8.5.4 Recommendation on collective actions and the UK government's response

Despite the similarities to the US class action,1 the representative action in English law remains underused.2 Because of the practical difficulties of an opt-in collective action mechanism as the GLO regime and the costs and risk incurred by the representative party in the above-described two-stage representative procedure, Mulheron proposes to adopt a single-stage opt-out collective action procedure in English law.3 In the same context, she also proposes to adopt the US fraud-on-the-market-theory with respect to causation.4 However, given the response of the UK government to the recommendations of the Civil Justice Council ("CJC") regarding collective actions, as will be discussed in this paragraph, it is not very likely that legislation will be adopted that introduces US style class actions. Furthermore, it must be noted that in the short term it is also very unlikely that the UK Supreme Court, as the new final court of appeal in the UK for civil cases, will adopt the position that individuals no longer need to establish actual causation individually.

The Civil Justice Council in its report 'Improving Access to Justice through Collective Action' makes recommendations to the Lord Chancellor, the UK Minister of Justice, with respect to collective redress in English law. The Council recommends introducing a generic collective action in which claims should be brought on an opt-in or opting-out basis, subject to court certification.5 The Council views the court as the appropriate institution to act as gate keeper and case manager so as to ensure that the collective procedure is fürly balanced between the litigating parties.6 In order to be able to perform these tasks effectively, the court should subject any collective claim to a strict certification procedure before it is allowed to proceed. The court should also decide which mechanism, opt-in or opt-out, is more appropriate in the case brought before it.7 In case that the collective procedure deals with a significant number of small claims arising out of a common contractual dispute or a common liability claim in which it is difficult to identify at the outset of the claim each member of the class, it may be better to resolve the dispute on an opt-out basis. Opt-in collective proceedings may be more appropriate in a case with a relatively small class involving high-value individual claims. Furthermore, the Council recommends, in the interest of the represented class claimants, that any settlement agreed by the representative claimant and the defendant must be approved by the court within a `Faimess Hearing' before it can bind the represented class of claimants.8

In the UK Government's response to this report,9 the government considers the introduction of a generic action not appropriate. The introduction of collective action rights in addition to the generic ones discussed in the previous subsection should be based on a sector-specific basis. Furthermore, the UK Government considers that a hybrid opt-in model is in most cases preferable to a full opt-out model. The disadvantages of the opt-in model, among others the difficulty to identify and mobilise sufficient members of a class at the initial stage in the court proceedings, are to be modified such that a hybrid model is combining the advantages of the opt-out model without the disadvantage of unidentified claimants losing their right to bring a claim. Furthermore, in the opt-out model with unidentified claimants, the damages are to be assessed on an abstract basis of the total damages to the class of which not all members are identified. This could consequently lead to insufficient funds to compensate all claimants if some error is made in the abstract calculation of damages.

The model preferred by the Government would include the following modifications to the normal civil procedure principles:

These changes in the civil procedure rules favouring claimants are to be balanced by court control on the merits of the case and a robust case management in general. At this moment, these modifications have not been implemented in the Civil Procedure Rules.11