Erin Brokovich showed how a class action can be used to humble a corporate giant. But will the EU go down the same road? June O'Keeffe and Andrew Laidlaw investigate


It is all about enforcement in Brussels at the moment. Last month saw proposals to harmonise nine serious environmental crimes with a range of sanctions, varying from fines to imprisonment of up to ten years. This month brings a variation on the theme of greater enforcement, with proposals to permit Europe-wide class actions, or to give it its proper title, a system of 'collective redress for European consumers'.



Although some member states already permit class actions under national law, what is novel about these proposals is that they would enable groups of consumers from different EU countries to pool their resources and take collective action.



Meglena Kuneva, Bulgaria's new commissioner, has taken up the consumer affairs brief and is intent on making her mark. She has already argued that such proposals would encourage consumers to buy more goods and services from abroad, safe in the knowledge that should things go wrong, effective mechanisms exist for taking legal action.



So, will we soon be seeing a European version of Erin Brockovich, championing the unfortunate purchasers of shoddy goods? More importantly, do we want to see a European version of Ms Brockovich emerge? In discussions in Brussels about facilitating damages actions in the field of competition law, many voices have already argued against importing the excesses of the US litigation culture.



The Anderson v Pacific Gas and Electric case, as portrayed in the film 'Erin Brockovich', brought vividly to our screens the drama associated with high-profile class actions. The case concerned the dumping of cancer-causing chemicals by Pacific Gas in California. The company was pursued doggedly by Ms Brockovich on behalf of local residents, with the result being the award of the biggest settlement for a civil class action. Even the trial judge described the settlement as 'a rather shocking sort of an offer'.



Proponents of class actions argue that they provide a remedy to those who otherwise would not have the means to instigate legal proceedings to team up with similarly affected persons to fight their claim. For example, aggrieved pension-holders whose individual losses are too small to warrant action can club together to pursue large companies collectively. Another argument in favour of class actions is that they act as a deterrent against large businesses indulging in certain types of behaviour, with the threat of a class action being a powerful restraint on what they can and cannot do. Lastly, class actions can provide for efficiencies in the court system, by avoiding the need for multiple proceedings where the facts and the claims are broadly similar, thus avoiding the need to call the same witnesses over and over again.



Not surprisingly, class actions have numerous detractors. One of the main criticisms is that, despite the staggering awards in a number of high-profile cases, lawyers tend to benefit more than the claimants. Lawyers in the US operate under contingency fee systems whereby if the case fails, they get nothing, whereas if the case is successful, they command a huge percentage of the award to compensate for the inherent risk.



Another criticism is that class actions operate as a form of blackmailers' charter, under which corporations are keen to avoid the costs and reputational damage associated with a trial often find themselves forced to settle.



Last year, the Swiss government rejected the introduction of class actions on the grounds that it 'is alien to European legal thought to allow somebody to exercise rights on the behalf of a large number of people if they do not participate as parties in the action... the class action can be abused. The sums sued for are usually enormous, so that the respondent can be forced to concede, if they do not want to face sudden over-indebtedness and insolvency (so-called legal blackmail)'.



It is doubtful that politicians will have any appetite for going this far. More likely are proposals allowing consumer bodies and other organisations to bring representative actions - something that already finds a precedent in some of the EU's consumer legislation, including the UK. It is also questionable to what extent the EU can really propose changes to domestic rules on the quantum of damages.



The EU, however, may simply be trying to catch up with the reality in some member states and widen the practice. We are seeing the scope of class actions in the UK spread - the new Companies Act being another such example. And then there is the novel representative action that consumer group Which? is bringing in relation to football shirt price-fixing at the Competition Appeal Tribunal (see [2007] Gazette, 15 February, 8). Litigation funding is also starting to develop, although still in its infancy.

It may in fact be that the European Commission will struggle to keep up with the more innovative members of the legal profession.



June O'Keeffe is head of the Law Society's Brussels office, and Andrew Laidlaw is the internal market policy executive