In recent years, the UK has seen a rising trend of individuals
coming together to collectively bring claims against large
companies due to the introduction of new European procedural rules
allowing for "collective actions".
Traditionally seen as a US procedure, class actions are now
flourishing in Europe and the UK. Global technology and financial
services companies are facing ongoing cases before the English
courts including a claim from 46.2 million individuals, valued at
£14B, and a claim from almost 20 million individuals, valued
at £1.4B.
Most recently in July 2023, the Court of Appeal in
Forex1 permitted a £2.7B
class action against six investment banks for alleged foreign
exchange manipulation concerning spot trading in the G10
currencies. The context of the class action is that on May 16,
2019, the European Commission found that the banks had each
participated in one or both of two FX spot trading cartels in
breach of EU competition law, for which they were fined
€1.07B. Phillip Evans, a former Inquiry Chair at the
Competition and Markets Authority (CMA) sought the
permission of the Competition Appeal Tribunal
(CAT) to act as Proposed Class Representative
(PCR) on behalf of the classes and filed a claim
on December 11, 2019. The CAT handed down a judgement on March 31,
2022, deciding that the proposed collective proceedings could be
certified, but on an opt-in basis only, effectively
"denting" the claim. However, a successful appeal led to
a ruling by the Court of Appeal on July 25, 20232, that
the claim can proceed on an opt-out basis – lending further
credibility to the usage of the procedure. The Court of Appeal
clarified that there was no presumption in favour of opt in or opt
out proceedings in collective action claims in the CAT.
Further, in August 2023, a collective action claim was brought
in the CAT against the first of six water companies alleging a
failure to properly report sewage spills and pollution of rivers
and seas, with compensation payments sought for an estimated
£330M. Given that the number of pollution incidents reported
to regulators is an important factor in determining the price that
can be charged to consumers, the alleged underreporting of these
incidents would have resulted in excessive and illegitimate service
charges. The Proposed Collective Representative in this case is
Professor Carolyn Roberts, an environmental and water consultant.
Roberts alleges that a water company abused its dominant market
position by underreporting the number of pollution incidents it
caused. This claim is significant for not only being an "
opt-out" collective proceedings claim, enabling compensation
to be sought out on behalf of millions of household consumers, but
also for being the first collective proceedings claim in the UK
with a strong environmental focus and impact. For the most part so
far, UK collective actions have copied theories asserted in the US
or elsewhere in the world—but because of the UK's
substantial focus on environmental regulation, it would not be
surprising to see the UK out in front of a new generation of
environment-related class actions, e.g., based on alleged
regulatory violations, "greenwashing" advertising claims,
or other types of matters.
These cases highlight the very real threat that companies across
a breadth of industries are facing from the collective action
mechanism recently developed in the UK. Class actions in the UK
have been limited in comparison to other jurisdictions, such as the
US and Australia; however, the rise of third-party funding and
potential loosening of court rules is driving forward large-scale
actions. In 2020, the UK Supreme Court handed down its judgment in
Merricks v Mastercard [2020] UKSC 51 and
approved a more permissive approach to the certification stage of
collective proceedings (in which the CAT determines the eligibility
of claims for collective proceedings). The Supreme Court held that
the complexity of damages and risk of over or under compensation
was not a bar to certification. The ruling has encouraged more
collective claims and it is likely that this trend will
continue.
Depending on their subject-matter, collective actions in the UK
exist on either an "opt-in" and "opt-out"
basis, although most of the actions operate on an
"opt-in" basis, meaning that in order to participate,
each claimant must proactively join in proceedings or authorise a
party to bring a claim on their behalf. These are most common in
what is known as a Group Litigation Order (GLO),
which is a mechanism whereby the Court will group claimants
together for the efficient management of claims which give rise to
"common or related issues of fact or law", so that these
common issues can be dealt with together, typically by the
selection of one or more test cases.
In 2015, an opt-out regime was introduced regarding
infringements of competition law under the Competition Act 1998 and
the Consumer Rights Act 2015. There is currently a debate playing
out in the Courts on whether the English legal system should make
wider use of opt-out procedures to protect consumers. In the
meantime, opt-out procedures are growing. The collective
proceedings regime in the CAT has seen a surge in cases, with 10 of
the 27 applications for a Collective Proceedings Order
(CPO) commenced since 2015 being brought in 2022
alone.
We set out below a table summarising the key features of UK
style class actions and highlighting the main differences and
similarities with class actions in the US.
