Europe Litigation: Mass Actions at a Global Scale

Olly Middleton: Hello and welcome to Connected with Latham, where we discuss ideas, legal developments, and business trends shaping the global economy. I'm Olly Middleton, a Partner in the Latham & Watkins London office and Chair of our London Litigation and Trial department.

In this episode, we're going to discuss developments in class actions across the EU and in the UK, with a focus on the impact of the EU Representative Actions Directive. Europe has entered the collective redress era. The full implementation of the EU Representative Actions Directive, coupled with a surge in litigation funding, has transformed the ability of claimant groups to coordinate across jurisdictions. Companies now face the prospect of parallel consumer, data privacy, and competition actions that are global in scope. And the challenge for defendants is not just winning individual cases, but managing consistency of arguments, data, strategies, and settlement approaches across multiple fronts.

To discuss these topics, I'm joined by my colleagues Christoph Baus, a Partner in Latham's Hamburg and Frankfurt offices and the Vice Chair of our Complex Commercial Litigation Practice group. I'm also joined by Nell Perks, a fellow Partner in Latham's London office who represents leading financial institutions in a wide range of disputes and contentious regulatory investigations. Christoph, Nell, welcome to the podcast.

Christoph: Thanks for inviting me to London for this, Olly. Really appreciate it.

Olly: Thanks for traveling across.

Nell: Thank you very much. It's great to be here.

Olly: To kick off, I'm going to go to you, Christoph. Can you tell us a little bit about the directive and your views on whether it's been effective so far?

Christoph: Olly, asking a lawyer that question would sort of beg me to say, well, what do you mean by effective? I'm not going to do that, but I think the directive is effective in the sense that it has changed the architecture for collective redress in Europe. It is not effective in the sense of what many feared — that it could spark a US-style class action regime in Europe. And I will say it has never been intended to be one. But it does give the member states a baseline mechanism for what they call “qualified entities” to bring these actions, including cross-border actions for consumer law infringements.

Still, the practical impact will vary quite significantly from jurisdiction to jurisdiction because the fundamental legal principles remain national. So I would describe it as an important harmonizing step, but not a fully harmonized European class action system.

Olly: And what has its actual impact been so far?

Christoph: From the point of view of our clients, I think the most immediate one is that businesses now have to think about mass claims on a pan-European basis. A consumer issue, a data incidence incident, a competition finding may no longer be a purely local risk. Rather, claimant organizations and funders and law firms — plaintiff law firms — they coordinate across borders, and they can select the jurisdictions that give them the best procedural platform.

That means that defendants need consistency in their legal arguments, their public messaging, their document and data strategy, and generally their approach to litigation across borders, especially when it comes to settlement.

So the directive has not created an overnight wave of cases, but it has unquestionably made collective redress more part of a mainstream risk that you consider when you're doing business in Europe.

Olly: Very interesting, and probably mirrors some of the stuff we're seeing in the UK now. What's the UK's approach been? Obviously we're not part of the EU, but how have we kind of implemented it or done something similar?

Nell: Yeah, Olly, that's right. So obviously it doesn't have any direct effect on us, but I think we know that the UK is wanting to remain aligned with Europe and particularly on consumer matters, and to make sure that it is a jurisdiction of choice for international disputes.

So there have been — and I think will continue to be — reforms in this area, as well as I think we'll see the courts looking to develop the way in which they treat these sorts of cases. So most recently, I think in late April of this year, the Law Commission launched a project which is going to consider the potential introduction of a class actions regime for consumer law claims. And the purpose of the project is going to be to examine potential risks and benefits of introducing a consumer class actions regime, while also thinking about the existing mechanisms for redress and public enforcement action, alternative dispute resolution, and what we already have in place.

So it's going to really consider holistically how, if there were to be a regime, it should be designed. Work on that is expected to start this autumn, and there are already responses being invited to an initial scoping questionnaire. So I think that's sort of where we see it. And it's been raised before — first of all, in 2021 there was a possibility of it raised. So I think it's a topic that keeps coming up in the UK. And it'll be interesting to see whether we do have similar reforms or if actually it's going to just be done more incrementally by the approach that the courts take in these cases.

Olly: So is this really an expansion of the competition regime? Is that what we're kind of talking about?

Nell: Yes. So I think that's what it's envisaged as being. I think there's been such a big expansion of class actions in the Competition Appeal Tribunal (CAT) that it's looking to see what could be done in that sphere in other areas.

Olly: This is a question for both of you, really. But when we talk about class actions in the EU, what do we mean when we talk about that in both a colloquial sense and the technical legal sense?

Christoph: I think it varies from jurisdiction to jurisdiction. If you think about mass actions, then in Europe, I think the Netherlands has the most advanced system for administering class actions, which is why many plaintiff firms like to go to the Netherlands.

