It seems that the European debate could not fully avoid the "ice-cream-sharkattacks" fallacy (also known as the "ice-cream-murder" fallacy). Studies show that the consumption of ice cream and shark attacks are positively correlated: the more ice cream is sold, the more shark attacks occur; and vice versa, the less ice cream is consumed, the less people are attacked by sharks. Is there correlation between the two? Yes, of course. Would it be reasonable to draw the conclusion that there is causation and advise people not to eat ice-cream to avoid shark attacks? Would abstention from ice-cream make our lives safer? No, of course, it would not. Both ice cream consumption and shark attacks increase in the summertime, when the number of people swimming in the seas and oceans is uncomparably higher than during winter, hence, the chances of shark attacks are obviously higher. Correlation does not mean causation. The alleged link between the US class action and certain abusive practices is nothing more but an optical illusion. A closer look at the perceived relationship confirms that there is not causation between the two, it is simple correlation.

#### **References**

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# **Chapter 4 Transatlantic Perspectives: Comparative Law Framing**

Not surprisingly, collective actions' regulatory contexts in the US and in Europe differ considerably. US law features a large array of legal institutions which catalyze the operation of class actions but are completely missing in Europe (e.g. contingency fees, no or one-way cost-shifting, super-compensatory damages such as punitive and treble damages, pre-trial discovery, jury trials). In fact, notwithstanding their independent nature, these legal concepts are quite often associated with class actions.1

The discovery of these contextual concepts is essential for two reasons. On the one hand, class actions are a real transplant and, as such, may have a quite different operation and impact in a new legal environment than in the US. On the other hand, class actions raise a good number of regulatory issues that simply do not emerge in the home country. For instance, due to the lack of cost-shifting, the allocation of liability for the prevailing defendant's legal costs is not an issue in US law, while it is a pivotal question in Europe.

This chapter, with the purpose of providing a comparative law framing, first, takes stock of the major differences between the regulatory and social environments of class actions on the two sides of the Atlantic. Second, it demonstrates how, as a consequence of these differences, class actions entail diverging outcomes in the US and Europe. Third, it presents the truly European issues raised by class actions, which are unknown for American law.

#### **4.1 Disparate Regulatory Environments**

One of the commonplaces of comparative law is that the transplantation of legal concepts is not like organ transplantation: legal institutions are deeply rooted in the legal system that gave life to them and are a coherent part of their legal, social and

1See Blennerhassett (2016: 132–133).

cultural environment.2 Hence, when assessing the potential consequences of introducing opt-out collective actions in Europe, the very first question to be addressed is the differences between the US class action and the European collective action in terms of context, in particular, because empirical data clearly suggests: the same opt-out collective action mechanism that bursts its banks in the US may only be a peaceful creek in Europe.

The ontological difference framing the comparative law analysis lies in the function of collective actions. In the US, private enforcement (individual and collective alike) may have both a compensatory and a public policy function. The concept of "private attorney general"3 describes this expressively: the law privatizes a parcel of public enforcement and uses market forces to further public policy (while saving public resources). Albeit that class actions are an important element of this regulatory strategy, it embraces individual and collective actions alike. The key to this concept is the financial incentives offered by the law. For instance, in *Hawaii v. Standard Oil Co.*, the Supreme Court, referring to the treble damages available under US antitrust law, stressed that "[b]y offering potential litigants the prospect of a recovery in three times the amount of their damages, Congress encouraged these persons to serve as 'private attorneys general.'"4

On the contrary, the concept of "private attorney general" is completely alien to European law, where private enforcement is not meant to replace or supplement public enforcement and collective actions are confined merely to facilitating victims to acquire an effective private remedy. This implies that as long as this attitude is maintained, European collective actions cannot be expected to produce the same effectiveness in terms of enforcement as the US class action and their performance should be assessed in light of this consideration. The regulatory complexity of and resistance against collective actions may be traced back to the fact that Europe experiments with the importation of a mechanism that has a substantial public policy role to fulfill a purely compensatory function. Nonetheless, as demonstrated below, US class actions' public policy function is made up of a general set of contextual legal concepts and not the opt-out class action alone.

One of the most important dissimilarities is cultural and economic in essence and relates to the role of lawyers. The major difference between litigators on the two sides of the Atlantic is that "entrepreneurial lawyering" is virtually missing in Europe,5 where the lawyer is a counsel, normally paid on an hourly or a flat-rate basis, and

2For an analysis on the culture of collective litigation, see Stier and Tzankova (2016).

3*Perma Life Mufflers, Inc. v. International Parts Corp.*, 392 U. S. 134, 147 (1968) (Fortas, J., concurring in result); Strong (2012: 900), Udvary (2013: 71).

4405 U.S. 251, 262 (1972).

5See Karlsgodt (2012: 49).

contingency fee arrangements are rare,6 in some Member States even prohibited or restricted.7 The lawyer usually does not take any risk in the action and law-suits are normally not financed (not even partially) by law firms. In contrast to this, US class actions are funded by lawyers and law firms, in exchange for a contingency fee.8 US litigators enter contingency fee arrangements and, hence, take enormous risks.

In Europe, some jurisdictions prohibit only pure contingency fees, where the attorney's fee is linked exclusively to the outcome of the case and the attorney receives no remuneration in case of loss. For instance, French law expressly prohibits pure contingency fees, i.e. attorney's fees based exclusively on the outcome of the case, albeit a conditional reward, as a complimentary element, may be combined with a fixed fee.9 Although the French Supreme Court (Cour de Cassation) held that a conditional reward does not need be proportionate to the fixed fee and may exceed the latter,10 it is widely accepted that the fixed fee element may not be negligible. A similar approach is taken by Belgian11 and Romanian law,12 which prohibit agreements on fees that are exclusively linked to the outcome of the case but permit the stipulation of a complementary fee conditional on the outcome.

Some jurisdictions are more stringent and prohibit all agreements where the attorney's fee is somehow, even partially, linked to the outcome of the case. In Germany, contingency fees have been traditionally prohibited. The German Federal Constitutional Court (Bundesverfassungsgericht) held a decade ago that the categorical prohibition of contingency fee arrangements is unconstitutional but it was quick to add that this deficiency can be easily removed if creating an exception for cases where a fee (hourly fee or flat rate) would deter the plaintiff from pursuing his right by reason of his financial circumstances.13 As a corollary, German law was amended to make it possible for the parties to agree to contingency fees but only in cases where the client, because of his economic circumstances, would otherwise not pursue his

6For a comparative overview, see e.g. Chieu (2010: 148), Russell (2010: 173).

7See Grace (2006: 287–88), Waelbroeck et al. (2004: 93–94, 116–17), Leskinen (2011: 98–105).

8See Hodges (2009: 42) ("[T]he claimant has no financial risk but has significant incentive to take action. In particular, any intermediary representing the claimant and funding the litigation has significant incentives."); Karlsgodt (2012: 53).

9Section 10 of Loi n° 71-1130 du 31 décembre 1971 portant réforme de certaines professions judiciaires et juridiques, version consolidée au 12 mars 2017.

10Cour de Cassation, Chambre civile 1, du 10 juillet 1995, 93-20.290.

11Section 446ter of the Judicial Code (Code judiciaire).

12Section 130 of Statutul profesiei de avocat, Adoptat prin Hot˘arârea Consiliului U.N.B.R. nr. 64/2011 privind adoptarea Statutului profesiei de avocat (M. Of. nr. 898 din 19 decembrie 2011). See ICCJ. Decizia nr. 2131/2013. Civil. Constatare nulitate act. Recurs.

13Beschluss des Ersten Senats vom 12. Dezember 2006. 1 BvR 2576/04.

claim.14 Nonetheless, as a matter of practice, contingency fee arrangements are still rare in Germany.

Not surprisingly, the Code of Conduct for European Lawyers of the Council of Bars and Law Societies of Europe (CCBE),15 in principal, pronounces contingency fee agreements (pactum de quota litis) unethical, unless it "is in accordance with an officially approved fee scale or under the control of competent authority having jurisdiction over the lawyer."16

Interestingly, in Spain, the ethical prohibition of contingency fee arrangements was quashed in 2008: the Spanish Supreme Court considered the Spanish Bar Association's ban on contingency fees as restrictive of competition and abolished them.17 However, contingency fee arrangements are, as a matter of practice, rare.

Whatever the precise national rules and the specific limits are, most importantly, contingency fees are still not generally accepted in Europe and there is no market providing litigation services on this basis.

In the same vein, in most European countries, active client-acquiring and lawyer advertisements are banned or heavily restricted,18 while, in the US, cases are often not client- but lawyer-driven19 and this is all the more true in class actions.20

Furthermore, not only lawyers but also clients are different. The statistical data suggests that the American society is much more litigious than the European.21

In short, in the US, there is an industry that assumes the risks of litigation in exchange for an appropriate risk premium. On the other hand, in Europe there is no

14Rechtsanwaltsvergütungsgesetz vom 5. Mai 2004 (BGBl. I S. 718, 788), last amended through Section 13 of Gesetz vom 21. November 2016 (BGBl. I S. 2591), Gesetz über die Vergütung der Rechtsanwältinnen und Rechtsanwälte (Rechtsanwaltsvergütungsgesetz—RVG), § 4a Erfolgshonorar: "Quota litis (Section 49b(2), first sentence of the [German] Federal Lawyers' Act (Bundesrechtsanwaltsordnung—BRAO)) may be agreed only for an individual case and only if the client, upon reasonable consideration, would be deterred from taking legal proceedings without the agreement of quota litis on account of his economic situation. In court proceedings, it may be agreed that in case of failure, no remuneration, or a lower amount than the statutory remuneration, is to be paid if it is agreed that an appropriate supplement is to be paid on the statutory remuneration in case of success." Bundesrechtsanwaltsordnung in der im Bundesgesetzblatt Teil III, Gliederungsnummer 303-8, veröffentlichten bereinigten Fassung, last amended through Section 3 of Gesetz vom 19. Februar 2016 (BGBl. I S. 254), § 49b(2).

15https://www.ccbe.eu/NTCdocument/EN\_CCBE\_CoCpdf1\_1382973057.pdf. Accessed 20 April 2019.

16Section 3.3. Interestingly, in 2008, the Spanish Supreme Court found the Spanish Bar Association's ban on contingency fees restrictive of competition and quashed it.

17Sentencia del Tribunal Supremo, Sala de lo Contencioso-Administrativo, de 4 noviembre 2008 JUR\2009\2800, Recurso de Casación 5837/2005.

18While lawyer advertising is interdicted or restricted in several EU Member States, in the last period these have been eliminated in several legal systems. See Communication from the Commission: Report on Competition in Professional Services, COM (2004) 83 final, 14; Stephen and Love (2000: 987–1017).

19See Calabresi and Schwartz (2011: 178–79) ("The business cases are almost entirely lawyerdriven.").

20See Alexander (2000: 12).

21See Gryphon (2011: 1).

established industry to assume the litigation risks, partially because European legal systems skimp litigators in financial rewards and incentives.

The shifting of legal costs is a pivotal question of class actions.22 According to the "American rule", each party bears his own costs and attorney's fees cannot be shifted.23 The plaintiff does not run the risk of paying the defendant's attorney if losing the action; and likewise, the defendant does not have to reimburse the winning plaintiff for his legal costs. It is true that US law contains plentiful exceptions providing for the shifting of reasonable attorney's fees, but these rules mainly enable one-way costs shifting from the prevailing plaintiff to the losing defendant.24 Though the prevailing defendant may request the court to shift the attorney's fees onto the unsuccessful plaintiff, this is limited to exceptional cases, such as frivolous law-suits where the plaintiff acted in bad faith.25 In other words, in the US, as a matter of practice, the plaintiff does not run the risk of becoming liable for the prevailing defendant's attorney's fees.

In contrast to this, as most parts of the world, European jurisdictions traditionally follow the principle of two-way cost-shifting,26 albeit shiftable legal costs are often limited and rarely cover all the expenses. In Europe, "the winner takes it all" and the loser, at least theoretically, pays all the legal costs that were induced by the proceedings, irrespective of whether these emerged on the plaintiff's or on the defendant's side.27

Of course, cost-shifting is never perfect and never all-embracing; but this is the principle. Some jurisdictions content themselves with limiting the shiftable sum to reasonable legal costs. In Hungarian law, the principle is full reimbursement and it is at the court's discretion whether and to what extent it shifts the prevailing party's attorney's fees. The losing party is liable for all the necessary legal costs that have a causal link to the claim's judicial enforcement, irrespective of whether they emerged

22Waelbroeck et al. (2004: 92–95). For a law and economics analysis of the American rule and the European two-way cost shifting principle, see Carbonara and Parisi (2012).

23See Rule 54(d) of the Federal Rules of Civil Procedure. *Alyeska Pipeline Service Co. v. Wilderness Society*, 421 US 240 (1975).

24See e.g. Sherman Act, 15 USC. § 4304(a); Fair Labor Standards Act, 29 USC. § 216; Magnuson–Moss Warranty Act, 15 USC. § 2310(d)(2).

