Brussels backs away from mass tort in Europe

The news on collective redress came along with the long-awaited draft 'Directive on certain rules governing actions for damages under national law for infringements of the competition law provisions of Member States and of the European Union'. It was feared that this directive could open the mass tort floodgates in Europe with potentially huge implications for corporations and their insurers. But the draft directive omits collective redress and it was only dealt with under a simultaneously issued non-binding recommendation, a much watered down version of what had been feared by risk managers and hoped for by plaintiff lawyers.hideThe European Commission explained that it had decided to issue a series of common, non-binding principles for collective redress mechanisms in member states 'so that citizens and companies can enforce the rights granted to them under EU law where these have been infringed'. The EC said that the recommendation aims to ensure a 'coherent horizontal approach' to collective redress in the European Union without harmonising member states' systems. It added that national redress mechanisms should be available in different areas where EU law grants rights to citizens and companies, notably in consumer protection, competition, environment protection and financial services. "By recommending to member states to put in place national collective redress mechanisms the Commission wants to improve access to justice, while ensuring appropriate procedural guarantees to avoid abusive litigation," stated the EC in business-friendly language. The Commission further explained that the recommendation calls on member states to introduce collective redress mechanisms but pointed out that the directive leaves it to them to decide whether or not to introduce collective redress actions in the context of private enforcement of competition law. "Member states have very different legal traditions in collective redress and the Commission wants to respect these. Our initiative aims to bring more coherence when EU law is at stake", said Vice-President Viviane Reding, the EU's Justice Commissioner. "This recommendation is a balanced approach to improve access to justice for citizens while avoiding a US-style system of class actions and the risk of frivolous claims and abusive litigation," she added. Vice President Joaquín Almunia, in charge of competition policy, said: "When they are victims of infringements of competition rules, citizens and businesses-particularly SMEs-often face strong obstacles in obtaining effective compensation. To overcome these difficulties we have proposed a directive on antitrust damages actions. Since the harm may be shared by many injured parties, collective actions mechanisms should also be in place. This recommendation is therefore a useful complement, sending a clear message to member states." Expert lawyer Yves Botteman of Steptoe &Johnson, suggested that risk managers should welcome the news from Brussels. "In our view, while it undoubtedly sets the path towards developing collective redress in Europe, it nevertheless sets up a number of barricades to avoid what many consider to be the excesses of the US class-action system," he told Commercial Risk Europe. "In particular, the EC favours opt-ins, rejects contingency fees, reserves such actions to recognised representative bodies, disfavours expansive discoveries and limits recovery to the actual damage suffered," continued Mr Botteman. "Accordingly, given those limitations and the high costs inherent to such litigation, it is questionable whether there are enough ingredients in the Recommendation to incentivise representative organisations of consumers to bring mass claims before national courts," he said. "Only time will tell whether this initiative translates into actual mass tort litigation in Europe," concluded Mr Botteman. On the specific antitrust rules designed to promote private damage claims, Mr Botteman said that the latest news from the EC is a step towards more effective private enforcement of EU competition rules. But again he pointed out that the European approach is far more conservative than in the US. "While the draft directive has drawn inspiration from US private antitrust enforcement (in particular, regarding the joint and several liability of defendants, and the non-disclosure of proffers made to antitrust authorities), it departs from the US system in a number of important respects, including: restricting the type of evidence that is discoverable and the ways in which it can be used; and limiting compensation to the actual loss or the loss of profit suffered, which therefore excludes the ability to seek punitive or exemplary awards," he said.

Brussels backs away from mass tort in Europe

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