In depth: Reforming the collective actions regime

A decade after the opt-out collective action regime of the Competition Appeal Tribunal (CAT) came into being, the government is considering legislation and other moves to check some of its less desirable manifestations. Proposals published for consultation by the Department for Business and Trade last week include offerings for both sides of a heated debate about whether the regime is serving access to justice.

Whether the proposals will be implemented, however, remains uncertain. 

For critics of the regime, which allows opt-out collective actions involving losses caused by competition law breaches, the main takeaway is a proposal to raise the bar for obtaining a collective proceedings order. In the government’s view, this bar is ‘still low, weakening the filter effect designed to guard against speculative claims’. 

The remedy would be a more explicit statutory test of the merits and cost/benefits of a case. The CAT would indicate the ‘reasonableness’ of the litigation funder’s return at the point of certification – rather than, as in Merricks v Mastercard, protracted later litigation. 

For enthusiasts of the regime as a vehicle for access to justice and a curb on multinational companies’ excesses, the main offering was a proposal to open options for funding by lifting the prohibition on damages-based agreements (DBAs). The document cites evidence that a claim must currently have a quantum of at least £500m to interest litigation funders – suggesting that many claims, however justified, do not see the light of day. 

‘An increase in options for funding claims could increase competition and therefore drive down the cost of litigation finance, mitigating the risk of a justice gap and increasing the resilience of the regime,’ the document states. However, any moves here will hinge on the government’s awaited response to the Civil Justice Council’s recommendations on regulation of litigation funding in general and reversing the PACCAR judgment on DBAs in particular. 

'We are particularly concerned by proposals that could provide further monetary incentives for intermediaries, including DBAs and greater certainty over funder returns. The priority should be compensation for consumers'

Seema Kennedy, Fair Civil Justice

One thing off the agenda for now is any revision to the scope of the CAT regime. The document acknowledges arguments on both sides: creating a wider, generic collective redress mechanism would at least deal with the complication of disguised claims – those ‘dressed up’ as competition matters in order to take advantage of the CAT regime. On the other side are calls for the regime to be abolished outright or tightened to cover only claims rooted in specific adverse findings by the competition authorities. 

Other proposals include stronger incentives for parties to engage in settlement discussions, court fees for the CAT (currently funded through general taxation) and an end to the Access to Justice Foundation’s monopoly on cash left over from damages distributions. 

Reactions from the rival camps ran on predictable lines. 

Seema Kennedy of lobby group Fair Civil Justice said: ‘The government is right not to rush into expanding the opt-out regime, but the existing safeguards plainly need strengthening. Certification must provide a genuine filter against speculative claims, with meaningful scrutiny of merits and the likely benefit to consumers. We are particularly concerned by proposals that could provide further monetary incentives for intermediaries, including damages-based agreements and greater certainty over funder returns.

‘The priority should be compensation for consumers, not creating new routes for lawyers and funders to extract increasingly large rewards.’

David Greene, co-president of the Collective Redress Lawyers Association, described the proposals as ‘measured and sensible given how nascent the opt-out regime is’. In a targeted attack on one of Fair Civil Justice’s backers, he said: ‘It is right that the DBT has put the interests of British consumers ahead of the US Chamber of Commerce, the world’s largest lobbying organisation.’ Reversing PACCAR and introducing DBAs in opt-out cases will increase the availability of funding, ‘which is positive for consumers to gain access to the justice process’, Greene said. However, he suggested that raising the bar at the claim certification stage ‘will increase the burden considerably for proposed class representatives and the class itself’.

Meanwhile, Jeremy Marshall, of funder Winward Litigation Finance, warned against allowing payments to be delayed until damages are distributed: ‘A funder’s return should not be determined by whether a distribution has been successful or not, as distribution is also not in the funder’s gift.’

Consultation on the proposals closes on 25 September. Although the document comes from the Department for Business and Trade (signed off by outgoing business secretary Peter Kyle – whose name, in the fashion of Stalin’s USSR, has now vanished from the ministerial foreword), reform will depend on the new lord chancellor’s enthusiasm for the sector.

About this, we have no idea.