25See Rule 11 of the Federal Rules of Civil Procedure; *Roadway Express, Inc. v. Piper*, 447 US 752, (1980); *Hall v. Cole*, 412 US 1, 5 (1973); Sherman Act, 15 USC. § 4304(a)(2).

26An exception that confirms the rule may be found in the Bulgarian administrative competition procedure. Section 69(2) of the Bulgarian Act on protection of competition provides for one-way cost-shifting. "Where the Commission [on Protection of Competition] issues a decision establishing an infringement under this Law, the Commission shall order the infringer to pay the costs of the proceedings, if so requested by the other party. If no infringement is established, the costs shall be borne by the parties who incurred them." The Act was promulgated in the State Gazette's Issue 102 of 28 November 2008. For an English translation see http://www.wipo.int/wipolex/en/text.jsp?file\_ id=238274. Accessed on 20 April 2019.

27Waelbroeck et al. (2004: 92–95). For a law and economics analysis of the American and the English (or continental) rule, see Carbonara and Parisi (2012).

before or during the law-suit.28 The prevailing party may claim reimbursement for the attorney's fees stipulated in the mandate agreement. However, the court may reduce the shiftable attorney's fees, if it is not proportionate to the claim's value or the actual work done.29 Likewise, in Bulgaria, the losing party my seek reduction of the attorney's fees claimed by the prevailing party, if it is exorbitant taking into account the value and complexity of the case.30 German law also provides for the shifting of reasonable legal costs on the losing party,31 however, the recoverable attorney's fees is capped by a statutory schedule.32 In French law, attorney's fees, which normally make up the overwhelming majority of the expenses, are shifted on the losing party to the extent determined by the court, which has to allocate them in an equitable manner and taking into account the losing party's financial situation.33

The "American rule" combined with the wide-spread use of contingency fee arrangements and the entrepreneurial law firm model creates a very peculiar compound that lies at the heart of the American litigation system. The plaintiff is very motivated to litigate: he faces no risk; all hazards are devolved upon his lawyer (contingency fee) and the defendant ("American rule").34 On the other hand, in Europe, the plaintiff, normally, cannot transfer the risks related to his own legal representation onto his lawyer, who works on the basis of an hourly rate, and has to compensate the defendant for his legal costs, if the court decides against the plaintiff.

Finally, US awards are much more generous for plaintiffs who sustained damages due to pernicious or malicious practices. Punitive35 and treble damages and "pain and suffering" awards are magnets that are non-existent in Europe. The availability of super-compensatory remedies and intensely generous "pain and suffering" awards may make litigation more attractive in cases where the balance of the litigation's expected value and expected costs is negative.

28Sections 80 and 83(1) of Act CXXX of 2016 on the Civil Procedure (2016. évi CXXX. törvény a polgári perrendtartásról).

29Section 2 of Ministry of Justice Decree nr 32 of 22 August 2003 on the attorney's costs that may be established in judicial proceedings (32/2003. (VIII. 22.) IM rendelet a bírósági eljárásban megállapítható ügyvédi költségekr ˝ol).

30Section 78(5) Bulgarian Code of Civil Procedure, for an English version of the statutory text, see https://kenarova.com/law/Code%20of%20Civil%20Procedure.pdf. Accessed 20 April 2019.

31Section 91 of the German Code of Civil Procedure (Zivilprozessordnung), Zivilprozessordnung in der Fassung der Bekanntmachung vom 5. Dezember 2005 (BGBl. I S. 3202; 2006 I S. 431; 2007 I S. 1781), last amended through Section of the Gesetz vom 21. November 2016 (BGBl. I S. 2591).

32Rechtsanwaltsvergütungsgesetz vom 5. Mai 2004 (BGBl. I S. 718, 788), last amended through Section 13 of Gesetz vom 21. November 2016 (BGBl. I S. 2591).

33Sections 695-700 of the French Code of Civil Procedure (Code de la procédure civile). For a detailed analysis, see Gjidara-Decaix (2010: 325).

34See Hodges (2009: 42).

35Black's Law Dictionary 416-19 (8th ed. 2004) ("damages" and "punitive damages"); *BMW of N. Am., Inc. v. Gore*, 517 US 559 (1996); *Cooper Indus. v. Leatherman Tool Grp., Inc.*, 532 US 424, 432 (2001). On the interaction and combination of punitive damages and class actions from a law and economics perspective, see Parisi and Cenini (2008).

In the US, punitive damages are generally available in all but five states36 and treble damages are provided for in various state and federal statutes. While surveys suggest that punitive damages are awarded infrequently37 and "are not typically very large",38 they are an integral part of the US justice system. The purpose of punitive damages is "*to punish* (…) [the wrongdoer] for his outrageous conduct and *to deter* him and others like him from similar conduct in the future."39 The amount of damages orientates to the gravity of the mischief ("the defendant's act, the nature and extent of the harm to the plaintiff that the defendant caused or intended to cause and the wealth of the defendant")40 and not to the weight of the harm.

On the other hand, in continental Europe, these goals and this rationale are, in principle, reserved for criminal law and damages are meant (only) to compensate the injured party for the loss suffered and may under no circumstance entail his enrichment: the purpose of damages is to restore the initial status (in integrum restitutio), that is, to compensate; they are not destined to punish the wrongdoer, although they may certainly have such a side-effect.41 The Principles of European Tort Law, which are both a restatement of the common core of European tort law and also a proposal for a comprehensive system of tortious liability, stress the compensatory purpose of damages and treat their deterrent effects as a welcome by-product.

Damages are a money payment to compensate the victim, that is to say, to restore him, so far as money can, to the position he would have been in if the wrong complained of had not been committed. Damages also serve the aim of preventing harm.42

Interestingly, while exemplary damages are, theoretically, available under English common law, in *Rookes v Barnard*, 43 the English Supreme Court (at that time: House of Lords) almost fully evirated the legal doctrine that underlay the remarkable conceptual development in the US resulting in the current practice of punitive awards. It held that exemplary damages, aside from the case when they are provided for by a statute, can be awarded only in matters involving "oppressive, arbitrary or unconstitutional action by the servants of the government" and when "the Defendant's conduct has been calculated by him to make a profit for himself which may well exceed the compensation payable to the plaintiff."44

36Sebok (2009: 155). See Rustada (2005: 1297).

37Surveys suggest that punitive damages were awarded in 2–9% of all cases where plaintiffs won. Sebok (2007: 964–965).

38Sebok (2009: 156–158).

39Restatement of Torts, Second, §908 (emphasis added).

40Id.

41See e.g. BGH 4 June 1992, BGHZ 118, 312 (Bundesgerichtshof). Quotations refer to the translation in Wegen and Sherer (1993) 1320 ("[O]ften, the sole appropriate aim of the civil action taken in response to an illegal act is to compensate for the effects of that act on the financial circumstances of the parties directly concerned"); Isidro (2009) 246.

42Principles of European Tort Law. Text and Commentary. European Group on Tort Law. 2009, Article 10:101 (Nature and purpose of damages).

43*Rookes v Barnard* [1964] 1 All England Law Reports (All ER) 367.

44On exemplary damages in English law, see Wilcox (2009: 7–53).

Finally, it is worth briefly highlighting that the differences between the American and European patterns of civil procedure also have a significant but less quantifiable effect on the operation of collective litigation: plaintiff-friendly US discovery rules significantly contribute to the success of class actions, while the lack of them may choke off collective actions in Europe. Jury trials, a scheme almost never used in Europe, certainly add to the uncertainty of outcomes but probably to the detriment of the defendants.

The above mapping of the contextual differences points out that in a civil-law environment collective actions obviously do not work in the same way as they do in the US. This also implies that when evaluating opt-out collective actions from a European perspective, one has to distinguish its effects and operation from those of the contextual legal doctrines of US law. These are not specific to class actions and govern individual litigation too.45 Furthermore, because of the different regulatory environment, in Europe, collective actions raise various novel questions that simply do not emerge in the US.

#### **4.2 Why Should Europeans Not Fear the American Cowboy? Diverging Effects of Disparate Regulatory Environments**

The major criticism against the US class action is that, through aggregation of individual claims, it creates a big, centrally conducted giant claim that makes the defendants settle even if the claim is unfounded (blackmailing potential).46 "Blackmail settlements" are "settlements induced by a small probability of an immense judgment in a class action."47 Nonetheless, both theoretical and empirical arguments suggest that this aspect of US class actions would not emerge in a European environment.48

45Neumann and Magnusson (2011: 157), Nagy (2013: 482–485).

46See Ebbing (2004: 39), Weinstein (1997: 834), Calabresi and Schwartz (2011: 175), Posner (1973: 399, 2001: 925), Delatre (2011: 53). See also *In re Rhone*-*Poulenc Rorer, Inc.*, 51 F.3d 1293, 1299–1300 (7th Cir. 1995), *cert. denied* 116 S. Ct. 184 (1995); *West v. Prudential Secs., Inc.*, 282 F.3d 935, 937 (7th Cir. 2002).

47*In re Rhone*-*Poulenc*, 51 F.3d 1293, 1298 (1995), citing Friendly (1973: 120).

48See Hodges (2010: 374) ("The crucial fact that legislators and commentators failed to observe was that the American legal and constitutional system operates on a model that is fundamentally different from the European systems, in that it places considerable reliance on private enforcement as a substitute for public enforcement. The result is that the American and European systems are incomparable in many respects."). Smithka (2009: 189–190). Unfortunately, it is usually taken as granted, without any empirical evidence, that opt-out collective proceedings, by themselves, generate excesses. See Delatre (2011: 38), Buchner (2015: 51–57). For the demythologization of the claim that third-party financing of class actions entails frivolous litigation in the US, see Hensler (2014).

It has to be noted that the effectiveness and widespread use of collective litigation and the potential for abuse and adverse effects are inversely proportional to each other: the engine of US class actions is the risk premium the group representative is afforded, while the risk premium may increase the potential for abuse and adverse effects. This issue will be addressed in Sect. 4.3.

It is submitted that the efficient cause of the perceived blackmailing potential of US class actions is that, among others, due to the "American rule" and the availability of super-compensatory damages, there is a striking imbalance (to the defendant's detriment) between the litigation's expected value and expected costs and, hence, it is rational for the defendant to settle even if the claim is grossly unfounded. Namely, due to the "American rule" (i.e. each party bears his own legal costs), the law-suit unavoidably causes serious losses to the defendant, irrespective of whether he wins the case or not. This is topped by the availability of super-compensatory damages.

The diverging effects of the above disparate regulatory environments may be best shown through a numerical demonstration. It has to be stressed that these calculations are valid as to both individual and collective claims. The only difference between collective litigation and individual actions is that the former amalgamates different claims. That is, the diverging effects of the disparate regulatory environments work irrespective of whether it is an individual or a collective action. This confirms that the alleged excesses of class actions are not due to the opt-out rule itself but to its regulatory environment.49 Hence, it seems to be unconvincing that the above phenomenon is problematic in case of collective actions but not in case of individual litigation.

The calculation in Sect. 3.1.4. demonstrates well how the legal institutions surrounding US class actions tilt the balance in the plaintiff's favor (independent of whether it is an individual or a collective plaintiff). Recall that in the antitrust case used for the purpose of the foregoing demonstration the plaintiff had a claim in value of \$1,000,000, while legal costs were \$200,000 − 200,000 for the plaintiff and the defendant; the plaintiff's chance to prevail was 10%. Because it was an antitrust case coming under the Sherman Act, treble damages were available50 and the plaintiff benefitted from one-way cost shifting (reimbursement for reasonable attorney's fees).

In such an extremely weak case, it is reasonable for the plaintiff to sue and for the defendant to settle; what is more, although the plaintiff has only 10% chance to win, the defendant may reasonably accept a settlement of more than 50% of the claim's value.

A reasonable plaintiff's decision on whether or not to sue would rest on the following calculation. The plaintiff's costs are \$200,000. The expected value of the law-suit is made up of two components. First, the principal claim which amounts to \$1,000,000 and has to be tripled due to the treble damages rule (\$3,000,000).

49Nagy (2013: 482–495).

50Though statutory provisions prescribing treble damages are relatively rare and punitive damages claims are more common, treble damages are used for the purpose of calculation, as in case of punitive damages outcomes are less predictable.

Second, the plaintiff may expect reimbursement for his reasonable attorney's fees which amount to \$200,000. That is, if he wins, the plaintiff gets \$3,200,000, however, both items of income may occur with a probability of 10%. Accordingly, the expected value is \$320,000 = (\$1.000.000 × 3 + \$200.000) × 10%, and the balance between the plaintiff's costs and the expected value is \$ +120,000 = \$320,000 − \$200,000. In other words, the balance is positive, it is reasonable for the plaintiff to sue and to accept a settlement offer higher than \$ 120,000.

The defendant's side is the inverse of the above calculus, but, contrary to the plaintiff's situation, the balance of litigation is always negative: the defendant has to inevitably bear the legal costs, these cannot be shifted on the plaintiff even if the latter loses the case, while the defendant cannot expect any income in the event he wins. Furthermore, the defendant also runs the risk of losing the case, even if the probability of this is rather small.

