Class actions are gathering pace in Europe, with big tech companies most prominently set in claimants’ sights.
The Netherlands, which is home of the current TikTok action, has become a hub for class actions in recent years. It is understood that around 50 class actions have now been instigated in the Dutch courts.
Why might this be the case? First, there is a relatively low cost of instigating claims in the Netherlands. Secondly, there is a low adverse costs risk. Thirdly, litigation funding is prevalent. Finally, the Dutch court system tends to be quite fast, as compared to the court system of some of its European neighbours.
These features are all common to litigation in Scotland, too.
To raise a court action in the Scottish courts there is a modest court fee, especially when compared to anywhere else in the UK. And while the risk of adverse costs can be significant for an unsuccessful party, there are a couple of measures now available which potentially mitigate that risk to a significant extent.
For example, protective expenses orders may be available to a claimant in some cases. And in class actions arising out of clinical negligence issues, qualified one-way cost shifting may apply. Further, where claimants are willing and able to pay the premium involved, the availability of After the Event (ATE) insurance cover may mitigate the risk of an adverse costs award entirely.
All of this is supplemented by the increased availability of litigation funding. Like the Netherlands, there are no constraints on the use of funding in group proceedings, which sets Scotland apart from some other jurisdictions.
If Scotland is so well-positioned for class actions, why haven’t there been more?
The main reason is that the Scottish procedure is still in its relative infancy. Class actions, known within Scotland as "group proceedings", were introduced with the Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018. And while the 2018 Act provides for the possibility of both "opt in" and "opt out" class actions, only provisions relating to opt in actions have been brought into force.
Opt in actions mean that the claimants have proactively sought to be involved in the action, but they can be of limited value because of the efforts required to find enough claimants to participate in the class.
However, opt out actions, which are available throughout Europe, are brought on behalf of a defined group of claimants without the claimants having to proactively choose to participate. If the representative party successfully persuades the court that the action should be brought, then any successful outcome will be shared by all claimants in the class. Accordingly, the value of opt out claims is potentially far more significant. This means that the introduction of opt out actions in due course will significantly benefit Scottish consumers.
While they are yet to be introduced, the concept of opt out actions is not entirely alien to Scotland. The Consumer Rights Act 2015 introduced opt out procedure to the Competition Appeal Tribunal (CAT) which has UK-wide jurisdiction in relation to breaches of competition law. Competition law disputes are common in Scotland and the CAT has already had experience dealing with significant opt out claims.
Experience in the CAT suggests that the courts may be willing to take a pro-consumer approach to opt out claims. In the Mastercard v Merricks case, in which the CAT had to deal with a collective claim for damages resulting from an alleged breach of competition law by Mastercard, the court gave claimants significant comfort. The court decided that in relation to the standard for certification, it would not involve a merits test, and in the approach to damages, a "broad brush" approach could be taken.
If that sort of flexible approach is shown by the courts in Scotland in relation to group proceedings, then these claims could be a real boost for Scottish consumers. Businesses will therefore need to take early advice to protect themselves if a claim is on the horizon. Potential claimants and their lawyers will be paying close attention to the likely timescale for introduction of opt out actions, as that introduction may well see a proliferation of claims which we have seen in other jurisdictions.
While the Scottish courts are just beginning to implement group proceedings and finetune how they will operate in practice, there are positive indicators that the nation could become a destination for class actions, both with opt in proceedings already available and the conditions which make the Netherlands favourable mirroring those in Scotland.
However, it’s important to note that the opportunities group proceedings may bring for consumers have to be balanced against the risks and cost for business.
The gradual introduction of group proceedings in Scotland, combined with a cautious approach from the court, is likely to mitigate the risk of costly and unmeritorious claims. Regardless, businesses will have to be ready to deal with these claims when they arise.
This article was first published in The Lawyer.
