Delivering Collective Redress

Christopher Hodges, Stefaan Voet

• Publisher: Hart/Beck
• Year: 2018
• ISBN:
  9781509918560
• Edition: 1
• Topic: Derecho
• Subtopic: Resolución alternativa de conflictos

This book charts the transformative shifts in techniques that seek to deliver collective redress, especially for mass consumer claims in Europe. It shows how traditional approaches of class litigation (old technology) have been eclipsed by the new technology of regulatory redress techniques and consumer ombudsmen.
It describes a series of these techniques, each illustrated by leading examples taken from a 2016 pan-EU research project. It then undertakes a comparative evaluation of each technique against key criteria, such as effective outcomes, speed, and cost. The book reveals major transformations in European legal systems, shows the overriding need to view legal systems from fresh viewpoints, and to devise a new integrated model.

1

Introduction: The Scope and the Criteria

I.Background and Principal Objective

This book summarises the findings of a joint project between the Centre for Socio-Legal Studies, Oxford University and the Catholic University of Leuven aimed at evaluating the empirical evidence on different mechanisms for delivering collective redress.

The project records a major paradigm shift in debates on collective redress. Traditional debates on collective redress have assumed that the only available mechanism is the court-based civil procedure mechanism of some form of collective action. That assumption has given rise to fierce political debate over the advantages and disadvantages of such civil procedure mechanisms, whether in their guise of US-style class actions or EU-style collective-actions-with-safeguards-against-abuse. The political divide can too easily be characterised, and possibly caricatured, as, on one hand, consumer advocates arguing for collective actions in order to achieve redress for multiple small claims that could otherwise not be brought (because of inherent failures in court systems and their associated funding and costs arrangements) and, on the other hand, business interests arguing against collective actions because they give rise to blackmail through unmeritorious cases with massive financial implications, brought by intermediaries who have conflicts of interest and who seek unfair personal benefit at the expense of both consumers and businesses. That sharp categorisation is subject to significant caveats on both sides, but it is not the purpose of this project to analyse such matters further.

This study is based on the realisation that new techniques other than traditional civil procedure mechanisms are available to deliver collective redress. Indeed, the authors continue to discover more examples of such techniques in more Member States. Given the availability of several options, the opportunity arises to undertake a comparative evaluation of the options. This is the principal aim of this study. We seek to answer the question: How do the various techniques compare in terms of objective criteria as mechanisms for (effectively and efficiently) delivering collective redress?

II.The Techniques

We identify four principal ‘technologies’:

—the collective action: a representative or non-representative action brought by a group representative acting on behalf of a group of persons who are confronted with the same or similar legal and/or factual issues;

—civil claims piggy-backing on criminal prosecutions (known as parties civil in some jurisdictions);

—regulatory redress: redress ordered or brought about by the intervention of public enforcers;¹

—consumer ombudsmen: a specific form of alternative dispute resolution (ADR) but within the context of a dispute resolution structure that is entirely separate from the courts.

More details of these mechanisms will follow in the relevant chapters below. Almost all of the discussions on each technique have taken place in individual silos, without recognition—and usually without realisation or acknowledgement—that any of the other techniques exist. Hence, this is the first major empirical study to undertake a comprehensive evaluation of the major available techniques for collective redress, and it is intended to inform policy-making at EU and national levels.

However, it may be helpful to note here that traditional ADR is not an effective collective consumer dispute resolution mechanism. The traditional form involves mediation and/or arbitration of individual claims. That model cannot aggregate claims and resolve them together, unless it is in the context where a mass settlement is voluntarily agreed and then needs to be approved by a court to give res judicata binding effect, as under the Dutch system. However, although the Dutch system provides some incentives for mass settlement, there is no compulsion for the parties to enter into discussions or agree settlements. The cases that have been processed by the Dutch system are typically ones where both sides wished to achieve a global settlement, following on from a US class action, and needed to use a non-US jurisdiction that was amenable to approving agreements where many parties might not be locally resident.

The Consumer Ombudsman mechanism that we refer to here is a specific form of ADR body. It is the ADR form that is capable of aggregating individual cases, and data from cases, and feeding it back into regulatory and compliance systems. The Consumer Ombudsman model that we refer to here is:

(a)an ADR entity that is independent of businesses, trade associations or consumer associations,

(b)usually created by statute or a not-for-profit company,

(c)whose dispute resolution process typically involves the following stages in sequence: triage, assisted negotiation between the parties (mediation), a decision that is either legally binding on the trader (but not usually the consumer) or non-legally binding but in practice having strongly persuasive effect,

(d)free to consumers,

(e)funded by traders either through a statutory levy or contractual fees,

(f)satisfies all the quality requirements of Directive 2013/11/EU, articles 5–12,

(g)publishes and feeds back data on cases to support improvements in trading and market behaviour, not identifying individual consumers.