As a corollary, the defendant has no expected value: the defendant may expect no reimbursement for his reasonable attorney's fees. The expected costs are made up of the following two items. First, the defendant will incur legal expenses in value of \$ 200,000. Second, there is a 10% probability that the defendant has to pay treble damages to the plaintiff in value of \$ 3,000,000 and reimbursement for the plaintiff's reasonable attorney's fees in value of \$ 200,000. Altogether, the defendant's balance is \$ −520,000 = \$ −200.000 + (\$ −1,000,000 × 3 + \$ −200,000) × 10%. In other words, the balance is negative, it is reasonable for the defendant to settle and to accept a settlement offer lower than \$520,000, although the plaintiff has only 10% chance to prevail as to a \$ 1,000,000 claim.

If the parties act reasonably, they should settle the case between \$120,000 and \$520,000. The settlement value will depend on their bargaining skills and tactics.

Let us see how the above case would work in a European legal environment. Here, it would not be reasonable for the plaintiff to sue. The plaintiff's expected value is 10% of the principal claim: \$100,000 = \$1,000,000 × 10%. His expected costs are made up of the legal costs of both parties: if he loses, he will be liable for all the legal costs: \$400,000 = 2 × \$200,000; if he wins, at least theoretically, he will incur no legal costs as the expenses advanced by him will be reimbursed by the losing defendant. Taking into account that he has 90% chance to lose, the expected costs are \$360,000 = \$400,000 × 90%. Accordingly, the plaintiff's balance is \$−260,000 = \$100,000 − \$360,000. In other words, the balance is negative and, hence, it is not reasonable for the plaintiff to sue.

The above calculations demonstrate well that, as noted above, the perceived excesses of class actions (e.g. black-mailing potential, forced settlements, litigation in extremely weak cases) are, in fact, not due to the opt-out class action itself but to the surrounding US regulatory environment, represented by doctrines like treble damages, the American rule and one-way cost shifting. Accordingly, these diverging effects emerge irrespective of whether it is an individual or a collective action and are not concomitant with the opt-out class action itself.

Interestingly, and perversely, the American rule makes the defendant's balance in a case with a probability of plaintiff success lower than 50% comparatively worse and the defendant comparatively more inclined to settle than in a case with a probability of plaintiff success over 50%. Below a 50% likelihood of plaintiff success, in the US the defendant will have a greater incentive to settle than in Europe, while over this threshold, a US defendant is comparatively less likely to settle than the European defendant. The reason behind this is the non-shiftability of legal costs. Assume, for the sake of simplicity, that the two sides have legal costs of the same value. The "American rule" makes the defendant bear 50% of the overall legal costs even in cases where the plaintiff's probability of success is less than 50% and, hence, in Europe, the expected legal costs would be below 50%. Likewise, the "American rule" makes the defendant bear 50% of the proceedings' overall legal costs (but not more) also in cases where the plaintiff's probability of success is more than 50% and, hence, in Europe, the expected legal costs to be borne by the defendant would be over 50%. Accordingly, the "American rule" incites defendants to settle against less substantiated claims more than the "loser pays" rule, while it incites them comparatively less in the event the plaintiff has a very good case.

Fortunately, the above theoretical analysis is not left without an empirical crutch. There are numerous opt-out systems in Europe: perhaps surprisingly, representation without a power of attorney is neither beyond example, nor exceptional.51 As shown below, the available statistical data reinforce the above analysis and show that in Europe opt-out systems do not produce the effects they trigger in the US. Furthermore, Australia and Canada introduced US-style class actions, while their legal systems diverge in several relevant aspects from the US regulatory environment and are in line with the principles prevailing in Europe. Accordingly, the empirical experiments of these countries may provide some guidance.

51See Delatre (2011: 38) ("[I]t is impossible to readily exclude a model of collective redress on the ground that it would not be consistent with the European experience on the topic. Essentially every model of collective litigation may be found in Europe, and the somewhat controversial opt-out class action does not constitute an exception.").

52The Belgian system leaves it to the judge to decide whether the action should be carried out in the opt-in or the opt-out scheme. Law Inserting Title 2 on "Collective Compensation Action" in Book XVII "Special Jurisdictional Procedures" of the Code of Economic Law, 28 March 2014, Moniteur Belge (M.B.) (Official Gazette of Belgium (29 March 2014) (Loi portant insertion d'un titre 2 «De l'action en réparation collective» au livre XVII «Procédures juridictionnelles particulières» du Code de droit économique et portant insertion des définitions propres au livre XVII dans le livre 1er du Code de droit économique) and Section XVII.38 in conjunction with Section I.21 of the Belgian Code of Economic Law.

53Chapter 33, Sections 379-388 of the Bulgarian Code of Civil Procedure, for an English version of the statutory text, see https://kenarova.com/law/Code%20of%20Civil%20Procedure.pdf. Accessed 20 April 2019. See Katzarsky and Georgiev (2012: 64).

54Sections 254a-254e of the Administration of Justice Act.

55In France, de facto opt-out class actions were first introduced in the field of consumer protection in 2014, Loi n° 2014-344 du 17 mars 2014 relative à la consommation et Décr. n° 2014-1081 du 24 sept. 2014 relatif à l'action de groupe en matière de consommation, followed by the health care sector in January 2016, Loi n° 2016-41 du 26 janv. 2016 de modernisation de notre système de santé et Décr. n° 2016-1249 du 26 sept. 2016 relatif à l'action de groupe en matière de santé. In November 2016, a general framework was created in France for group actions. Loi n° 2016-1547 du 18 novembre 2016 de modernisation de la justice du XXIe siècle, JORF n°0269 du 19 novembre 2016 texte n° 1. The new regime extended the purview of the mechanism to discrimination, environmental and personal data and health care matters, inserting Sections 826-2-826-24 into the French Code of Civil Procedure.

56Articles 10(16)-(29) of Law 2251/1994 on Consumers' Protection. For an English translation, see https://www.eccgreece.gr/wp-content/uploads/2015/07/N2251-1994-enc2007-en1.pdf.

57Section 92 of Hungarian Competition Act (1996. évi LVII. törvény a tisztességtelen piaci magatartás és a versenykorlátozás tilalmáról); Sections 38-38/A of Hungarian Consumer Protection Act (Act CLV of 1997) (1997. évi CLV. törvény a fogyasztóvédelemr ˝ol); Sections 580-591 of the new Hungarian Code of Civil Procedure effective as from 1 January 2018 (Act CXXX of 2016 on the Code of Civil Procedure, in Hungarian: 2016. évi CXXX. törvény a polgári perrendtartásról).

58Law 83/95 on the Acção Popular. See Rossi and Ferro (2013: 46–64), Ferro (2015: 299–300).

59Law on Collective Actions (Zakon o kolektivnih tožbah—ZkolT), Official Journal of the Republic of Slovenia No. 55/2017. For the English version of the statutory text, *see* http://www.pisrs.si/Pis. web/pregledPredpisa?id=ZAKO7399. Accessed 20 April 2019.

Spain,60 and the United Kingdom61 without having produced any litigation boom. Section 5.1 gives an account of the statistics of European class actions in these Member States and demonstrates that these systems brought about no litigation boom and, due to the lack of appropriate financial incentives, are not particulary effective or wide-spread and do not even compare to the US class action in terms of significance.

Since European empirical experiences are rather limited in terms of territorial representation and time, it is worth taking a look at systems outside the EU that adopted the US-style class action but have a regulatory environment that is in some relevant aspects different from the US. Australia and several provinces of Canada adopted US-style class action legislation and inserted it into a regulatory context where entrepreneurial law-firms, contingency fee arrangements and jury trials, though definitely existent, are less relevant, the allocation of legal costs is, as a general principle, governed by the "loser pays" rule, and the availability of super-compensatory damages is, in comparison to the US, highly restricted.62 Presumably due to this regulatory environment, here the opt-out class action did not entail the overgrowth and abuses some perceive in the US.63

In Australia, opt-out class actions were introduced on the federal level in 1991 (these provisions entered into force on 4 March 1992)64 and in the state of Victoria in 2000.65 A 2009 study showed that 241 class action applications were filed up to March 2009 and 245 up to 30 June 2009; that is, on average, 14 class actions were instituted annually. The number of class action proceedings was fluctuant and their frequency did not have an increasing tendency. The first quarter of the rules' 17-yearlong history saw 33 proceedings, followed by an intensive period of 92 proceedings;

60See Section 20 of Law 26/1984 of 19 July on Consumer Protection (Ley para la defensa de los consumidores y usuarios), now Section 24 of Royal Legislative Decree 1/2007 of 16 November, which issued a consolidated text of the Law on Consumer Protection and other supplementary laws (Texto refundido de la Ley General para la Defensa de los Consumidores y Usuarios y otras leyes complementarias). This provision was later on inserted in almost every special consumer law issued by the Spanish legislator. See Piñeiro (2007: 63–65). The Spanish Civil Procedure Act of 2000 is, though, the first attempt to systematize collective proceedings and its provisions (Articles 6, 11, 15, 15bis, 221, 222(2), 256(1)(6), 519).

61See e.g. Sections 18-19 of the 2002 Enterprise Act, which were inserted in Sections 47/A-47/D of the 1998 Competition Act. See also Group Litigation Orders in Sections 19.10. and 19.11. of the Civil Procedure Rules.

62See Heffernan (2003: 104), Branch and Montrichard (2005). See Gotanda (2004).

63See Stuyck et al. (2007: 379) ("Connected with concerns about (…) unmeritorious claims are fears that introducing US-type collective actions into a legal system would have a floodgate effect. That is, courts would be overwhelmed with weak cases trying to obtain compensation through collective action procedures. Experience from countries such as Sweden, Canada and Australia shows that the fears of legal blackmail and a resulting floodgate effect on the courts do not seem to have occurred."). Another point of reference could be Latin-America; several Latin-American countries adopted class action legislation and inserted this institution into a civil-law environment. See Gidi (2003: 311, 2012: 901–940).

64Federal Court of Australia Amendment Act 1991 (Cth). The federal class action rules are to be found in the Federal Court of Australia Act 1976 (Cth) pt IVA. See Clark and Harris (2001: 289).

65Supreme Court Act 1986 (Vic) pt 4A (Austl.). See Morabito (2009a: 321).

the number of the proceedings was decreasing in the last two quarters: 63 between 4 September 2000 and 3 December 2004 and 53 between 4 December 2004 and 3 March 2009.66

In Canada, opt-out class actions were introduced in the vast majority of the provinces (starting with Quebec's 1978 legislation67) 68 and in the Federal Court Rules (in 2002).69 Albeit class action litigation is frequent in Canada, it is by no means excessive, as compared to the US. Nonetheless, it is worthy of remark that Canada's empirical experiences may be taken into account only with some correction. For instance, contingency fees are lawful in Canada and lawyers fund the bulk of class actions70; and several provinces lifted or softened the "loser pays" principle in respect to class actions.71

Between 2010 and 2018, the launch of 826 class actions was reported to the Canadian Bar Association's database.72 This is, on average, 92 cases *per annum*. 73 Other surveys show that at least 287 class action proposals were filed in Ontario between 1993 and April 200174 and, up to September 2004, 52 proposed class actions were certified in British Columbia, 104 in Ontario and 130 in Québec.75 In another

69Kalajdzic et al. (2009: note 29). For an overview of the Canadian experiences and major issues, see Watson (2001: 272–284).

70Kalajdzic et al. (2009: 44).

72National Class Action Database, The Canadian Bar Association, http://www.cba.org/ ClassActions/main/gate/index/default.aspx. Accessed 20 April 2019. The database is based on voluntary reporting and is therefore not a comprehensive record of all Canadian class action lawsuits. Nonetheless, it may be used as a rough indicator as to the number of class actions in Canada within specific time periods.

732010: 116, 2011: 101, 2012: 141, 2013: n/a, 2014: 150, 2015: 85, 2016: 71, 2017: 80, 2018: 82.

74Baert and Guindon (2008: 3).

66Morabito (2009b).

67Loi sur le recours collectif, L.Q. 1978, c. 8. See Bouchard (1980), Mazen (1987), Lafond (1998–1999: 19–34).

68British Columbia, Class Proceedings Act, R.S.B.C. 1996, c. 50; Newfoundland, Class Actions Act, S.N.L. 2001 c. C-18.1; Saskatchewan, Class Actions Act, R.S.S. 2001 c. C-12.01; Alberta, Class Proceedings Act, R.S.A. 2003 c. C-16.5; Manitoba, Class Proceedings Act, R.S.M. 2002 c. C130; New Brunswick, Class Proceedings Act, R.S.N.B. 2011 c. C-125; Nova Scotia, Class Proceedings Act, R.S.N.S. 2007 c. 28.