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UK CLASS
ACTIONS |
COMPARISON WITH US CLASS
ACTIONS |
Types of actions |
- Opt-In actions require "would-be class
members" to take proactive steps to be included in the class.
Opt-in actions have historically been the most common type of UK
class actions.
- Opt-out actions are where a claim can be
brought on behalf of a defined group without identifying all of the
individual claimants or obtaining their authorisation. Opt-out
actions are available albeit only for breach of competition law at
present. The members of a class in opt-out actions are, by nature,
larger than opt-in.
- Another available opt-out action is the Representative
Action procedure. It dates back hundreds of years, but
to-date has rarely been used. The UK Supreme Court's decision
in Lloyd v Google [2021] UKSC 50 has lowered the threshold
imposed for Representative Actions.
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- In the UK, opt-in class actions are more developed than
opt-out.
- In the US, both types of class actions (and, in some instances,
mandatory participation classes) exist though claims for monetary
damages most commonly proceed on an opt-out basis.
- This fundamental structural distinction with the US model is
beginning to become blurred, and we expect UK claimant lawyers and
funders to explore innovative ways of structuring litigation to
increase the class size and therefore aggregate value of claims.
The Court of Appeal's decision of July 25, 2023 in Evans v
Barclays Bank PLC & Ors will likely make it easier for
opt-out collective actions in the UK's CAT to proceed.
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Procedure |
OPT-IN
- Obtaining a GLO: A claimant or defendant may apply for a GLO at
any time or this may be directed by the court's own
initiative.
- Group members each issue their own claim and the court may
grant a GLO if the claims "give rise to common or related
issues of fact or law".
- The court will then set up a Group Register
that lists the claims that are subject to the GLO. Judgments and
rulings concerning common issues (GLO issues) are binding on all
claims subject to the GLO.
- No class representative to represent interests
of all in the same class, albeit the court may select test cases to
try and encourage efficiencies amongst the group.
OPT-OUT (competition collective actions)
- Exclusive jurisdiction of the CAT.
- A proposed representative will attend an approval hearing and
apply for a CPO.
- Requires a class certification through the granting of a CPO by
the CAT based on 3 criteria: an identifiable class, common issues
and suitability.
- Following Merricks v Mastercard, the "Suitability
Criterion" requires a relative assessment, to consider whether
the claims are more suitable for collective rather than individual
action.
- Group members each issue their own claim and the court may
grant a GLO if the claims "give rise to common or related
issues of fact or law".
- The court will then set up a Group Register
that lists the claims that are subject to the GLO. Judgments and
rulings concerning common issues (GLO issues) are binding on all
claims subject to the GLO.
- No class representative to represent interests
of all in the same class, albeit the court may select test cases to
try and encourage efficiencies amongst the group.
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OPT-IN
- The UK does not have class representatives in the case of
GLOs.
- In the US, named class representatives represent the interests
of all members of the class in collective proceedings, assuming
they meet the requirements for class certification.
- In the US, many class actions are litigated in federal courts,
though it depends on subject matter and other issues. In the UK,
GLOs may be filed with both the County Court or the High
Court.
OPT-OUT
- Given the recency (2020) of the opt-out concept, there is
limited caselaw on such actions in the UK, compared to the greater
availability of caselaw in the US.
- Opt-out procedures in the US carry a lower threshold to certify
when compared to the UK and permit a prolonged discovery process to
determine whether a class can be certified. In hearing early
disclosure applications in the UK, courts will not tolerate
"fishing expeditions" to establish whether or not the
claimants have a good and arguable case or not. That said, the UK
courts have demonstrated some flexibility as regards to disclosure
at an early stage. For example, in the phone hacking group
litigation, Mann J gave directions for an early disclosure regime
under which a claimant, on issuing a claim, was entitled to
disclosure of data in respect of calls made to the claimant's
mobile telephone and to certain of their associates. The aim was to
enable each claimant to assess the level of potential phone hacking
at an early stage.
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Damages |
- Damages and injunctions are available for claims brought under
the opt-in mechanisms and for representative actions.
- Damages are generally calculated on a compensatory basis.
Restitutionary damages or an account of profits can be used where
appropriate.
- For CPOs, the CAT can make an aggregate award of damages to be
calculated on a class-wide basis.
- In principle, exemplary damages are available in English law.
They are not available for claims under the CPO
regime.
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- The scope of damages available in the UK is narrower compared
to the US.
