Corporate & Securities Law

Sweden evaluates Group Proceedings Act

By Werner R. Kranenburg

Earlier this week I came across a 2006 article by Shook Hardy & Bacon LLP’s Laurel J. Harbour and Marc E. Shelley, entitled The Emerging European Class Action: Expanding Multi-Party Litigation To A Shrinking World. Among other things, the Swedish collective action legislation (Lag om grupprättegång, Group Proceedings Act) is discussed therein (from p.5). (Also see this 2006 intervention by (then-)Deputy Consumer Ombudsman Marianne Åbyhammar of Konsumentverket, the Swedish Consumer Agency.)

That discussion ended with the note that ‘[t]he Swedish Act is to be reviewed at the end of 2006 or beginning of 2007.’ So I e-mailed the authors with the question if that review indeed took place and if so what the outcome was. After exchanges with both, I invited Marc to amend slightly his initial comprehensive response for publication as a guest post. He kindly accepted the invite. With thanks, his guest post is as follows:

In October 2008, the committee to evaluate Sweden?s Group Proceedings Act (SFS 2002:599) released its nearly 300 page report and recommendations (in Swedish; summary, in English). When the Act was adopted in 2002, the law provided for an evaluation after five years. In June 2007, the Ministry of Justice appointed the committee to analyze the cases filed since the law went into effect on January 1, 2003 (for the interest of the readers of With Vigour and Zeal, to my knowledge, none has been filed yet based on alleged misconduct related to securities).

By way of background, the Act requires cases to satisfy several preconditions in order to proceed. Like the U.S. Rule 23, a class action may be brought by an individual or association seeking monetary or injunctive relief on virtually any type of claim. There must be common factual circumstances, and the action must be manageable and a superior way of handling the litigation compared with the alternatives of joinder and test cases. The class must be ?appropriately defined? and the plaintiff must suitably represent the class. However, in contrast to Rule 23, class members must opt in to be included as a member of the class and only individuals who have done so will be bound by the judgment.

The committee concluded after surveying the cases filed since 2003 that there has been no abuse of the device and, on the contrary, it has had a positive effect on access to justice for consumers. Despite the lack of abuse and its apparent success, the committee proposes to expand the procedural law in the following way:

1. Introducing U.S. style contingency fees of up to 30% of the disputed amount, in order to facilitate the financing for the plaintiffs to bring more class actions. The committee?s report specifically cites to the 2006 German Supreme Court decision that a bar on contingency agreements is unconstitutional. The report also proposes an increase of legal aid for class actions.
2. Allowing plaintiffs to provide notice to class members instead of the court to improve the notification process for greater participation.
3. Expediting the court’s certification process, particularly with respect to the class definition, to make the device quicker and more effective.
4. Preserving the opt-in model, despite calls for changing to an opt-out model (either generally or for certain types of claims, as permitted in the Norwegian and Danish class action models).

It is not yet clear whether these proposals will be successful. Interested parties have until January 16, 2009, to submit comments.

Full post as published by With Vigour and Zeal on December 19, 2008 (boomark / email).