71Kalajdzic et al. (2009: 42). British Columbia essentially adopted the "American rule:" cost awards may be made only in case of "vexatious, frivolous or abusive conduct," improper or unnecessary applications or steps "taken for the purpose of delay or increasing costs or for any other improper purpose" and in case there are "exceptional circumstances that make it unjust to deprive the successful party of costs." See Class Proceedings Act, R.S.B.C. 1995 c. 50, art. 37 and Watson (2001: 274). In Ontario, the court, when exercising its discretion with respect to awarding costs, "may consider whether the class proceeding was a test case, raised a novel point of law or involved a matter of public interest." Class Proceedings Act, R.S.O. 1992, c. 6, s. 31(1).

75For further statistics, see Branch and Montrichard (2005) and Lafond (2006: 35) (In Québec, between 1979 and 2004, 151 class actions ended with a settlement, and in 32 cases the court decided for the class).

survey, approximately 332 class actions were reported pending in 2009 and 427 class actions in 2014.76

Although these numbers do not exclude the potential of blackmail settlements and other adverse effects, they clearly suggest that collective proceedings entailed no litigation boom and the concern of blackmailing litigation seems not to be real.

#### **4.3 The Novel Questions of Collective Actions in Europe**

Collective actions are legal transplants alien to traditional civil-law thinking, hence, once introduced, they call for the re-consideration of a wide array of questions.77 Obviously, it is perfectly legitimate to adopt foreign legal solutions without adopting their regulatory context; however, in this case, the legal transplant may raise issues that do not emerge in the donor country.

#### *4.3.1 Funding in the Absence of One-Way Cost-Shifting, Contingency Fees and Punitive Damages*

European legal systems are largely devoid of the financial incentives that so intensively stimulate litigation in the US (contingency fees, super-compensatory damages, no or one-way costs shifting). While it is neither imperative, nor necessarily justified to adopt foreign legal solutions as a package, absent this a foreign transplant may take a life of its own. In the US, class actions are normally financed by law firms (incited by the reward of a contingency fee) and protected against the risks related to the defendant's attorney's fees (due to the American rule). On the other hand, in Europe there is no comparable market, not only because class actions have no history but also because litigation is less profitable. In the US, law firms are compensated, via legal institutions of general application, for the immense risks they undertake. At the same time, there are no such mechanisms on the other side of the Atlantic. This circumstance calls for a regulatory consideration, given that financing is the oil in the engine of collective actions.78

Unfortunately, European collective action laws have failed to settle or even address the problem of financing. On the one had, they ruled out the American institutions that stimulated the operation of US class actions. On the other hand, they failed to replace these with appropriate substitutes. Nonetheless, European collective actions will not be effective and self-sustaining absent appropriate financial incentives providing a risk premium that compensates the group representative for the risks incurred.

76Kalajdzic (2018: 16–17).

77On the financing options in Europe, see Voet (2016: 201–222).

78See Nagy (2015: 548–550).

The European fear of the American-style financial incentives has been so huge that the Recommendation on Collective Redress suggested the introduction of safeguards in order to obviate incentives to abuse the mechanism of collective action. It makes the use of the "loser pays" principle mandatory,79 excludes, at least in principle, contingency fees80 and prohibits punitive damages.81 Furthermore, it restricts group representation to non-profit entities.82

The Recommendation demonstrates well Europe's aversion to the American litigation pattern. Namely, these safeguards appear to be excessive (even redundant), taking into account that the Recommendation explains the choice of the "opt-in" system with the consideration of obviating abusive practices. The Recommendation's insistence on not adopting legal concepts peculiar to the US regulatory environment surrounding the operation of the US class action actually suggests that, on the other side of the Atlantic, it is not the opt-out system but its legal environment that may be responsible for the alleged plethora of class actions. Furthermore, contingency fees and punitive (or exemplary) damages are available in quite of few Member States83 and there is no reason to rule them out specifically in relation to class actions. Albeit that the amount of exemplary damages awarded in European common law systems is tiny (as compared to US punitive awards), this concept is a solid part of these.84

The biggest trouble is, however, that the European model, in essence, rules out the risk premium devices of US law, which are rather unpopular in Europe, anyway, while it fails to offer any surrogate. The function and effects of contingency fees and punitive damages are to provide a risk premium to group representatives, in order to compensate them for the risk they run in favour of group members. European systems scrap these legal institutions (in line with the prohibition of the Recommendation on Collective Redress) without offering anything in exchange in order to tackle the problem of risk premium.

Above, it was argued that it is economically rational for group representatives to enforce group members' claims if all the costs related to the collective action can be shifted on the losing defendant and group representatives are granted a risk premium, i.e. if they win they get a reimbursement higher than their actual costs in order to compensate them for the risk they run when instituting the proceedings.85 The "American rule" on attorney's fees, contingency fees and punitive damages are meant to be a risk premium (or simply have such an unintended effect). The

79Commission Recommendation of 11 June 2013 on common principles for injunctive and compensatory collective redress mechanisms in the Member States concerning violations of rights granted under Union Law, para 13.

80Id. at para. 29-30. According to the Recommendation, contingency fees can be permitted only exceptionally. ("The Member States that exceptionally allow for contingency fees should provide for appropriate national regulation of those fees in collective redress cases, taking into account in particular the right to full compensation of the members of the claimant party.").

81Id. at para 31.

82Id. at para 4.

83See Grace (2006: 287–288), Waelbroeck et al. (2004: 93–94, 116–17), Leskinen (2011: 98–105). 84Wilcox (2009: 7–54).

85Nagy (2013: 495–497).

purpose of the "American rule" is to shift some of the risks attached to the plaintiff's or group representative's failure onto the defendant.86 Super-compensatory damages are clearly risk premiums; punitive and treble damages are meant to incite the plaintiff to litigate through compensating him for the risks he runs because of the litigation.87 Contingency fees also contain a clear risk premium, because they are presumably higher than the attorney's fees charged in case of no risk88; this risk premium is meant to compensate the law firm for the risks it takes over from the client. Albeit jury trials (which appear to issue in higher awards) and generous "pain and suffering" awards are probably not meant to provide a risk premium, this is one of their side-effects.

In US law, it is the provision of generous risk premiums that makes the operation of the US class action so intensive.89 Ironically, the measures that could make collective litigation effective would move the European regulatory environment towards US law. All the measures the absence of which explained why Europe should not fear the opt-out class action are actually the functional equivalents of a risk premium, even if they are of general application and are not specific to class actions. These ensure that the scheme is effective and wide-spread.90

In Europe, the simplest way of compensating group representatives for the risks they assume when enforcing the group's claims would be to grant them a lump sum in excess to their expenses (organizational and ordinary legal costs). Nevertheless, all benefits in excess of compensation would be the functional equivalents of super-compensatory damages. Another solution, introduced, by way of example, in Canada,91 could be lifting or softening the "loser pays" rule in favour of the group representative; however, again, the risk premium granted to the group representative (and borne by the defendant), whereas lifting one of the hurdles of collective litigation, may create a catalysing factor whose absence is an argument confirming why Europe should not fear the opt-out class action.

All in all, it seems that the effectiveness and widespread use of collective litigation and the potential of abuse and adverse effects are inversely proportional to each other. It would amount to an exaggeration to contend that this is a vicious circle; it is not, it is a trade-off, which does allow fine-tuning. The European legislator or legislators have to find the point of equilibrium where the marginal benefit of effective enforcement equals the marginal cost of abuse and adverse effects. Low risk premiums would encourage collective litigation in good cases but would not be sufficient to be an incentive to take up weak cases. If the risk premium embedded in the US system appears to be excessive in Europe, a lower one should be introduced.

Furthermore, the perils inherent in the risk premium certainly do not refute the proposition that the opt-out class action should not be feared if introduced in the current European regulatory environment. The fact that without an appropriate risk

86See Gryphon (2011: 569).

87Behr (2003: 120–121), Visscher (2009: 224), Koziol (2009: 304).

88Nagy (2013: 495–496).

89Nagy (2013: 489, 497).

90Nagy (2013: 496).

91See Kalajdzic et al. (2009: note 29).

premium the intensity of opt-out class actions would not exceed a certain level is not an argument against their introduction. In particular, because the group representative may espouse the collective action for different non-economic reasons; and the limited European experience shows that civil organizations may endeavour to protect the rights of group members, even in case it does not pay out for them to do so.

All in all, the main flaw of European collective actions' treatment of financial incentives is that, in essence, they scrap the risk premium devices of US law, while failing to offer any surrogate.92 In the absence of an adequate risk premium it will not pay out for group representatives to take up the case; and even if the group representative is a non-profit organization, failing public funding, the entity's expected costs and expected income have to be in balance to make the system sustainable.

#### *4.3.2 Two-Way Cost-Shifting*

While in the US, owing to the American rule, group members do not run the risk of becoming responsible for the defendant's attorney's fees, in Europe the principle of two-way cost-shifting prevails. This implies that, even if this principle does not work to the full, group members' financial liability for the legal costs has to be addressed. The general principle of civil procedure requires that someone should be obliged to reimburse the winning party for his legal expenses and there is no reason to deprive the defendants of collective actions of this protection. This obligation may be placed either on individual group members or on the group representative. In opt-in systems both variations are conceivable, as group members join the collective action voluntarily. However, if adopted, opt-out systems entail an additional twist: the strongest argument for the constitutionality of opt-out class actions is that they confer only benefits and no disadvantages on group members; this argument would lose weight if group members were exposed to the risk of being liable for the defendant's legal costs. Hence, the argument for the opt-out scheme's constitutionality may be preserved if group members are freed from all liability and the group representative runs the full risk as to legal costs.

#### *4.3.3 Distrust of Market-Based Mechanisms in the Enforcement of Public Policy (No Private Attorney General)*

In Europe, class actions are not meant to have a public policy function and serve as a purely compensatory function. A public policy role would be difficult to reconcile with the principle that public policy is the prerogative of the state. The only legitimate purpose of collective actions is to organize the effective enforcement of private law

92See Geradin (2015: 1096–1099).

claims that would otherwise not be enforced. While this may certainly influence the behavior of undertakings, beyond these side-effects, all public policy aims are left to public law and public authorities. In the same vein, the concept of "private attorney general" is completely alien to European legal systems and for-profit entities' aptness to serve the public interest is normally received with doubt.

As a result, European legislators have been reluctant to vest for-profit private entities with the power to launch collective proceedings. Standing has been normally limited to public entities and non-profit organizations. The general attitude is that financial incentives may give a stimulus that is not reconcilable with the public interest to be protected.

The consequence of this attitude is that in class actions standing is normally conferred on non-profit entities (non-profit organizations, administrative agencies or public prosecutors), which are presumed not to be influenced by inadequate incentives.93

#### *4.3.4 European Opt-In Collective Actions and Joinders of Parties*

A few EU Member States adopted opt-in systems, ruling out representation without positive authorization. These systems embed the requirement that the group representative, one way or another, has to be explicitly authorized by group members and only those persons are part of the litigation who expressly did so.

Probably the first question that emerges as to the opt-in system is its*raison d'être*: why to have an opt-in scheme if the doctrine of joinder of parties is available for organizing group litigation. The answer lies in the details. A joinder of parties creates a very decentralized system. It is not lead by a group representative, quite the contrary, in a joinder of parties, legally speaking, there is no group representative, though the parties may hire the same attorney. The group is not centralized, group members have equal rights and obligations, they may make individual submissions and their motions may contradict. This makes a traditional joinder of parties unsuitable for mass litigation, in particular in relation to small claims.

The opt-in class action is a centralized joinder of parties that makes mass litigation feasible through the concentration of the representation and the restriction of certain procedural rights of group members (i.e. group members' procedural rights are restricted in comparison to individual litigation). That is, the opt-in class action not only simplifies adherence but also turns the group representative from a marionette into the master of the case.

93See Fairgrieve and Howells (2009: 400, 407) (The European model regards "public agencies or accredited consumer organizations as a gatekeeper[s].").

#### *4.3.5 Opt-Out Systems and the "Only Benefits" Principle*

The taboo of party autonomy has profoundly shaped the European model of collective actions. This entailed that some Member States adopted opt-in schemes, while those who introduced an opt-out system did this along with the "only benefits" principle (i.e. in the opt-out system only benefits may accrue to group members).

According to the "only benefits" principle, the opt-out rule is reconcilable with the constitutional right to party autonomy, because it confers only benefits on group members, so their assent may be presumed. As a corollary, opt-out systems were worked out in a way that group members run no risk as to legal costs and, at times, they are covered by the final judgment's res judicata effects only if they expressly accept it or if that is in their interest.

The French class action yarn demonstrates well how the "only benefits" principle, erected by constitutional considerations, has shaped Europe's paradigm.

France introduced a collective action mechanism for consumers in 2014,94 which was scrutinized and endorsed by the French Constitutional Council.95

The French regulatory regime established a truly unique system (action de groupe à la française), which combines the elements of the opt-out and opt-in models. Even though French law retained the requirement that the consumer needs to adhere through an express declaration, this declaration needs to be submitted only after the judgment has been made, when the consumer turns the award into cash.