The Consumer Ombudsman model exists in some Member States in some regulated sectors, working closely with sectoral regulators, such as a Financial Ombudsman, Energy Ombudsman, Communications Ombudsman and so on. Other forms of ADR bodies, especially ADR schemes that decide individual decisions in arbitration-like processes, do not generally have the capacity to aggregate individual claims and decide them collectively, as most Ombudsman schemes do. ADR bodies should migrate from models of individual arbitration to this ombudsman model. Thus, both sectoral legislation that requires ADR, and the generic consumer ADR legislation,² should specify that consumer ombudsmen models should be required, rather than other types of general ADR.

It is important to recognise different types of ‘ombudsmen’. In Nordic States, the Consumer Ombudsman is the national enforcement official for consumer law, but does not act as a dispute resolution body between traders and consumer (for which there are separate Complaint Boards). In our classification, redress facilitated by a Nordic Consumer Ombudsman squarely falls into the ‘regulatory redress’ category. In contrast, in the UK, Ireland and Germany, ombudsmen exist to handle consumer–trader disputes (the consumer ADR function) in some individual sectors, such as financial services, pensions, energy, communications, and so on. They operate differently from public sector ombudsmen, which exist in most States to investigate citizen–State complaints. In this book, save where otherwise noted, this latter category is referred to as Consumer Ombudsmen.

It should also be noted that a further technique is not evaluated in this study, since it has been noted in related work. Various Member States process personal injury claims through ‘no blame’ administrative schemes, especially the Nordic states, but other leading examples are France and Poland.³ These schemes might be viewed as another specific form of ADR. They have notable advantages in terms of the criteria noted above, as noted in the related study.

III.Description of the Project and Methodology

This project was developed from earlier work surrounding a conference held at Rüschlikon, Zurich in January 2012. The current updated project was timed to contribute to the review in 2017 of the European Commission’s Recommendation relating to collective redress.⁴

The first stage of the project was to obtain national reports on a wide range of European States by colleagues in those jurisdictions. The national reports gave short summaries of the relevant legislative schemes for different mechanisms used to deliver collective redress, and various metrics, but also case studies on significant cases. The second stage was to discuss the results at an international conference in Oxford on 12–14 December 2016 attended by around 50 officials, scholars and practitioners.

The conference firmly succeeded in achieving these criteria. National reports were kindly submitted by colleagues across Europe, ranging from scholars, officials and lawyers. In each country, contributors were selected primarily on the basis of being known to the two organisers as experts in the field and—crucially—as being able to identify empirical evidence on the state of national mechanisms (as opposed to theoretical or legal issues) within a limited period of time. National reports were made available on the conference website of the Centre for Socio-Legal Studies, Oxford.⁵ At the conference, contributors also presented abbreviated summaries of their national reports, and distinguished experts commented on the materials and conclusions.

The dataset at that stage comprised information on redress cases in around 80 class actions, four piggy-back cases, over 24 ombudsman cases, and at least 24 regulatory cases. There was a further 17 injunctions (non-damages-redress) cases, and 21 mixed cases identified by the European Consumer Organisation (BEUC) and the Consumer Justice Enforcement Forum (COJEF).⁶

The third stage of the project is to present the data in book form, together with analysis and conclusions for policy development on collective redress. In presenting in this book the different techniques and the mass of empirical evidence in a coherent fashion, the authors concluded that it would clearly be preferable for them to write a single unified text together, editing a mass of material into a consistent narrative, and to ask the contributors to check and update their contributions. The alternative of repeating the format of the conference, with a series of national reports, would be far less coherent in identifying and evaluating the basic groups of techniques that are identified here. We have sent our draft text to national reporters to check and update how we have organised the information from their contributions, and all have most kindly agreed to this method of presentation.

IV.Criteria for Evaluation of Mechanisms

Having identified a number of different mechanisms for delivering collective redress, the question arises of how they should be comparatively evaluated. Such comparative evaluation should be against a set of objective criteria.

Many may seek to evaluate collective redress systems against the sole objective of redress, ie the delivery of monetary compensation or rectification of harm. The analysis may even be restricted to the access or commencement of a process that has that objective, rather than including an assessment of the critical outcome of the extent to which it is achieved. It is, however, well recognised that systems can fail to deliver the redress sought, to some degree or even at all. It is also recognised that systems can involve disadvantages, such as cost and delay.

We believe that contemporary society requires more than systems that perform poorly. People also expect a number of outcomes and adequate performance. Indeed, the importance of certain criteria are illuminated if we consider the viewpoints of different societal and market actors, such as consumers, traders and regulators—a multiple users’ perspective.

Consumers may value an outcome in which they are repaid sums lost but, especially if that outcome involves too much cost, delay, investment of time and a modest return, the far more important objective may be that the trader who owes the money should change behaviour—stop the breach, not repeat it, and behave fairly. The same point is highly important from the market perspective. Regulators, competitors and customers would wish that traders behave well, not only in observing the norms of fair trading whilst selling, but also if responding to challenge. Honest traders who have broken rules and who understand the need to make redress should seek effective, speedy and efficient ways of achieving that outcome.

In other words, a number of outcomes and performance criteria are relevant to mechanisms of collective red...