Organizations are now facing growing class action risks in the UK, EU and Canada. It is crucial for businesses to stay informed about these emerging challenges and adapt their risk management strategies accordingly.
What are the trends you are seeing in class actions in the UK?
Typical group claims in the UK have related to product liability, financial services and investor claims, but in recent years, these have been supplemented by data breach, vehicle emissions/environmental and competition claims.
There are three main ways of bringing group claims in England and Wales: representative actions, group litigation orders and collective proceedings.
Representative actions are where one person brings a claim on behalf of all members of a representative class who have the "same interest" in the claim. Members of that class do not need to do anything (i.e., opt out). Lloyd v. Google has been the most high profile case. There, Mr. Lloyd claimed on behalf of 4.4 million users that Google had been tracking online behaviour without consent. However, the claims failed when the Court found that the "same interest" requirement had not been met – each claim required an individual assessment of loss. A representative claim brought against Google and Deepmind also failed for related reasons. While this may be a setback, it is not quite the end – in 2023, the Court found that the process could be used where the "essential pattern" of the claims remains the same.
Group litigation orders (GLOs) are "opt in" proceedings – each claimant has to take a proactive step in the litigation. There needs to be common or related issues, and those common issues are usually tried via sample lead cases. The Volkswagen Emissions Group Litigation is a recent GLO example. While there have been around 116 GLOs since 2000, there have not been as many as expected as they sometimes fail for lack of common/related issues.
Competition collective proceedings are consumer-focused damages claims for alleged breaches of competition law and can only be brought in the Competition Appeal Tribunal (CAT). This is a relatively new, but well-utilised regime. Since the first certification in 2021 (Merricks v. Mastercard), there have been over 30 collective proceedings.
The increase in all group claims has been fuelled by the growth of litigation funding in the UK in the past 10 years. This also led to the establishment of new boutique claimant law firms such as Pogust Goodhead who actively seek out group claims against corporations, alongside long-standing claimant firms such as Leigh Day. In October 2023, Pogust Goodhead received a £450 million investment from Gramercy, which has been claimed as the largest ever litigation funding deal.
It has not all been plain sailing for the funders. In July 2023, litigation funding hit the national headlines when the Court found that a litigation financing agreement in the context of competition claims in the CAT was in a form that was unenforceable. This potentially has far-reaching implications as many claims going through the CAT have the same form of financing. However, after the initial furor, we expect most funders will restructure their financing agreements and continue to seek to fund these group claims.
So, despite some obstacles in bringing group claims, we expect to see a sustained increase in the number of group claims coming through the UK courts.
What are the trends you are seeing in class actions in Canada?
In Canada, proposed class actions typically arise in a variety of contexts, but over the last few years there has been a rise in consumer protection class actions, including those related to allegations regarding credit card fees, defective products and exposure to harmful/censored content. Canada has also continued to see a fair number of negligence and anti-competition proposed class actions.
We have continued to see a shift in proposed class actions to jurisdictions that have more favourable class action legislation. In particular, there is a move away from plaintiffs filing claims in Ontario, where recent legislation changes have resulted in a more stringent certification test, to claims being filed in western provinces, primarily British Columbia where the class action legislation provides a ‘no costs’ regime for proposed class actions. Québec continues to be the jurisdiction most favourable to certifying class actions.
We are also seeing Canadian courts starting to take a hard look at whether there are alternative remedies, other than class actions, that may be preferable for proposed class members. These alternative remedies are primarily company initiated remedies such as recalls, extended warranties and self-administered compensation schemes. They are receiving increased attention by the courts under the preferable procedure aspect of the certification test.
In addition, there is currently a push by plaintiffs’ class counsel to test the limits of the application of arbitration clauses in consumer actions. Some provinces, such as Ontario, have legislation limiting the application of arbitration clauses in consumer contracts, while other provinces do not. Specifically, in British Columbia, arbitration clauses can, in certain circumstances, be enforceable in consumer contracts (with the exception of claims brought under the applicable consumer protection legislation). To date, British Columbia courts have declined to declare the consumer-friendly arbitration clauses invalid or unconscionable. However, plaintiffs’ counsel continue to explore potential arguments to avoid mandatory arbitration clauses and as of December 2023, there are three consumer cases, as well as one employment case, seeking leave to appeal to the Supreme Court of Canada on this issue.