The scheme appears to be a de facto opt-out system, although the consumer's right to opt-in is retained and can be exercised after the judgment is made. This is, to some extent, comparable to the opt-out system, since even there, at the end of the day, group members have to act in order to receive their share of the award. At the same time, there is a real difference between the "action de groupe à la française" and opt-out class action. In the former case, the judgment's res judicata effect extends to the group member only if, after having been duly informed, he expressly accepts the judgment and the compensation. If a group member thinks that he can reach a more favourable award, he can enforce his claim individually. However, this seems to be a rather formal difference: it is highly unlikely that in the subsequent individual action the court would reach a different conclusion. Taking into account the rule that the consumer has to step in only in the last phase, after the legal situation has been fixed, and assuming that consumers will go their own way extremely rarely, this system can be reasonably characterized as a de facto opt-out scheme.

The French consumer code (Code de la consummation) establishes a standard group procedure and a simplified procedure. The simplified procedure96 applies if the identity and the number of the injured consumers are known and they sustained either a harm of the same amount, of the same amount per a given service or of the

94Act 2014-344 of 17 March 2014 (Loi n° 2014-344 du 17 mars 2014 relative à la consommation publiée au Journal Officiel du 18 mars 2014).

95Decision 2014-690 of 13 March 2014 (Le 14 novembre 2014, JORF n°0065 du 18 mars 2014, Texte n°2, Décision n° 2014-690 DC du 13 mars 2014).

96Article L423-10 of the French Consumer Code.

same amount for a given period. According to these criteria, the court may establish the defendant's liability and order it to compensate group members directly and individually within the deadline set by the court. The only element which obscures the opt-out nature of this procedure is the rule providing that a consumer can be compensated only after he accepted to be compensated according to the terms of the judgment. The simplified procedure has the strongest opt-out features. From the perspective of res judicata effects, this rule preserves, indeed, the opt-in nature of the procedure, since if the consumer is not content with the judgment, he may take the route of individual litigation. However, notwithstanding the lack of res judicata effects, as noted above, it is highly unrealistic that the court would come to a different conclusion in the subsequent individual litigation. Furthermore, as a matter of fact, the simplified procedure does not make express adherence a pre-condition of the procedure and the judgment. In fact, it does not require much more activity from the consumer than opt-out systems do: the consumer would have to act at the payment or enforcement stage anyway (for example, contact the group representative or the court, initiate the enforcement of the judgment).

The standard procedure follows the same logic.97 In the first phase, the judge as a result of the group representative's action—decides on the merits of the case, insofar this is possible. It establishes the defendant's liability, defines the group and establishes the applicable criteria, determines the harms that can be compensated in respect of all consumers or all categories of consumers, including the amount and the elements, which permit the evaluation of the harm. Furthermore, the court establishes the measures that have to be adopted to inform group members and fixes a deadline for adherence. In the second, out-of-court phase, group members are informed and have to decide whether they want to be covered by the judgment. In the ideal case, the defendant pays compensation to them. Should this not happen, the action moves to the third phase, where the court decides on the eventual difficulties of enforcement and on individual cases. Accordingly, the court decides on the merits of the case as early as the first phase.  The third stage is left for fine-tuning and individual aspects. Again, the judgment's res judicata effect is conditional on the consumer's acceptance of the judgment. However, this appears to be a rather formal dissimilarity to the opt-out system: as noted above, it seems to be highly unrealistic that the court would come to a different conclusion in the subsequent individual litigation than in the collective action.

It appears that, during the law's constitutional review, it was decisive for the French Constitutional Council that the res judicata effect covers solely those group members who received compensation at the end of the procedure.98 It seems that the circumstances that only benefits accrue to group members and that the judgment's res judicata effect covers only those group members who assented to it (since compen-

97Articles L423-3 to L423-9 of the French Consumer Code.

98Decision 2014-690 of 13 March 2014 (Le 14 novembre 2014, JORF n°0065 du 18 mars 2014, Texte n°2, Décision n° 2014-690 DC du 13 mars 2014), paras 10 and 16.

sation can be paid only if the group member accepts it) were sufficient to extinguish the possible constitutional concerns.

Before the adoption of the above-mentioned decision, the French Constitutional Council had been referred to as an authority to justify the unconstitutionality of the opt-out system, citing its famous decision of 1989,99 which dealt with a law that authorized trade unions to launch any action (toutes actions) on behalf of the employee, including claims of unfair dismissal.100 The French rules adopted in 2014 seem to have gone beyond the constitutional requirements of the decision of 1989, since, although at the end of the procedure, they do require express acceptance from group members, they do not content themselves with tacit adherence.

#### **4.4 Summary**

The regulatory and social environments of collective actions differ considerably on the two sides of the Atlantic. Contrary to the US, "entrepreneurial lawyering" is virtually missing in Europe, contingency fees are either prohibited (or available with restrictions) or, even if legal, are normally not available in the market; active client-acquiring and lawyer advertisements are banned or heavily restricted in most EU Member States. The "American rule" and especially one-way costshifting, as provided by various American protective statutes, are unknown to European jurisdictions, which traditionally follow the rules of two-way cost-shifting. Super-compensatory damages are not available in Europe, with some narrow and insignificant exceptions in a couple of common law jurisdictions, and the generous US discovery rules have equally no counter-part.

These differences have twofold consequences. First, due to the absence of the above pro-plaintiff incentives, the operation and impact of European collective actions differ considerably from their American ancestor. Second, European legislators have to address quite a few regulatory issues that do not emerge in the US.

Both theoretical analysis and empirical data clearly suggest that the purported negative repercussions of opt-out collective litigation (US class action) would not emerge if this regulatory mechanism were introduced in Europe. The theoretical arguments and the brief account of the empirical evidence in Europe suggest that, whereas the relatively short time that has elapsed since the wide-spread appearance of these mechanisms (both opt-in and opt-out systems) in Europe does not enable us to predict long-term consequences, opt-out collective proceedings would trigger no litigation boom in Europe. This conclusion is underpinned also by the empirical experiments of Australia and Canada, which introduced class actions in a regulatory environment different in some of the relevant aspects from the US.

The transplantation of collective actions into the European legal and social environment raises an array of novel regulatory questions.

99Décision n° 89-257 DC du 25 juillet 1989.

100Id. at para 25.

European legal systems lack the counterparts of US legal institutions that facilitate litigation through the provision of financial incentives (one-way cost-shifting, contingency fees and punitive damages), making litigation finance a crucial regulatory issue. Unfortunately, European collective action laws have failed to settle or even address this problem: while they ruled out the American institutions that stimulate the operation of US class actions, they failed to replace these with appropriate substitutes. Arguably, failing public funding, European class actions have little chance to become effective and self-sustaining, if, one way or another, appropriate financial incentives are not provided for to ensure that the group representative receives a risk premium for running financial risks in the interest of the group. Economically speaking, the group representative's expected income and expected costs cannot be equilibrated in the absence of an appropriate risk premium and, hence, he may be incited to espouse group members' claims, if he is compensated for the risks he runs when engaging in collective litigation.

While in US class action, due to the American rule, group members are not responsible for the defendant's attorney's fees even if the class action fails, in Europe, the principle of two-way cost-shifting prevails, raising—both in opt-in and opt-out systems—the regulatory question of allocation. It is generally accepted that the optout scheme's constitutionality may be preserved if group members are freed from all liability and the group representative runs the full risk as to legal costs.

European class actions are not meant to have a public policy function and their role is limited to ensuring a compensatory remedy for group members. As the concept of "private attorney general" is completely alien to European legal systems and the general attitude is that financial incentives may function as an unacceptable stimulus, for-profit entities' aptness to serve the public interest is normally received with doubt. This explains why in Europe standing has been normally limited to public entities and non-profit organizations.

A peculiar element of the architecture of European collective actions is the "only benefits" principle, which prevails in opt-out systems. The strongest argument for "representation without authorization" and against the allegation that opt-out class actions encroach on party autonomy is that only benefits may accrue to group members, so it would be redundant to require express authorization. Hence, these systems were worked out in a way that group members run no risk as to legal costs and they are covered by the final judgment's res judicata effects only if they expressly accept it or if that is in their interest.

#### **References**

Alexander JC (2000) An introduction to class action procedure in the United States. Paper presented at "Debates over group litigation in comparative perspective", Geneva, 21–22 July 2000. http:// law.duke.edu/grouplit/papers/classactionalexander.pdf. Accessed 20 April 2019

Baert KM, Guindon A (2008) Class proceedings in Ontario: the growing risk of adverse costs awards against representative plaintiffs. Paper presented at the 5th Annual symposium on class actions, Toronto, Canada, 10–11 April 2008

Kalajdzic J, Bogart WA, Matthews I (2009) Canada. Ann Am Acad Polit Social Sci 622(1):41–52

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# **Chapter 5 European Models of Collective Actions**

Aside from some general legal requirements, EU law contains no "federal" legal framework for Member States' collective action regimes. Member States have procedural autonomy in the application of EU law, that is, they are free to determine the structure and way of application and enforcement,1 with the proviso that national law must not discriminate between the application of EU and domestic law (principle of equivalence)2 and "must not be so framed as to make it virtually impossible or excessively difficult to obtain reparation (principle of effectiveness)."3

In 2013, the European Commission adopted a Recommendation on Collective Redress,4 a non-binding legal instrument,5 proposing that Member States adopt collective redress mechanisms for violations of EU law. Although it may certainly have an impact on Member State laws,6 as noted above, contrary to a directive, the

5Article 288 TFEU.

1See e.g. Case 51-54/71 *International Fruit Company*, [1971] ECR 1107, ECLI:EU:C:1971:128, paras 3 and 4.

2See e.g. Case 33/76, *Rewe*-*Zentralfinanz eG and Rewe*-*Zentral AG v Landwirtschaftskammer für das Saarland*, [1976] ECR 1989, ECLI:EU:C:1976:188, para 5.

3See e.g. Case C-261/95 *Rosalba Palmisani v Istituto nazionale della previdenza sociale* (*INPS*), [1997] ECR I-4025, ECLI:EU:C:1997:351, para 27.

4For an analysis of the Recommendation, see Piñeiro (2013), Szalai (2014), Stadler (2015: 61) and Nagy (2015: 530).

6In fact, the Recommendation's impact on positive law in the Member States has been rather slight, see Commission Report on the implementation of the Commission Recommendation of 11 June 2013 on common principles for injunctive and compensatory collective redress mechanisms in the Member States concerning violations of rights granted under Union law (2013/396/EU), COM(2018) 40 final, p 20. ("As far as the transition into legislation is concerned, the analysis of the legislative developments in Member States as well as the evidence provided demonstrate that there has been a rather limited follow-up to the Recommendation. The availability of collective redress mechanisms as well as the implementation of safeguards against the potential abuse of such mechanisms is still very unevenly distributed across the EU. The impact of the Recommendation is visible in the two Member States where new legislation was adopted after its adoption (BE and LT) as well as in SI where new legislation is pending, and to a certain extent in the Member States that changed their legislation after 2013 (FR and UK).")

Recommendation creates no framework for national regulation. Its significance and potential impact has to be assessed accordingly.

The Recommendation follows a conservative approach. It suggests restricting group representation to non-profit entities and public authorities.7 Furthermore, it expresses a strong preference towards the opt-in system, recommending that only those group members should be involved in the collective action who expressly assented to it.8 The Recommendation does not ban the opt-out scheme outright but leaves open a gate, even if a small one, to such mechanisms: "[a]ny exception to [the opt-in] principle, by law or by court order, should be duly justified by reasons of sound administration of justice."9

The Recommendation introduces safeguards in order to obviate the incentives to abuse the mechanism of collective actions: it makes the use of the "loser pays" principle mandatory,10 excludes, at least in principle, contingency fees11 and prohibits punitive damages.12

The above European federal framework may change considerably in the foreseeable future. In April 2018, the Commission proposed the adoption of a consumer collective action scheme (termed "representative action").13 The proposed directive is in accordance with the common principles of European collective action laws: it has a sectoral approach (consumer protection), rigorous pre-conditions, confers standing on qualified representative entities, maintains the "loser pays rule" and rules out financial incentives, such as contingency fees and punitive damages. It evades the dilemma of opt-in and opt-out through leaving the choice to Member States.14 Given that most national collective action schemes already comply with these requirements,

7Recommendation on Collective Redress, paras 4–7.

8Trstenjak (2015: 689).

9Recommendation on Collective Redress, para 21. ("The claimant party should be formed on the basis of express consent of the natural or legal persons claiming to have been harmed ('opt-in' principle). Any exception to this principle, by law or by court order, should be duly justified by reasons of sound administration of justice.")

10Recommendation on Collective Redress, para 13.

11Recommendation on Collective Redress, paras 29–30. According to the Recommendation, contingency fees can be permitted only exceptionally. ("The Member States that exceptionally allow for contingency fees should provide for appropriate national regulation of those fees in collective redress cases, taking into account in particular the right to full compensation of the members of the claimant party.")

12Recommendation on Collective Redress, para 31.