And then there's other countries where, because of certain specifics of the local regime, class actions come more in the form of mass actions. Like my own jurisdiction, Germany, we have mass actions just coming in the form of thousands of thousands of claims, mainly because we have legal cost insurance that will give a consumer access to a lawyer and pay the fees. And so the lawyers are incentivized not to join one big action, but rather each bring their own action as an individual case.

And obviously, it makes a big difference whether you're defending 10,000 individual cases or one case with 10,000 claimants.

Olly: Have we already seen the EU directive changing that in Germany?

Christoph: Interestingly, we have not. I think that was the intention when the regime was drafted, and I think the whole Dieselgate scandal was one, if not the trigger point for that. But what we have not seen is plaintiff firms completely pivoting to mass actions and abandoning individual actions. They are doing both now. And that sort of amplifies the risk for companies, because you have to deal with mass actions at scale, and a sort of dominating class action in the sense that it may shape the law in a certain area.

Olly: Interesting. And Nell, what about in the UK? Because my understanding really is that when we technically talk about class actions, we are talking about representative actions, really. But what do you understand is meant by the term?

Nell: Yeah. So I think in the UK we tend to use the term quite loosely. And certainly when I speak to people in the US about class actions, I often get the answer “that's not a class action,” because actually the only opt-out regime we have is the one in the Competition Appeal Tribunal. So I think we mean more broadly mass group litigation.

So we have group litigations under CPR 19.11 (Civil Procedures Rules), which allow for cases which give rise to common issues to be managed together. We have representative actions under CPR 19.8, which actually is the only opt-out mechanism that we have outside the CAT. And that's where claimants can bring a mass claim where they have the same interest. But it's been quite narrowly interpreted.

And then we just have joint claims by multiple claimants using an omnibus claim form, which has been quite broadly interpreted as being able to be used where claims can be conveniently disposed of in the same proceedings.

And there's actually a very recent case on that — I think a week or two ago in Black Horse Ltd v Angel & Ors, where it confirmed that that is a very broad test as to what can be dealt with conveniently together.

So, we're really talking about all those sorts of things. It's not just a standard one or two claimants against one or two defendants, but something much bigger.

Olly: And taking that broader meaning of class actions or group actions or mass claims, are we seeing a rise in them? Are we seeing more of them now?

Nell: In the UK, yes. I think if we look at the Competition Appeal Tribunal — yes, I think since that opt-out regime was introduced, there has been a real surge of those claims, and the CAT is now one of the busiest courts in the country. Outside, I think increasingly people are going to mass actions. We've seen a number of Section 90 and 90A FSMA (Financial Services and Markets Act 2000) claims going through the English courts in recent years, and there have been others in the data privacy sphere and environmental spheres. So I think we do see people coming together and trying to bring more of them.

Having said that, I think also the English courts retain some caution about just going into that wholesale and so have tried to keep a bit of a lid on it. And some of the recent decisions in the last few years have tended away from encouraging mass groups of claimants to get together and bring proceedings.

I think, for example, quite recently in the Evans decision (Phillip Evans v Barclays Bank PLC and Others) in the Competition Appeal Tribunal — that indicated that the tribunal's taking a stricter approach to certification and case management, and we've seen that in other cases. So overall, I think over the last few years, we see there is a trend of them increasing. And then I think we see sometimes the courts seem to go through a phase of having quite claimant-friendly decisions. Then sometimes they seem to be a bit more defendant-friendly. And I think there hasn't been a surge as such; it's more a gradual, incremental increase.

Olly: Some cautious growth. What about you, Christoph? What are you seeing in the EU in that respect, and Germany specifically?

Christoph: Olly, I think Germany is one prime example of an unusual combination of an incentive scheme for litigation funders and plaintiff firms — and consumers, frankly — to bring these kinds of mass actions. But has it really done what it's supposed to do, I think, which is giving access to justice to more people? Or is it just really a money-making machine for plaintiff firms? I think the jury is still out. And I'd be interested in your views on the UK there.

Olly: Yeah, it's an interesting perspective because there's lots of talk about access to justice and that's why these are a good thing. And I guess we as litigators should be almost selling them as, “this is a good thing” because, in theory, we want more litigation.

And I think there's not really a clear view either way. I think you hear claimant law firms and litigation funders often putting those lines out there and saying this is all about access to justice and bringing wrongdoers to task, etc. But then you hear the defense side always saying this is really just about litigation funds and claimant law firms making money. And it's not really about underlying helping consumers or whatever it is.

