Class Action Lawsuits in the EU: A Balancing Act

Class Action Lawsuits in the EU: A Balancing Act 30/11/2020

“Perfectly balanced, as all things should be.” – Thanos, Avengers: Infinity War

Although most government bodies would not use Marvel’s Thanos as an inspiration, the EU appears to be taking into account some of the villain’s core philosophy in its approach towards class action lawsuits. In the wake of several large corporate scandals, the European Parliament has recently endorsed legislation standardising EU citizens’ right to file class actions. The intent of these lawsuits is to allow consumers to band together to seek justice from corporations; however, there is the possibility for corporations to be bombarded with frivolous litigation designed to squeeze money from them. Thus, the EU has to balance the consumers’ right to fight back against unethical corporate actions with the corporation’s right to not be encumbered by meaningless lawsuits.

This issue of collective redress was brought to the forefront by recent corporate misconduct such as Volkswagen’s “Dieselgate” in 2015 and the 2018 data breaches at British Airways and Marriott. In all three instances, the settlement or fine that the corporations ultimately had to pay was significantly lower than what was initially expected. Because of cases such as these, the European Parliament has endorsed the Collective Redress Directive on 24 November which requires all EU members to offer their citizens at least one method for them to file class-action lawsuits. However, there are three distinct differences between EU class actions and their American counterparts.

1. Unlike the United States, where private law firms are usually the ones to spearhead class action lawsuits, the EU’s Directive will require such litigation to be brought by either a consumer organisation or some other qualified entity. These qualified entities must be nonprofits.
2. Only monetary “compensatory damages” can be awarded; the purpose of this directive is not to punish large corporations through punitive damages, but rather to compensate the negatively affected consumers for the harm that they suffered.
3. All EU class-action lawsuits will have a “loser pays” principle—the party that loses, whether it is the corporation or the entity representing the consumers, is the one that pays the legal fees for both sides.

These three differences help balance consumers’ ability to seek redress while ensuring that any class action litigation is legitimate and not an attempt to abuse the system. The UK will not be required to follow the EU Directive due to Brexit, but if the new legislation becomes popular, it may encourage the UK to adopt something similar for its own citizens. Hopefully, when the Collective Redress Directive is officially enacted in two years, the rights of both consumers and corporations will be perfectly balanced, as all things should be.

Would you like to make a request?