13Proposal for a Directive on representative actions for the protection of the collective interests of consumers, and repealing Directive 2009/22/EC, COM(2018) 184 final. See European Parliament legislative resolution of 26March 2019 on the proposal for a directive of the European Parliament and of the Council on representative actions for the protection of the collective interests of consumers, and repealing Directive 2009/22/EC (COM(2018)0184–C8-0149/2018–2018/0089(COD)). 14Article 6.

the directive is supposed to entail no landslide conceptual reform. Instead, its major virtue is expected to be the introduction of consumer collective action in one third of the Member States where this meachanism is still not available at all.

This chapter gives a transsystemic overview of the European national solutions and schemes along the key issues of class actions.15 It presents the European landscape, the opt-in and opt-out systems and their main features, the purview of collective action laws featuring a precautious, step-by-step evolution, the pre-requisites of collective actions and certification, the rules on standing and adequate representation, the status of group members, their liability for legal costs and the res judicata effect in opt-in proceedings, the operation of the "only benefits" principle in opt-out proceedings and its impact on the status of group members, and the enforcement of judgments in collective actions.

#### **5.1 The European Landscape: To Opt in or to Opt Out?**

In Europe, the history of collective actions started roughly three decades ago.16 Collective action law gained a foothold in the mid-1990s. Aside from the English representative action, a doctrine rooted in common law but rarely used in practice,17 class action legislation first appeared in the Hispanic peninsula (Spain, 1984; Portugal, 1995), in Greece in consumer protection law (1994) and in Hungary in the field of competition law (1996). Interestingly, all these systems were based on the opt-out principle and, even more interestingly, they proved to be less effective than one would expect from an opt-out scheme, and way less effective than US class actions. These were followed by the introduction of various opt-in and opt-out schemes. Today, 17 out of 28 Member States provide for collective actions18 and 10 out of them have

15For a general typology, see Hensler (2017: 971–979).

16See Fairgrieve and Howells (2009: 383–401).

17Sherman (2002: 402).

18Commission's Report on the implementation of the Recommendation on Collective Redress says that "Compensatory collective redress is available in 19 Member States (AT, BE, BG, DE, DK, FI, FR, EL, HU, IT, LT, MT, NL, PL, PT, RO, ES, SE, UK)." Commission Report on the implementation of the Commission Recommendation of 11 June 2013 on common principles for injunctive and compensatory collective redress mechanisms in the Member States concerning violations of rights granted under Union law (2013/396/EU), COM(2018) 40 final, p 3. However, somewhat misleadingly, it also lists Member States where there is admittedly no "legislation on compensatory relief" but "collective actions are carried out on the basis of the assignment of claims or the joinder of cases."

a system based, at least partially, on the opt-out principle (Belgium,19 Bulgaria,20 Denmark,21 France,22 Greece,23 Hungary,24 Portugal,25 Slovenia,26 Spain,27 and the

19The Belgian system leaves it to the judge to decide whether the action should be conducted according to the opt-in or the opt-out model. Law Inserting a Title 2 on 'Collective Compensation Action' in Book XVII 'Special Jurisdictional Procedures' of the Code of Economic Law, 28 March 2014, Moniteur Belge (M.B.) (Official Gazette of Belgium (29 March 2014) (Loi portant insertion d'un titre 2 «De l'action en réparation collective» au livre XVII «Procédures juridictionnelles particulières» du Code de droit économique et portant insertion des définitions propres au livre XVII dans le livre 1er du Code de droit économique) and Section XVII.38 in conjunction with Section I.21 of the Belgian Code of Economic Law.

20Chapter 33, Sections 379-388 of the Bulgarian Code of Civil Procedure, for an English version of the statutory text, see https://kenarova.com/law/Code%20of%20Civil%20Procedure.pdf. Accessed 20 April 2019. See Katzarsky and Georgiev (2012: 64).

21Sections 254a–254e of the Administration of Justice Act.

22In France, de facto opt-out class actions were first introduced in the field of consumer protection in 2014, Loi n° 2014-344 du 17 mars 2014 relative à la consommation et Décr. n° 2014-1081 du 24 sept. 2014 relatif à l'action de groupe en matière de consommation, followed by the health care sector in January 2016, Loi n° 2016-41 du 26 janv. 2016 de modernisation de notre système de santé et Décr. n° 2016-1249 du 26 sept. 2016 relatif à l'action de groupe en matière de santé. In November 2016, a general framework was created in France for group actions. Loi n° 2016-1547 du 18 novembre 2016 de modernisation de la justice du XXIe siècle, JORF n° 0269 du 19 novembre 2016 texte n° 1. The new regime extended the purview of the mechanism to discrimination, environmental protection, personal data and health care matters, inserting Sections 826-2–826-24 into the French Code of Civil Procedure.

23Articles 10(16)-(29) of Law 2251/1994 on Consumers' Protection.

24Section 92 of Hungarian Competition Act (1996. évi LVII. törvény a tisztességtelen piaci magatartás és a versenykorlátozás tilalmáról); Sections 38-38/A of Hungarian Consumer Protection Act (Act CLV of 1997) (1997. évi CLV. törvény a fogyasztóvédelemr ˝ol); Sections 580-591 of the new Hungarian Code of Civil Procedure effective as from 1 January 2018 (Act CXXX of 2016 on the Code of Civil Procedure, in Hungarian: 2016. évi CXXX. törvény a polgári perrendtartásról).

25Law 83/95 on the Acção Popular. See Rossi and Ferro (2013: 46–64) and Ferro (2015: 299–300).

26Law on Collective Actions (Zakon o kolektivnih tožbah—ZkolT), Official Journal of the Republic of Slovenia No. 55/2017.

27See Section 20 of Law 26/1984 of 19 July on Consumer Protection (Ley para la defensa de los consumidores y usuarios), now Section 24 of Royal Legislative Decree 1/2007 of 16 November,

United Kingdom28).29 Accordingly, more than half of the Member States have sanctioned the introduction of collective actions and from those who did, more than half chose, to some extent, the opt-out system and only less than half stuck fully to the more conservative opt-in principle (Finland,30 Germany,31 Italy,32 Lithuania,33 Malta,34 Poland35 and Sweden36).

A couple of states adopted mechanisms that may resemble collective actions but cannot be regarded as a means of collective civil litigation (Fig. 5.1). For reasons advanced above in Sect. 4.3.4, traditional procedural institutions (joinder of parties and assignment of claims) cannot be considered a form of collective action, although they are at times used for the purpose of collective litigation in a couple of Member States (e.g. Austria and the Netherlands). Virtually every single Member State law provides for this possibility and in 11 Member States (Austria, Croatia, Cyprus, Czech Republic, Estonia, Ireland, Latvia, Luxembourg, the Netherlands, Romania, Slovakia), beyond these legal instituions, no special procedural scheme is available

which issued a consolidated text on the Law on Consumer Protection and other supplementary laws (Texto refundido de la Ley General para la Defensa de los Consumidores y Usuarios y otras leyes complementarias). This provision was later on inserted in almost every special consumer law issued by the Spanish legislator. See Piñeiro (2007) 63–65. The Spanish Civil Procedure Act of 2000 is, though, the first attempt to systematize the rules of collective proceedings (Articles 6, 11, 15, 15bis, 221, 222(2), 256(1)(6), 519).

28See e.g. Sections 18-19 of the 2002 Enterprise Act, which were inserted in Sections 47/A-47/D of the 1998 Competition Act. See also Group Litigation Orders in Sections 19.10. and 19.11. of the Civil Procedure Rules.

29*Contra* Commission Report on the implementation of the Commission Recommendation of 11 June 2013 on common principles for injunctive and compensatory collective redress mechanisms in the Member States concerning violations of rights granted under Union law (2013/396/EU), COM(2018) 40 final, p 13. (Considering French, Hungarian and Spanish law to contain an opt-in system.)

30Act 444/2007 on Group Actions (Ryhmäkannelaki).

31Gesetz zur Einführung einer zivilprozessualen Musterfeststellungsklage (MuFKlaG k.a.Abk.). G. v. 12.07.2018 BGBl. I S. 1151 (Nr. 26).

32See Law No 99 of 23 July 2009.

33Chapter XXIV1, Section 4411−17 of the Lithuanian Code of Civil Procedure with the latest amendment on 8 November 2016 No. XII-2751.

34Act VI of 2012. See http://www.justiceservices.gov.mt/DownloadDocument.aspx?app=lom& itemid=11910&l=1. Accessed 20 April 2019.

35Act of 17 December 2009 on Pursuing Claims in Group Proceedings (Ustawa z dnia 17 grudnia 2009 r. o dochodzeniu roszcze ´n w post˛epowaniu grupowym), Journal of Laws from 2010, No. 7, item 44. The law was comprehensively amended by Act of 7 April 2017 amending different laws in order to facilitate recovery of debts—(Ustawa z dnia 7 kwietnia 2017 r. o zmianie niektórych ustaw w celu ułatwienia dochodzenia wierzytelno´sci), published in Dziennik Ustaw (Journal of Laws) of 2017, item 933. The amendments entered into force on 1 June 2017.

36Group Proceedings Act, SFS 2002: 599.

**Fig. 5.1** The European collective action landscape (grey: solely opt-in collective actions are available, black: opt-out collective actions are available)

for collective monetary claims, even though collective proceedings are available for injunctions and declaratory judgments.37

Although usually listed among Europe's opt-out collective proceedings, the Dutch collective settlement is not considered to be a collective action, as it merely provides a framework for cases where the defendant concedes liability and is ready to settle. In 2005, the Netherlands adopted the Act on Collective Settlement of Mass Damages (Wet collectieve afwikkeling massaschade),38 which is applicable (as its name suggests) solely to settlements and, accordingly, cannot be used to claim recovery. The group is represented by a social organization, which may conclude a settlement

37See British Institute of International and Comparative Law (2017: 10) and European Parliament, Policy Department for Citizens' Rights and Constitutional Affairs, Directorate General for Internal Policies of the Union (2018: 18).

38The Act entered into force on 27 July 2005. For a comprehensive analysis on the Act, see Krans (2014) and Bosters (2017: 47–59).

with the tortfeasor; the settlement has to be approved by the court.39 Group members may opt-out from the settlement within three months.

Likewise, regimes providing for the disgorgement of illicitly obtained proceeds for the public budget are not regarded as collective actions, as they are not meant to compensate the victims. For instance, German law, in the field of antitrust and unfair competition law, provides for a disgorgement procedure where wrongdoers may be enjoined to surrender the illicitly acquired economic benefits, however, the proceeds, instead of the victims, go to the federal budget. In the field of unfair competition law, certain associations may sue for monetary relief equal to the illicit profits, less the sums the wrongdoer paid because of the violation, to third parties or the state. The association may enforce the creaming-off claim without the express authorization of group members, however, the money awarded does not go to the victims but to the central budget.40 Similar rules are embedded in the German Antitrust Law, which applies in cases where the German Federal Competition Office (Bundeskartellamt) adopted no measure to cream off the illicit profits and provides that the Office shall reimburse the associations for their costs up-to the payments they secured for the federal budget.41 Accordingly, the creaming-off mechanism's function is not to secure a private remedy for the injured parties but to supplement public enforcement.42

In same vein, judicial mechanisms that help to coordinate the adjudication of parallel individual proceedings after they have been launched are not considered to be collective actions, as they are not related to access to justice and are not aimed at enhancing the effectiveness of law. For instance, in 2005, Germany introduced a statutory test-case mechanism in capital market law for investor claims.43 However, this mechanism does not unite individual claims to be submitted and enforced jointly but streamlines individual actions already launched. It creates a possibility to suspend individual actions and to have the common legal and factual issues decided by a single court.

As noted above, while Europe is generally considered to feature the opt-in scheme, this observation is only partially valid. On the one hand, it is true that representation without authorization is generally disapproved taking into account that in 40% of the Member States solely traditional joinder of parties and assignment of claims are

39The approval of these settlements comes under the competence of the Court of Appeals in Amsterdam.

40Section 10 of the German Act against Unfair Competition (Gesetz gegen den unlauteren Wettbewerb—UWG), Gesetz gegen den unlauteren Wettbewerb in der Fassung der Bekanntmachung vom 3. März 2010 (BGBl. I S. 254), last amended through Section 4 of Gesetz vom 17. Februar 2016 (BGBl. I S. 233).

41Section 34a of the German Act against Restrictions of Competition (Gesetz gegen Wettbewerbsbeschränkungen—GWB), Gesetz gegen Wettbewerbsbeschränkungen in der Fassung der Bekanntmachung vom 26. Juni 2013 (BGBl. I S. 1750, 3245), last amended through Section 5 of Gesetz vom 13. Oktober 2016 (BGBl. I S. 2258).

42Cf. Stadler (2009: 117).

43Law on Model Proceedings in Capital Market Disputes (Gesetz über Musterverfahren in kapitalmarktrechtlichen Streitigkeiten—KapMuG), adopted on August 16, 2005 (BGBl. I S. 2437). See Halfmeier and Feess (2012), Steinberger (2016: 44–132) and Bosters (2017: 27–34).

available as a means to bring collective claims to court. On the other hand, from the 17 Member States which created a special regime for collective litigation, only 7 stuck fully to the opt-in principle.

