UK government’s class action proposal raises concern from global corporates

UK Business Minister Vince Cable published the government's proposals last week. "What is needed from government is to create the legal framework that will empower individual consumers and businesses to represent their own interests," wrote Mr Cable. Under the UK's current system all affected parties in a collective action must actively opt in and participate in a case. The new proposals would introduce an opt-out clause, whereby claimants could pursue their own legal action. Supporters say this will make it easier for consumer groups to bring collective actions and for individuals to launch their own private cases. Critics from business, however, say the move will fuel a new litigation culture by making the UK more like the US where rules similar to the proposed class action changes exist.hideTheir fears are based on the sheer number of cases brought in the US under such a regime. Between 2005 and 2008 the UK had 41 anti-trust cases that resulted in a judgment, whereas in the US there were 677 cases in 2012 alone. The Confederation of Business Industry (CBI), Britain's largest business lobbying group, has accused the government of 'letting the litigation genie out of the bottle' and threatening the UK's economic recovery. "By grouping potential claimants together indiscriminately, these opt-out actions fail the growth test and will fuel a litigation culture in the UK," said Katja Hall, Chief Policy Director of the CBI. "It is absolutely right that victims of competition law breaches are properly and swiftly compensated but there are better ways to do this than resorting to litigation, like using alternative dispute resolution." The UK government insists that the new proposals would guard against 'frivolous or unmeritorious litigation' by disallowing contingency fees that allow plaintiff's lawyers to earn up to a third of the damages and by retaining the loser pays provision whereby the losing side pays the legal costs of their opponents. The proposals also call on law firms to undergo a judicial test to assess the adequacy of the representative plaintiff in order to inject more rigour than is the case in the US. Furthermore, the 'opt-out' clause only refers to competition cases brought before the Competition Appeal Tribunal and not other areas of law. The proposals have been welcomed by the legal profession in the UK as a way to give consumer groups a greater chance of redress in price-fixing scandals and other anti-competitive practices. "We are very pleased with the key changes proposed, particularly the introduction of opt-out collective actions and the expanded role for the Competition Appeal Tribunal," said Lucy Scott-Moncrieff, President of the Law Society in the UK. "The current system simply isn't working." But she expressed disappointment that some types of fee agreements will be prohibited and that law firms will not be able to bring their own opt out actions to prevent anti-competitive behaviour. Ms Scott-Moncrieff applauded the news that any compensation awarded to affected individuals but not claimed would be donated to Access to Justice Foundation, an independent charity, rather than reverting to the claimant.

UK government’s class action proposal raises concern from global corporates

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