Speaking today after the vote of the European Parliament JURI Committee report on collective redress, EuroCommerce Director-General Christian Verschueren warned of the risk that the proposal as amended will spark a wave of vexatious litigation:
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“We fully support fair and balanced civil justice systems with effective enforcement of consumers’ rights. We have, however, concerns whether this proposal can deliver on these goals. The proposal should not provide incentives to competitors, third-party investors and law firms to litigate against companies at the expense of consumers.”
We recognise the efforts made in the report to bring legal clarity to some of the elements of the proposal. This includes strengthening principles such as the loser pays rule, the prohibition of punitive damages, and the admissibility criteria for compensation claims, as well as rules on out-of-court settlements, and on evidence gathering to make discovery claims subject to a proportionality test subject to the opinion of a judge.
However, despite improvements, there is still a danger that the proposal could lead to vexatious litigation in Europe. The text contains no clearly-stated safeguards that need to apply to all claims, including a requirement for consumer opt-in, a prohibition of contingency fees, and the prevention of overlapping claims. We regret the absence of more transparency and stronger safeguards on the relationship between by third-party litigation funders and law firms. We also miss sufficiently robust criteria for a qualified entity, including proof of stability and seriousness, and a guarantee that awards are properly passed on to consumers.
Finally, there needs to be more clarity on how this Directive will interact with existing national collective redress systems, and a minimum level of procedural principles and safeguards at EU level to avoid the pitfalls of forum shopping and a race to the bottom between national jurisdictions.
