Class actions and collective claims making an impact in the UK
The approval by the Court of a £10bn opt-out class action against Mastercard on behalf of 46 million UK consumers is the highest profile illustration of the arrival of class actions in the UK. It is by no means the only such claim and more are expected. Nicholas Heaton, President, London Solicitors Litigation Association (LSLA) and partner, Hogan Lovells comments
n a recent survey of its members, the London Solicitors Litigation Association, a leading organisation representing litigators practicing in London, found that 77% of respondents foresaw "a material increase in class/collective actions during the next 24 months". The areas respondents identified as most likely to generate such claims were data/ privacy, consumer / product liability and securities /shareholder disputes. There are few large businesses whose operations do not touch on these areas and therefore class actions, or other forms of collective claim, are matters that need to be taken seriously by company boards.
President, LSLA and partner, Hogan Lovells
There are a number of factors behind the rise of such mass claims. One is the introduction in 2015 of a US style opt-out class action regime in the UK for competition law claims. That regime took time to get going, but when the Supreme Court gave judgment in the Mastercard case at the end of 2020, clarifying the requirements of the new regime and settling a relatively low threshold for allowing a class action to be certified and to proceed, that gave encouragement for other claims. Although this formal class actions regime only applies to claims for breach of competition law at the moment, alleged breaches of competition law can be used to frame claims in many different areas. Current examples include three claims against tech giants, claims relating to train fares, car transport, trucks, insurance, chip makers, phone calling charges and FX trading.
Outside the competition law regime, claimant lawyers have been testing the boundaries of pre-existing procedural tools to group together thousands and sometimes hundreds of thousands of individual claims. This approach can be applied to any kind of claim, but recent examples include product liability claims, claims relating to car emissions, and shareholder claims, like the high profile cases against RBS and Tesco. An attempt was also made recently in Lloyd v Google to deploy a centuries old but little used procedure, known as a representative claim, to bring a claim on behalf of millions of mobile phone users for breaches of data protection law . Although the Supreme Court rejected the claim as not suitable for the requirements of that procedure, different claims might still be able to use it in future.
Another significant driver is the ready availability of commercial litigation funding. This market has grown very considerably and funders are becoming more ambitious in the kinds of litigation they are prepared to back. In turn, this fertile environment for collective claims is resulting in the establishment and growth of law firms specialising in class actions and collective claims.
As a consequence, directors need to take the risks associated with class actions and other forms of collective claim seriously. There is potential for the sums claimed to be very high, running to billions in some cases. Claims of this kind by definition concern very large groups of individuals or businesses and are highly publicised. As a result, involvement in such a claim (regardless of its merit) causes reputational harm. Such high profile, high value litigation will require a great deal of senior management attention and will be expensive to defend. There is, therefore, a significant cost to the business even if a claim is defeated. Moreover, once a class action is certified, or a collective claim gathers momentum as more claimants sign up, they can be challenging to settle. The settlement dynamic can be very different from that for a claim of a similar value brought by a single claimant.
Possibly the most important thing a business can do in the face of this claims environment is to make a realistic assessment of its exposure. Few areas of business are risk free, but some are clearly more exposed than others: consumer facing businesses obviously have a higher exposure (although claims can be made by business customers or by indirect customers); businesses that hold or process large amounts of personal data are at particular risk; businesses that have a significant market share, and so might be considered dominant from a competition law perspective, are becoming more frequent targets of class actions too.
It is also important for businesses faced with a potential class action or collective claim to appreciate that there are tools available to challenge such claims. With a class action, the Court must certify the claim before it can proceed. Class actions and collective claim can all be struck out at an early stage if they lack sufficient merit or potentially be narrowed in scope. Class actions and other forms of collective claim are still very much in development in the UK and the parties and the Court are still testing out their limits. That uncertainty is unwelcome for potential defendants, but it does involve risk for claimants too and there remain many battles to fight in defining the proper boundaries of such claims.
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