Can you give an overview of the new EU legislation? What are the benefits/drawbacks/challenges? What does this mean for companies with global operations?
The new Directive entered into force on December 24, 2020. Member states were given 24 months to transpose the Directive into national law, and an additional six months to implement it. Therefore, we had expected these changes to have been implemented starting from mid-2023, although a number of member states are still in the process of doing so.
Once implemented, the Directive will allow for more cross-border mass litigation claims throughout Europe, as it offers the opportunity for consumer associations to partner internationally. International companies need to be ready to face and coordinate parallel pan-European cross-border class actions in the future.
Clients are concerned because in many jurisdictions the opt-in regime causes uncertainty related to the risk of litigation even for balance sheet purposes, since the system allows consumers to join the action up until the final stage of the proceeding, and as a result, it is impossible to determine the economic risk associated with an adverse decision.
We believe that companies should carefully monitor the implementation of the Directive across Europe, especially in those jurisdictions where their business is most active and thus may be more exposed to actions.
What are the trends you are seeing in class actions in Europe?
As the new class action legislation is still being implemented or enacted throughout the EU, it is still hard to provide an analysis of the trends or predict what these will be in the future. By way of example, in Italy, thanks to the Justice Telematic Service Portal, we can already map 21 registered actions, which focus on consumer rights’ protection, unfair commercial practices, unfair terms, protection of homogeneous rights against public authorities and concessionaires, and refunds of amounts paid by consumers for various reasons. However, we expect many more areas of contention will emerge.
In general, we believe that companies should pay specific attention to ESG-related matters, as well as consumer rights, data breaches and product liability issues, in order to mitigate or prevent the risk of litigation.
What is Dentons doing to get ahead of this coming change? Any proactive measures you can speak to?
Our Europe-wide team has been monitoring the new EU class action legislation being implemented and enacted in member states, and are prepared to provide detailed analysis of the local laws and propose solutions to reduce or prevent the risks of class actions. We have created a class action hub on our website to keep our clients fully updated, and many teams are already assisting clients in designing their litigation strategy in preparation for class actions under the new legal regime.
We are also tracking new group actions and collective proceedings in the UK and contributing to Dentons' global class action tracker. In addition, we are providing bespoke training to our UK and international clients on how to be prepared for and mitigate the risk of class actions in their relevant jurisdictions. For example, guiding clients to be alert to unusual one-off claims that could be the stalking horse for much bigger group claims and highlighting the importance of coordinating information on new claims across their international offices. One area that clients are particularly interested in is the risk of climate change and/or greenwashing litigation, and we are hosting workshops to run through the scenarios of how such claims might emerge and how to respond to them.
Our global class action team works closely to respond to multinational class and group proceedings to ensure that defences are properly coordinated and that positions taken in one proceeding or jurisdiction do not impair or undermine defences in other proceedings or jurisdictions.
How is Dentons well-positioned to meet the changing class action landscape?
Thanks to Dentons’ global platform, the Firm is particularly well-positioned to respond to the ever-changing global class action landscape. Not only do we leverage our presence in jurisdictions across the globe to provide clients with seamless service when they are faced with multi-jurisdictional class actions, but we also draw on experience from other regions to assist in novel issues that arise and provide support to regions where class actions are a fairly new occurrence.
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Neil Rabinovitch is co-leader of Dentons Canada’s national Class Action group and a partner in the Litigation and Dispute Resolution group in Toronto.
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Emma Irving is co-leader of Dentons Canada’s national Class Action group and partner in the Litigation and Dispute Resolution group in Vancouver.
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Louisa Caswell is a partner and Head of the Disputes division for Dentons in the UK.
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Sara Biglieri is a partner and Europe Head of Dentons’ Litigation and Dispute Resolution group.