- Whilst punitive and exemplary damages are available in the UK,
these are very rare in practice.
- GLOs may allow individualized proceedings for damages, however
these are less common than in the US where individualized damages
may be determined late in the litigation.
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Settlement |
- There are no requirements for court approval of settlements of
opt-in claims (save that, if the opt-in claim is made in the CAT,
the class representative cannot settle the proceedings prior to the
deadline for class members to opt-in to the proceedings unless
court approval is obtained). Each claimant can make its own
decisions in respect to settlement.
- For opt-out CPO claims, settlements must be approved by the CAT
in the form of a "collective settlement approval order".
The CAT will only make such an order where it is satisfied that the
terms of collective settlement are "just and reasonable"
taking account of all relevant circumstances set out under the CAT
rules.
- Representative Actions allows for a claim to be begun by or
against one or more persons as representatives of any others who
have the "same interest" in the claim. Those represented
are not joined as parties. In settlement of such actions, the
court's approval is required and will only provide such
approval if it is "satisfied that the settlement is for the
benefit of all the represented persons". CPR 19.9(5) and
(6).
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- In the UK opt-in actions, settlement does not require approval
from the courts, unlike in the US, where the general requirement to
approve class settlements is a protracted process and must follow
the rules set out in Fed R Civ P 23(e)(2).
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Jurisdiction limitations |
- OPT-IN: No territorial restrictions to who may
be group members
- OPT-OUT: court's jurisdiction restricted
to persons domiciled in the UK, but persons domiciled elsewhere may
opt-in to such a claim.
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- In the UK, personal jurisdiction will not be a ground for
dismissing a claim, unlike in the US where it can be a basis to
eliminate a class action or narrow its scope.
- Subject-matter jurisdiction is a ground for dismissing a claim
both in the UK and the US.
|
Evidence |
- OPT-IN: No special rule for disclosure in
collective actions.
- OPT-OUT: The CAT has the power to make an
order requiring members of the class to give disclosure.
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- Disclosure in the UK is more limited and less adversarial than
discovery in the US. Depositions and declarations, available in the
US, do not exist in the UK.
- Procedure regarding witnesses is more closely controlled in the
UK, there is a ban on any sort of "witness coaching" and
stricter safeguards are in place regarding witness statements than
those in the US.
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Appeal |
- OPT-IN: No special rule.
- OPT-OUT: appeals are only available on a point
of law as to the award of damages or the grant of an injunction.
Other decisions of the CAT can be challenged by judicial review. A
decision to refuse a CPO in an application that sought aggregate
damages is a decision relating to the "award of damages"
over which the Court of Appeal had jurisdiction to hear an
appeal.
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- In both jurisdictions, a party does not have an automatic right
to appeal, judicial permission must be granted to allow an
appeal.
- In the US, trial courts are given discretion to grant or deny
class certification; however, they are subject to judicial review
either immediately or at the end of the case.
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Costs & Funding |
- UK courts have the discretion to apply costs shifting
mechanisms ordering the losing party to pay some of the winning
party's fees.
- OPT-IN: all claimants bear direct the adverse
costs risk.
- OPT-OUT: the adverse costs risk is primarily
borne by the representative.
- Litigation funding. On July
26, 2023, the Supreme Court handed down a judgment in PACCAR v
CAT which precludes opt-out collective actions from being
funded by litigation funding agreements which provide for a
reward-based return. As for opt-in claims, litigation funding
agreements must now comply with the formal requirements of the
Damages-Based Agreements Regulations 2013. In order to comply, such
agreements will need to have a return based on a multiple of costs
provided by the funder rather than a return based on a percentage
of a damages award.
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- Costs rules differ between the UK and US.
- In the US, each party will pay their own respective
costs—though plaintiffs benefit from many fee-shifting
statutes that can be implicated in class actions, and practically,
very few class action settlements and judgments against defendants
do not involve payment of plaintiffs' counsels' fees.
- Third-party funding is more mainstream in the UK than in the US
since it is rare that plaintiffs or their counsel would be made to
pay a defendants' fees.
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Footnotes
1. Mr Phillip Gwyn James Evans v Barclays
Bank Plc & Ors and Michael O'Higgins FX Class
Representative Limited v Barclays Bank PLC & Ors [2023]
EWCA Civ 876 (Forex)
2. Evans v Barclays Bank PLC &
Ors [2023] EWCA Civ 876
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.