Corporate Governance

European Union Grapples With Class Action Model

By Jeremy Lieberman

While U.S. government and business leaders are doing everything in their power to stamp out class actions in America, the European Union is slowly embracing the class action mechanism.  On April 3, 2008, the European Commission published a much anticipated ?White Paper? setting forth recommendations to establish a system for the private enforcement of violations of EU antitrust laws.  The White Paper follows the Commission?s December 2005 Green Paper, which noted the inadequacy of its Member States? rules and procedures in providing adequate compensation to businesses and consumers harmed by anticompetitive practices.

The recommendations, which are not binding on Member States, sets forth a number of proposals for class or collective action.  The proposals are intended to strike a balance between redressing the inadequacies of the European system, while avoiding perceived ?abuses? or ?excesses? that occur in the U.S.  First, the Paper proposes that representative actions be brought by qualified agencies, which will be designated by Member states in advance.  The paper further proposes that antitrust victims be allowed to bring ?opt in? actions, whereby victims will need to express their intent to join a collective action.  This stands in contrast to the U.S. ?opt out? system, whereby a passive class member is bound by the resolution of the action unless it expressly chooses to be excluded.

The White Paper also proposes several measures designed to give plaintiffs better access to evidence in civil actions.  In order to compensate for the inadequate discovery mechanisms in Europe, the Commission recommends allowing courts to impose sanctions in cases where evidence is destroyed.

To protect indirect purchases in anticompetitive civil suits for whom it is difficult to establish damages, the Commission proposes creating a rebuttable presumption that the illegal overcharge was passed on to these purchasers in full. 

While many of these measures fall far short of the U.S. system for collective redress, other proposals?such as providing a rebuttable presumption of harm to indirect purchasers--go even further in protecting wronged consumers.  Indeed, while Paulson and his cohorts are complaining that the U.S. capital markets are losing their competitive edge to the EU because of the U.S.?s class action system, the EU is slowly, yet inexorably, adopting this very system.

The irony!

Full post as published by PomTalk on April 14, 2008 (boomark / email).