The 2002 Swedish Act on Group Proceedings44 is one of the first comprehensive national codifications of collective actions that covered the whole spectrum of civil claims (and not only specific sectors or branches of law).45 The Swedish Act entered into force on 1 January 2003. Although it adopts an opt-in system, the available statistical data suggests that the Swedish Group Proceedings Act is relatively effective: 17 group proceedings were initiated until the beginning of 2014 (that is, in the first 12 years of the law).46 These matters include the enforcement of air passengers' rights, claims by insurance holders, a procedure against the Swedish state for violating EU law, overcharges concerning electricity supply (violation of fixed universal service prices).47

The Finnish parliament adopted the Act on Collective Proceedings in February 2007, after 15 years of social debate48; the Act came into force on 1 October 2007.49 The central feature of the Finnish system is that is creates an opt-in system50 empowering exclusively the Consumer Ombudsman to institute a collective action51 in matters coming under its competence (consumer matters).52 Until recently, there has been no proceedings instituted on the basis of the Finnish Act53; this may be explained with the opt-in rule and with the fact that collective actions may be launched exclusively by the Consumer Ombudsman.54 Of course, the lack of cases does not necessarily mean that the Finnish Act has been devoid of impact on the behavior of enterprises.55

44Group Proceedings Act, SFS 2002:599. For the non-official translation of the Act, see https:// www.government.se/government-policy/judicial-system/group-proceedings-act/ and http://www. courdecassation.fr/IMG/File/loi\_suedoise\_swedish\_law\_eng.pdf. Accessed 20 April 2019. The Act entered into force on 1 January 2003. For a comprehensive analysis of the draft version, see Lindblom (1997: 824–830), Nordh (2001: 395–402), Lindblom (2007) and Persson (2012).

45Sections 1-2 of the Swedish Act on Group Proceedings.

46Ervo (2016: 188). See also Ervo et al. (Unknown).

47Lindblom (2008: 2–7) (reporting 12 cases.). Cf. Persson (2008: 17) (reporting 11 cases).

48Act 444/2007 on Class Actions (Ryhmäkannelaki), for an unofficial English translation of the Act, see http://www.finlex.fi/fi/laki/kaannokset/2007/en20070444.pdf. Accessed 20 April 2019. For an analysis on the Act, see Viitanen (2007).

49Section 19 of the Finnish Act on Class Action.

50Section 8(1) of the Finnish Act on Class Action.

51Section 4 of the Finnish Act on Class Action.

52The Act is not applicable to capital market matters.

53Ervo (2016: 189) and Kiurunen (2012: 226).

54Välimäki (2007) and Viitanen (2008: 2).

55It may be used as a leverage to compel a settlement. See "Caruna and the Consumer Ombudsman reached a negotiated solution—no need for a class action lawsuit, but changes in the Electricity Market Act still in the agenda". http://www.hankintajuristit.fi/caruna-and-the-consumer-ombudsmanreached-a-negotiated-solution-no-need-for-a-class-action-lawsuit-but-changes-in-the-electricitymarket-act-still-in-the-agenda/. Accessed 20 April 2019.

The Italian legislator enacted a law on collective actions in December 2007 by inserting Section 140bis in the Italian Consumer Code.56 These rules were, nevertheless, replaced by a new Section 140bis,57 which entered into force on 1 January 2010.58 Contrary to the rules of 2007, which referred to the "collective interests" of group members, according to the rules of 2009, the collective action aims to protect the "individual interests" of group members. In 2012, one of the pre-requisites of collective action was softened: as from 25 March 2012, it suffices if the rights of group members are "homogeneous", they do not have to be "identical" anymore.59 The Italian class action may be used only for pursuing consumer claims arising from specific cases: standard contractual terms and conditions, defective products and services, unfair commercial practices and anticompetitive conducts.60 According to publicly available sources, 58 class actions had been launched under this provision until January 2016, although a considerable part of them was declared inadmissible and the vast majority of them is pending.61

Poland introduced collective actions in 2009 (Act on Pursuing Claims in Group Proceedings). These rules went into effect on 19 July 2010.62 The Act underwent significant changes in 2017,63 which entered into force on 1 June 2017. The regime initially applied to consumer law, product and tort liability (with the exception of the protection of personal interests). In 2017, it was extended to claims resulting from the non-performance or undue performance of an obligation, unjust enrichment and certain infringements of personal interests (bodily injury or health disorder).64 The Act follows the opt-in principle.65 Members may join the group after the court certifies it.66 Standing is conferred on class members and the regional consumer

56Act 244 of 24 December 2007. For a comprehensive analysis of the Italian legislation, see Caponi (2011a: 61), Caponi (2011b) and Ernesto and Fernando (2012).

57Act 99 of 23 July 2009. http://www.tedioli.com/Italian\_class\_action\_text\_english\_version.pdf. Accessed 20 April 2019.

58In respect of the Italian legislation, see Silvestri (2007a, b, 2008).

59Law no. 27 dated 24 March 2012 under the heading "Rules to make class actions effective".

60Section 140bis(2) of the Italian Consumer Code; Principe (2012). Recently, in *Adusbef v Monte dei Paschi di Siena*, the court of appeals of Florence held that retail investors are not consumers and, hence, are not covered by the Italian class action legislation. Afferni (2016: 82, 85).

61See the overview provided at http://www.osservatorioantitrust.eu/it/azioni-di-classe-incardinatenei-tribunali-italiani/. Accessed 20 April 2019. For more information on the case-law, see http:// www.collectiveredress.org/collective-redress/reports/italy/caselaw. Accessed 20 April 2019.

62Act of 17 December 2009 on Pursuing Claims in Group Proceedings (Ustawa z dnia 17 grudnia 2009 r. o dochodzeniu roszcze ´n w post˛epowaniu grupowym). Journal of Laws from 2010, No. 7, item 44.

63Act of 7 April 2017 amending different laws in order to facilitate recovery of debts—(Ustawa z dnia 7 kwietnia 2017 r. o zmianie niektórych ustaw w celu ułatwienia dochodzenia wierzytelno´sci), published in Dziennik Ustaw (Journal of Laws) of 2017, item 933.

64Sections 1(2) and 1(2)(a)–(b) of the Polish Act on Pursuing Claims in Group Proceedings.

65Sections 6(2), 11 and 13(2) of the Polish Act on Pursuing Claims in Group Proceedings.

66Section 11(1) of the Polish Act on Pursuing Claims in Group Proceedings.

ombudsman (a public body).67 Notwithstanding the opt-in rule, the Polish system has produced numerous cases.68

Malta introduced opt-in collective actions in 2012 covering the violations of consumer protection, competition and product safety law.69 Group members may join the action within the deadline specified by the court.70 It appears that so far two cases have been launched.71

Lithuania introduced collective actions in 2015.72 The regime was inserted into the Lithuanian Code of Civil Procedure73 (articles 4411 to article 44117).74 The act introduced an opt-in scheme of general application having a horizontal approach. So far the Lithuanian rules have been applied in a handful of cases.75

Germany introduced a "model declaratory claim" (Musterfeststellungsklage) in 2018, which was inserted as Book 6 (Sections 606-614) in the Code of Civil Procedure (Zivilprozessordnung).76 The collective action, which entered into force on 1 November 2018, created an opt-in scheme for consumer matters. As a peculiar feature of the Germany system, courts have no power to award damages but may enter a declaratory judgment as to the pre-conditions of liability (they may establish that the claim's or legal relationship's factual and legal pre-conditions exist or do not exist).77 Group members may seek monetary relief, on an individual basis, after the pre-conditions of the defendant's liability have been established. The final declaratory judgment is binding on courts in matters between the defendant and those consumers who opted in, provided these have the same aim and concern the same fact pattern as the collective declaratory judgment.78 Since the law's very recent entry into force, the

67Section 4(2) of the Polish Act on Pursuing Claims in Group Proceedings.

68See the statistics of the Polish Ministry of Justice for the period between 2010 and 2016, Pozwy zbiorowe w latach 2010–2016, at https://isws.ms.gov.pl/pl/baza-statystyczna/opracowaniawieloletnie/download,2853,32.html. Accessed on 20 April 2019.

69Articles 3-4 and Schedule A of the Maltese Collective Proceedings Act.

70Articles 2 (definition of represented person), 7-8 and 18 of the Maltese Collective Proceedings Act.

71British Institute of International and Comparative Law (2017) 217.

72It has to be noted that group actions were theoretically available also before 2015. Section 49(6) of the Lithuanian Code of Civil Procedure, introduced in 2003, made provision for group actions in case it was necessary to protect the public interest. However, as confirmed by ruling Nr. 2- 492/2009 of the Court of Appeal of Lithuania, this provision could not be put into practice as it was not accompanied by an effective implementation mechanism. New Chapter XXIV1 on Collective Redress was inserted into the Code of Civil Procedure which came into effect on 1 January 2015 and repealed Section 49(6). See Juška (Unknown).

73Section 4411−17 of the Lithuanian Code of Civil Procedure.

74For an English version of the 2015 Lithuanian Class Action Act see Renata Juzikienè's unofficial translation at http://globalclassactions.stanford.edu/sites/default/files/documents/Class\_ Action\_Lithuania.pdf. Accessed 20 April 2019. In the following, the quotes from the Lithuanian legislation refer to the foregoing translation.

75See Juška (Unknown).

76See Halfmeier (2017) and Schäfer (2018).

77Section 606(1) of the German Code of Civil Procedure.

78Section 613(1) of the German Code of Civil Procedure.

institution of three cases has been published79; the first "model declaratory claim" (emerging from Volkswagen's notorious diesel emissions scandal)80 was submitted on the very day when the rules entered into force.

In the EU, there are 10 Member States which have sanctioned (at least partially) an opt-out scheme.

Four of these combine the opt-in and the opt-out rule and leave it to the judge to decide under which scheme to carry out the collective action.81

The Danish rules on collective action are applicable to proceedings instituted as from 1 January 2008.82 It is up to the court to decide whether to carry out the action in the opt-in or the opt-out scheme. However, the value of this flexibility is significantly reduced by the fact that the opt-out scheme can be used only if the group representative is an administrative agency.83 The court decides for the opt-out pattern if the claims' individual enforcement is not feasible due to their low monetary value and it may be assumed that the opt-in pattern would not be appropriate for managing the claims. According to the *travaux préparatoir*, the monetary value of the claim is low if it does not involve more than DKK 2000 (approximately e 270).84 If the court adopts the opt-out pattern, a deadline is set for group members to abandon the collective action. Until recently, there has been nine cases launched on the basis of the Danish Act on Class Action.85

In the same vein, in Belgium,86 it is up to the court's discretion whether to certify the collective action under the opt-in or the opt-out scheme.87 However, group members residing habitually or having their principal place of business outside Belgium are covered only if they opt in.88 Furthermore, only the opt-in scheme may be used in case of physical and moral damages.89

79See the registry of "model declaratory claim" cases (Register für Musterfeststellungsklagen) of the German federal ministry of justice at https://www.bundesjustizamt.de/DE/Themen/Buergerdienste/ Klageregister/Allgemeines\_node.html. Accessed on 20 April 2019.

80Weimann (2018: 38). Interestingly, while facing technical hurdles in Germany, in the diesel emissions case an opt-out collective action was launched in Belgium. Staudt (2019: 157).

81For a scholarly proposal suggesting that the choice between the opt-in and the opt-out scheme should be made dependent on the sum of the claims, see Neumann and Magnusson (2011: 169–170). 82For an English summary of the Danish legislation, see Werlauff (2008).

83Although it is not an EU Member State, it is noteworthy that the Norwegian rules on collective actions entered into force on the same day as their Danish counter-parts. The rules on collective proceedings were included in Chapter 35 of the Dispute Act. For an English translation of the Norwegian rules, see http://globalclassactions.stanford.edu/sites/default/files/documents/Norway\_ Legislation.pdf. Accessed 20 April 2019. The two systems follow roughly the same model: both combine the opt-in and the opt-out scheme and leave the choice between the two to the court.

84Møgelvang-Hansen (2008: 5) and Nielsen and Linhart (2012: 236).

85See Ervo (2016: 189).

86See Laffineur and Renier (2016).

87For an overview, see Paris (2015: 23–24).

88Sections XVII.38 and XVII.43 of the Belgian Code on Economic Law (Code de droit économique).

89Section XVII.43 3° of the Belgian Code on Economic Law.

