EU shies away from US-style class actions

Hopes for a US-style class action rule in the EU have been dashed with a very watered-down set of recommendations expected from the European Commission today.

Consumers organisation have criticised the draft proposals, saying it would do little to help the 5,000 victims of the PIPs breast implants scandal and other cross-border problems.

Many businesses and governments, including Ireland, have been arguing against EU-wide legislation that would give consumers more power to take cases against companies for defective products or services, saying it would lead to exorbitant payouts, as in the US.

While 79% of the public said they would like the ability to join together, cutting costs and making such action possible, it will be left up to countries to decide whether to allow such cases.

Unlike Ireland, 16 EU countries have some form of system allowing collective redress, but rules vary widely and do not facilitate cross-border actions.

Justice commissioner Viviane Reding will announce details in Brussels today, eight years after the commission said it was exploring the issue.

She is due to set out a series of common, non-binding principles that EU members would be recommended to adopt.

“The recommendation aims to ensure a coherent, horizontal approach to collective redress in the EU across the range of areas where rights are granted under EU law without harmonising member states’ system.”

The collective redress being recommended is different from the class actions common in the US legal system.

Monique Goyens, head of the European Consumers’ Organisation, said having a recommendation rather than a binding legislation was a letdown for consumers.

She also said that each victim would be asked to sign up when automatic inclusion of all victims should be the norm.

“There has been a degree of scaremongering that this will bankrupt European businesses or prompt a litigation culture, this is nonsense,” she said.

“It simply has not happened in the European countries already benefiting from it.

“The key safeguards against exorbitant awards are in place. So we are not importing US class actions. This is a basis to ensure victims receive compensation as and where needed. It also boosts a competitive market by reclaiming illegal profiteering.”

Ms Goyens appealed to all EU countries to put collective redress systems in place and ensure it is harmonise with all other countries.