10 May 2018

Commercial Risk Europe: European Commission’s collective redress proposals open door for US-style litigation, warns source

An insurance industry insider has added to the list of those concerned about the Commission’s proposed collective redress system, claiming it fails to protect against third-party litigation funders bringing US-style class actions to this side of the Atlantic and lacks other key safeguards.

The source was keen to stress that although collective redress can be useful in some instances, it should not be promoted at the expense of alternative dispute resolution (ADR), which she believes currently works well in many EU member states.

In its New Deal for Consumers package announced last month, the EC put forward plans to introduce pan-European Union collective redress and penalties of up to 4% of annual turnover for organisations that fall foul of consumer law, among other measures.

The EC wants to see the legislative changes on the statute book before the European Parliament elections in May 2019.

Its collective redress system – which would allow all consumers to bring multi-country, joint actions across the EU for the first time – has raised concern among the business, risk management and insurance community. Such redress is currently not possible at all in nine member states, and is patchy in others.

The EC believes its proposals contain measures to ensure US-style class actions will not be seen on this side of the Atlantic, but current safeguards have not calmed fears over unfair and unmerited litigation.

Representative bodies and sources from key stakeholders, including insurance buyers, all complain that several safeguards put forward by the EC in 2013 to avoid mass US-style class action in the EU have not made the final proposals.

Concerns focus on the fact that the loser-pays principle and need for consent to be part of an action are missing, as well as fears that rules governing who can bring a class action will not preclude third-party litigation funders from delivering mass US-style litigation in Europe.

Full article on Commercial Risk (subscription required)

© Commercial Risk Europe