” against firms that break antitrust rules.
Her officials say a number of national obstacles prevent such action, while lawyers complain of the lack of a clear regime on damages.
Ms Kroes believes that the threat of collective court action by victims of cartel activity would be a vital deterrent, in addition to the escalating fines being levied by the European Commission in antitrust cases. Neither Ms Kuneva nor Ms Kroes has a precise idea of how this European-wide collective redress might work in practice – the issue is out for consultation – and that has caused uncertainty in the business community.
Ernest-Antoine Seillière, the president of the employers’ organisation Business Europe, said he strongly supported improving consumers’ access to justice, particularly in the context of cross-border transactions. “But we are strongly against a US-type class action because of the drawbacks
of the system,” he said.
Ms Kuneva’s officials also dislike aspects of the US model, particularly the idea of punitive damages and the concept that claimants have to opt-out of a class action.
One potential European model might allow consumers to group together under the auspices of national consumer bodies, with the power to bring a collective case in the national courts of one of the member states.
Some countries already have different collective procedures for claiming damages: the Netherlands is the closest to the US model, while Germany and Austria have test-case procedures and France allows representative actions. Harmonising such systems is one option being considered but could be highly controversial and time-consuming.
Emmanuel Gybels, a Brussels lawyer specialising in fighting class actions in the US, says a number of American law firms are gearing up their operations in London and Brussels. He said: “It’s only a matter of time before this kind of thing comes to Europe.”
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