Collective redress: justice for all or free–for–all?

The current debate on reform of collective redress mechanisms raises interesting questions for law firms. Access to justice for both consumers and businesses may be more readily facilitated by a more efficient means of resolving actions involving large groups of litigants across Europe and the UK. The question of whether any proposed system should be opt-in or opt-out dominates discussion, hindering a broad-ranging exploration of the issues.

The conflict between different legislative frameworks creates regulatory uncertainty for corporations operating across jurisdictions. Further, the variety of domestic remedies available across the EU encourages forum shopping by potential litigants. John Wright, National Chairman of the Federation of Small Businesses has expressed the view that an effective cross-border collective redress mechanism is an important step in the completion of a single market.

Consumer organisations are seeking to expand their role in organising collective action amongst large groups of relatively powerless individuals with low-value claims. Philip Cullum, acting CEO of the National Consumer Council, has argued that some businesses exploit the fact that the cost of pursuing legal action is disproportionate for individuals involved in disputes over relatively small sums. Only by enabling consumers to join forces can this power imbalance be addressed.

Options for reform

Richard Wiseman, former General Counsel of Shell International Ltd has criticised the excesses of the US system of collective redress, arguing that the solution lies in giving regulators the power to award compensation in cases involving breaches of competition law.

Opinions differ with respect to the efficacy of alternative means of dispute resolution in the context of collective actions, though most agree that it is likely to develop into a niche area of practice for lawyers. Third-party funding of class actions may be an attractive prospect for outside investors.

These policy discussions have been informed by a series of events hosted by the Law Society. Read more about the legal breakfast series.