Class or collective actions have not been a prevalent feature of the English legal system and the viability of such actions before the English and Welsh courts has been limited, at least historically. The concept of large group actions conjures up thoughts of Hollywood courtroom dramas or bumper cash payouts following high-profile corporate scandals, which climaxed with the record-breaking package in 2008 of USD 7.2 billion payable to the eligible shareholders of the collapsed energy giant, Enron. However, if recent high-profile cases are anything to go by, then group actions are shaping up to become a more regular tool deployed in legal proceedings in England and Wales.
Playing FTSE
Based on recent research by Thomson Reuters, group actions involving FTSE 100 companies increased by 10% in 2020-2021, with a total number of 170 cases, up from 155 during 2019-2020 and 152 during 2018-2019. Interestingly, the majority (more than two thirds (67%)) of these cases have originated from the US – which is perhaps an indication of the more litigious culture across the pond – and almost half of actions (47%) related to breaches of competition law. There are several drivers behind the increased interest in group actions:
- Wider scope to bring group action claims
A number of key reforms over the past two decades that have facilitated the viability of collective/group actions, including the introduction of formal group litigation orders (GLO) under Part 19 of the Civil Procedure Rules (CPR) and orders permitting collective proceedings in the specific context of competition law before the Competition Appeal Tribunal (CAT). A notable theme of UK collective actions in the competition field was that they could only operate on an opt-in basis – as such, each claimant was required to actively elect to join the lawsuit. However, since October 2015, and following an amendment to Section 47B of the Competition Act 1998 (as amended by schedule 8, paragraph 5 of the Consumer Rights Act 2015), there is now the possibility to bring opt-out cases before the CAT, where claimants have been impacted by infringements of competition law (such as cartels). In this latter scenario, claimants (including those who are unnamed) are deemed to be included in the action pursued on behalf of a class unless they have expressly opted out.
- First-of-a-kind cases are being launched
Recent cases have broken new ground for collective actions:
- In early June 2022, the CAT issued its first-ever Collective Proceedings Order (CPO) for an opt-in action under the new regime in a £2 billion claim brought by the Road Haulage Association against the truck manufacturers’ cartel (which was already fined record amounts by the European Commission).
- In October 2021, the CAT, since being empowered to hear such cases in 2015 by Section 47B of the Competition Act, certified the first standalone opt-out case in the Justin Gutmann case in the context of rail ticket fare overcharges, noting that opt-in proceedings were not practical in that case.
- Similarly, group proceedings have been brought in the context of data privacy following data breaches by British Airways, EasyJet and Morrisons, as well as in the automobile industry relating to car emissions/environmental claims and interchange fees in the banking sector.
- Litigation funders eying investment
The reported interest from litigation funders willing to inject cash into group actions can additionally be seen as a contributing factor to the growing presence of collective actions, particularly as not all claimants in the class will have sufficient resources to launch – or market – cases. While issuing proceedings can be costly at the earlier stages of the process, group actions can attract thousands of potential claimants, resulting in huge settlements running into millions. Indeed, trial risk may also be reduced as – at least in the US – group actions typically settle rather than proceed to trial.
Groupthink
The idea of a company being hit with a high-profile claim, which could result in a significant time, money, resources and reputation being expended, creates uncertainty and general anxiety within the business. Together with strong financial backing from funders, it would not be surprising if a large number of FTSE companies (and other companies more generally) were apprehensive about the uptick in group actions in the UK.
Notwithstanding the above, it is worth noting that any group claim in the English and Welsh courts can still only be issued on an opt-in model. Opt-outs are limited to the CAT and competition law; accordingly, floodgate concerns as a result of a ‘relaxation’ in the rules can (for the moment) be downplayed. Nonetheless, with ever-increasing scrutiny on governance – whether in the context of data protection, environmental or social concerns – coupled with more creative routes to group litigation, there certainly will be new challenges to face.