In the United Kingdom, due to a mechanism introduced in 2015,90 opt-out class actions are available in competition matters and it is up to the Competition Appeal Tribunal (CAT) to decide whether the procedure will be carried out in the opt-in or the opt-out scheme.91 It is worthy of note that class members domiciled outside the United Kingdom have to opt-in, even if the CAT chose the opt-out scheme for the case. The Competition Act does not set out the factors the CAT has to take into account when exercising its discretion, however, the Competition Appeal Tribunal Rules of 2015 list two considerations: "the strength of the claims" and "whether it is practicable for the proceedings to be brought as opt-in collective proceedings, having regard to all the circumstances, including the estimated amount of damages that individual class members may recover."92

The CAT's 2015 Guide to proceedings93 amplifies these requirements. Without carrying out a full merits assessment, the CAT "will usually expect the strength of the claims to be more immediately perceptible in an opt-out than an opt-in case, since in the latter case, the class members have chosen to be part of the proceedings and may be presumed to have conducted their own assessment of the strength of their claim. (…) For example, where the claims seek damages for the consequence of an infringement which is covered by a decision of a competition authority (follow-on claims), they will generally be of sufficient strength for the purpose of this criterion." As to whether it is practicable for the proceedings to be brought in the opt-in scheme, the CAT "will consider all the circumstances, including the estimated amount of damages that individual class members may recover in determining whether it is practicable for the proceedings to be certified as opt-in." It has to be emphasized that "[t]here is a general preference for proceedings to be opt-in where practicable." "Indicators that an opt-in approach could be both workable and in the interests of

justice might include the fact that the class is small but the loss suffered by each class member is high, or the fact that it is straightforward to identify and contact the class members."

In Slovenia, the law on collective actions was adopted in 2017 (and entered into force in April 2018).94 It leaves the choice between the opt-in and the opt-out scheme to the court.95 The opt-in system has to be used if non-pecuniary damages are involved or if at least 10% of group members has a claim in value exceeding EUR 2000. Nonetheless, even if the opt-out system is chosen by the court, group members not domiciled in Slovenia can become part of the proceedings only if they opt in.96

90Consumer Rights Act 2015. For a comprehensive analysis, see Rodger (2015).

91Section 47/B(7)(c) of the 1998 Competition Act. See Section 47/B(10)–(11).

92Section 79(3) of Competition Appeal Tribunal Rules 2015, Statutory Instrument 2015/1648.

93Section 6.39 of 2015 Competition Appeal Tribunal, Guide to proceedings. http://www.catribunal. org.uk/files/Guide\_to\_proceedings\_2015.pdf. Accessed 20 April 2019.

94See Footnote 26.

95Article 29 of the Slovenian Law on Collective Actions. See British Institute of International and Comparative Law (2017: 14–15) and Sladiˇc (2018: 214).

96Article 30 of the Slovenian Law on Collective Actions.

Seven Member States provide for the statutory right to opt-out collective litigation (in England this operates in addition to the foregoing competition law mechanism combining the opt-in and the opt-out system).97

Greece introduced opt-out collective actions very early, in 1994, in the field of consumer protection.98 This vests certified consumer protection organizations with standing to claim damages on behalf of a group of injured consumers. Since its introduction, this mechanism has produced, on average, 2–3 cases per annum.99

The Portuguese collective action law dates back to 1995, long before this question became so topical in Europe, and has a constitutional basis.100 The Portuguese provisions have a general application and enable actions for any civil claim, including financial relief. The general rules on popular actions (acção popular) are included in Act 83/95 and special provisions are to be found in particular fields, e.g. Law No. 19/2014 of 14 April on Environment Policy, Law No. 24/96 of 31 July on Consumer Protection, Law No. 107/2001 of 8 September on the Cultural Heritage, Securities Code and Law 23/2018 of 5 June on Antitrust Damages Actions. Notwithstanding the opt-out rule, the Portuguese popular action seems not to be particularly successful101; the information available suggests that the law's first decade saw only a few collective proceedings.102

The Spanish system103 is a mixed opt-in-opt-out scheme with a restricted sectoral approach (it applies only to consumer matters).104 In 2007, a similar provision was inserted as to matters concerning equal treatment between men and women.105 Only some collective cases have made their way to court over the last thirty years, mostly injunctive actions. Collective actions are rare in practice due to their cost and the difficulty involved, first, in legally understanding what is needed to proceed with the action, and, second, in gathering group members and evidence and administering enforcement. In the recent years, an increase has been observed as a result of the economic downturn.106 Notwithstanding the non-exhaustive and uncertain regulation

97As noted above, from these the United Kingdom also has, in the field of competition law, a scheme leaving the decision between the opt-in and opt-out scheme to the judge.

98See Footnote 23.

99Emvalomenos (2016: 6).

100Section 52(3) of the Portuguese Constitution.

101See Tortell (2008: 2–3, 5) and Rossi and Ferro (2013: 37–38).

102Tortell (2008: 10). Cf. Rossi and Ferro (2013: 65–66).

103Section 11 of Spanish Code on Civil Procedure (Ley 1/2000, de 7 de enero, de Enjuiciamiento Civil). For an English translation of the Spanish provisions, see de Cabiedes Hidalgo (2007a), for an analysis of the Spanish system, see de Cabiedes Hidalgo (2007b). Collective actions have been part of Spanish law since 1984. See Piñeiro (2016: 88).

104Gomez and Gili (2008: 6–7).

105Section 11bis introduced by L.O. 3/2007, de 22 de marzo, para la igualdad efectiva de mujeres y hombres («B.O.E.» 23 marzo).

106See Piñeiro (2015: 1055–1088).

of the field107 and the absence of a settled practice,108 49 collective proceedings have been recorded until 2008.109

In Hungarian law, opt-out collective action mechanisms exist in competition law and consumer protection law, while an opt-in joint action scheme was introduced by the new Hungarian Code of Civil Procedure as to certain subject-matters (consumer protection, employment matters and environmental damages).110 Although the optout mechanism has been in force for two decades, it has produced only a single published case where monetary relief was awarded.111

Bulgaria adopted an opt-out class action scheme in its Code of Civil Procedure of 2007.112 However, courts continuously apply high requirements on class formation and representation, effectively transforming the procedure into an opt-in system, with the exception where the plaintiff is a public authority (the Commission on Consumer Protection) or a representative consumer association pursuing injunctive measures.113 In terms of statutory language, the regime may cover all violations of law, though the case-law has the tendency to limit the scope to non-contractual violations.114

Besides consumer associations' usual power to request an injunction or a declaratory judgment on an opt-out basis,115 the French Consumer Code (Code de la consommation) contains two patterns of collective action where monetary relief may be sought. First, in 1992 an opt-in scheme was inserted into the Consumer Code (action en représentation conjointe),116 and subsequently introduced as to other matters (investor protection,117 environmental protection). This appeared to be less efficient given that it produced, in the first one and a half decade of its history, only

113Markova (2015: 142–152).

107See Gomez and Gili (2008: 3). (No special procedure was introduced for collective proceedings and the respective rules are sometimes inconsistent, self-contradictory and gappy.)

108See Almoguera et al. (2004: 7).

109Gomez and Gili (2008: 51, 19–28).

110Sections 580-591 of the new Hungarian Code of Civil Procedure to go into effect on 1 January 2018 (Act CXXX of 2016 on the Code of Civil Procedure, in Hungarian: 2016. évi CXXX. törvény a polgári perrendtartásról). See Szalai (2017) and Udvary (2018).

111Case Gf.40336/2008/7 (Budapest High Court of Appeals), published under nr ÍH 2009.125.

112Promulgated in State Gazette No. 59/20.07.2007, amended and supplemented by SG No. 50/30.05.2008, modified by Judgment No. 3 of the Constitutional Court of the Republic of Bulgaria of 8.07.2008–SG No. 63/15.07.2008, amended by SG No. 69/5.08.2008. The class action provisions can be found in Chapter 33, Sections 379-388 of the Bulgarian Code of Civil Procedure.

114Katzarsky and Georgiev (2012: 64), para 1.2.

115Sections L621-1-L621-6 of the French Consumer Code (Code de la consommation). The French Commercial Code (Code de Commerce) also provides for the possibility of collective actions in respect of certain unfair competition mischiefs; the public prosecutor (ministère public), the minister of economic affairs and the head of the competition council have standing. Section L442-6 of the French Commercial Code. See Momège and Bessot (2004: 8).

116Loi n° 92-60, 18 janv. 1992 devenue les articles L. 422-1 à L. 422-3 du Code de la consommation, réd. Loi n° 93-949, 26 juillet 1993; R. 422-1 à 422-10, réd. Décr. n° 92-1306, 11 décembre 1992.

117L452-2 of the Monetary and Financial Code. See Magnier and Alleweldt (2008: 7–9).

a few cases.118 Second, recently, in 2014, the French legislator inserted an opt-out collective action regime into the Consumer Code (action de groupe), which appears to be much more effective than the *ancien régime*, having produced seven cases in two years' time. This regime was extended to health care matters and, in 2016, converted into a general scheme applicable to discrimination, environmental protection, personal data119 and health care matters.

English law provides for three options for collective litigation: two general procedural tools (representative proceedings, group litigation orders120) and a sectoral tool in competition law (where, as noted above, it is at the CAT's discretion to choose the opt-out scheme). Although representative proceedings may be carried out on an opt-out basis, they have remained ineffective due to the strict construction of the preconditions in the judicial practice.

#### **5.2 Purview: Step-by-Step Evolution of a Precautious Revolution**

Most European collective action laws have a limited (sectoral) purview121 reflecting the notion that collective actions should be limited to cases where they are badly and obviously needed. Some Member States have used "leapfrogging" to extend the scheme to other sectors demonstrating the precautious approach of the European legal systems as to collective litigation.

In Greece, collective redress is available only in consumer protection law.122 The Finnish Act on Collective Proceedings of 2007 applies exclusively to matters coming under the remit of the Consumer Ombudsman (consumer matters).123 Italy introduced collective actions in the Consumer Code,124 which may be used to pursue consumer claims arising from specific cases: standard contractual terms and conditions, defective products and services, unfair commercial practices and anti-

118See Magnier (2007: 14).

119Loi n° 2014-344 du 17 mars 2014 relative à la consommation et Décr. n° 2014-1081 du 24 sept. 2014 relatif à l'action de groupe en matière de consommation; Loi n° 2016-41 du 26 janv. 2016 de modernisation de notre système de santé et Décr. n° 2016-1249 du 26 sept. 2016 relatif à l'action de groupe en matière de santé; Loi n° 2016-1547 du 18 novembre 2016 de modernisation de la justice du XXIe siècle, JORF n° 0269 du 19 novembre 2016 texte n° 1.

120For an analysis of group litigation orders, see Mulheron (2014: 94–111).

121Commission Report on the implementation of the Commission Recommendation of 11 June 2013 on common principles for injunctive and compensatory collective redress mechanisms in the Member States concerning violations of rights granted under Union law (2013/396/EU), COM(2018) 40 final, p 3.

122Emvalomenos (2016: 2); British Institute of International and Comparative Law (2017: 181). 123See Footnote 51.

124Act 244 of 24 December 2007 and Act 99 of 23 July 2009. http://www.tedioli.com/Italian\_class\_ action\_text\_english\_version.pdf. Accessed 20 April 2019.

competitive conducts.125 The purview of Maltese collective actions is confined to certain fields, such as competition, consumer protection and product safety law.126 The Polish regime introduced in 2009127 initially applied only to consumer law, product liability and tort liability (with the exception of the protection of personal interests) but was extended, in 2017, to claims resulting from the non-performance or undue performance of an obligation, unjust enrichment and certain infringements of personal interests (bodily injury or health disorder).128 The Spanish class action rules129 apply only to consumer matters.130 In 2007, a similar provision was inserted as to matters concerning equal treatment between men and women.131

After the introduction of group actions in the field of consumer protection in 2014132 and health care in January 2016,133 in November 2016, the French legislator created a general framework for group actions.134 The new regime extended the purview of the mechanism to discrimination, environmental protection, personal data and health care matters; consumer matters are not concerned by the general framework.135

Hungary introduced opt-out class actions in 1996 in the Competition Act and then in 1997 in the Consumer Protection Act.136 Interestingly, while the operation of these systems attracted no criticism, the new Hungarian Code of Civil Procedure, having gone into effect on 1 January 2018, introduced an opt-in scheme applicable to consumer, employment and environmental tort matters.

125Section 140bis(2) of the Italian Consumer Code; Principe (2012). Recently, in *Adusbef v Monte dei Paschi di Siena*, the court of appeals of Florence held that retail investors are not consumers and, hence, are not covered by the Italian class action legislation. Afferni (2016: 85).

126See Footnote 69.

127Act on Class Actions of 17 December 2009 (Ustawa o dochodzeniu roszcze ´n w post˛epowaniu grupowym), published in Dziennik Ustaw), published in Journal of Laws of 2010, no 7; item. 44 p. 1.

128New Sections 1(2) and 1(2)(a)-(b) of the Polish Act on Class Actions.

129Section 11 of the Spanish Code of Civil Procedure.

130Gomez and Gili (2008: 6–7).

131Section 11bis of the Spanish Code of Civil Procedure.

132Loi n° 2014-344 du 17 mars 2014 relative à la consommation et Décr. n° 2014-1081 du 24 sept. 2014 relatif à l'action de groupe en matière de consommation.