WHITE PAPER: safeguards needed to avoid unfounded claims


The European Commission last week rejected US-style opt-out class actions as a vehicle for allowing individuals and businesses to sue over competition law breaches, plumping instead for opt-in representative actions.



In its long-awaited White Paper on private damages actions, the commission said that, while those with small-value claims need better access to justice and should be able to group their claims and bring actions via suitable representatives, 'safeguards to avoid that such actions would lead to unfounded claims need to be put in place'.



It said: 'The commission therefore recommends allowing only representative actions led, for example, by recognised consumer groups and actions in which victims can choose to participate, as opposed to class actions run by law firms for an unidentified number of claimants.'



A government report on representative action in consumer protection cases last month concluded that further work was required on the issue. The Civil Justice Council, meanwhile, is looking at opt-out actions, while the Office of Fair Trading (OFT) has already put forward proposals in the competition field.



The White Paper also recommended a disclosure regime controlled by the judge, and allowing the final decisions of member states' competition authorities to be sufficient proof of an infringement in a subsequent damages action.



The commission called on member states to consider modifying 'loser pays' rules which deter claims.



Stephen Wisking, partner at City firm Herbert Smith, said the White Paper may offer 'incremental assistance', but added that much of it either already exists in the UK or is likely to come about through the OFT's proposals.



Neil Rose