In the UK, I don't know. I think there's quite a nice balance at the moment, which fits in with what Nell's saying about it's a sort of cautious growth. We're not trying to make, certainly, the UK litigation market like the American one, where everyone gets sued for everything all the time. It's a kind of cautious “let's lean into areas which actually suit there being more litigation because we're trying to protect consumers,” which is why they did the competition regime at first, and now they're looking at consumers and maybe they will spread that out. But it's all very cautiously done.

Nell: Yeah, Olly, I think that's right. And I think it doesn't have to be binary. Is this being done cynically by litigation funders, or is it being done to benefit mass groups of claimants who wouldn't otherwise be able to bring claims? I think there's probably a bit of both. Mass groups of claimants do need to get some funding from somewhere. And while I'm sure there are some litigation funders who would be prepared to do that out of the goodness of their heart, most kind of want something in it for them. But it doesn't mean that actually the underlying claims are not good and shouldn't be brought.

And I think we also see — and again, Olly, tell me if you disagree with this — but where it is more cynical, you see that straight away. And those are the claims that are much more quickly and easily disposed of because they've been brought more cynically on lesser grounds, and without really that aim of achieving an ultimate gain for the end consumer.

Olly: Yeah, I think that's right. With maybe the caveat being in the Competition Appeal Tribunal cases, it feels like these are a way in for claimant law firms and litigation funders to bring huge claims and huge potential for damages. And then tying up defendants and defending companies and their lawyers into years of litigation, very expensive litigation, with a view to trying to reach settlements.

And so I think that's maybe my slight caveat: I'm not completely convinced by the way — from the outside, I haven't done many CAT cases — but the way that has often looked is a bit like a play from funders and claimant law firms.

Nell: Yeah, but then I wonder if actually just having the risk of it means that companies tighten up their procedures so much more that actually it ends up having a beneficial effect for consumers just as a deterrent.

Olly: Yeah, totally fair. Trying to make this practical for some of our listeners and clients who may listen to this. Christoph, what should our clients be concerned about in this respect? Or should they be concerned?

Christoph: Obviously, they should think about regulatory breaches in certain areas of the law where claims are on the rise more holistically. And the areas that we already touched upon are competition law claims, data privacy claims — generally those follow-on damages claims — but also mass damage scenarios where product liability is concerned or we are seeing more cases brought against tech companies for consumers being disadvantaged by subscription plans, service fees — that kind of area which is more prone to giving rise to mass actions.

So if you are doing business in these areas — and nowadays almost any company is a data company that deals with data of its customers — they need to be aware that any data breach could have ramifications not only from a regulatory perspective, but also from a civil damages perspective. And whatever you do in one area to defend yourself can certainly affect your defense in another one.

So very specifically, if a regulator does an investigation into a data breach or data loss at a company, whatever you say in your defense may be accessible to plaintiff firms in all European countries. And plaintiff firms will coordinate. And so you will have to deal with what you said there as a civil law defendant in any of the other jurisdictions. Depending on how global your business is, it may obviously carry beyond the EU, UK, US — the US being an example of even more litigious countries. And you even need to think about that in your defense.

Olly: Interesting. Nell, do you think the same is true in the UK? Are there some of the same things that clients need to be worried about, or are there any specifics that are more applicable to the stuff we're seeing here?

Nell: Yeah. So I think that's right. I think it's very frequently where there is some kind of regulatory finding, people look to bring litigation off the back of that. And there are various different angles from which they can do it. But where there is any sort of potential regulatory issue, companies should be thinking about future litigation as well as the regulatory issue that they're dealing with.

And that's what we've found for years when we've done regulatory investigations — you need to be thinking about privilege, because litigation privilege may not apply at that stage, but you are going to be litigating in due course and you need to be thinking about it in that context.

I think in England, we particularly see in that context claims then being brought under, as I mentioned earlier, Sections 90 and 90A of FSMA — we usually call them "stock drop" cases because they involve allegations that claimants who have invested in a company's shares on the basis of certain information, which then ends up being contradicted or appears to be contradicted, and then leads to a drop in the share price. We see quite a lot of litigation being brought in that context, and it's certainly a new and growing area with cases going through the courts right now showing that.

So yes, I think that's probably an area that we see it. And then it is, as Christoph said, just areas where you get big groups of people. So ESG is a classic one. There was the Mariana Dam case where a decision came out this year, which was to do with the number of people affected by the collapse of the dam. I think there have been some recently in the context of talc, illnesses caused by talc and claims brought against Johnson & Johnson, and that's in the product liability arena.

And data privacy, I think, is one where we've seen a few examples of big groups of claimants trying to bring claims after data breaches. To date, the courts have closed them down. But I think that is certainly an area at some point where there will be more claims along those lines.

Olly: Very good answers, because I hate that question because we get asked it quite a lot by clients. As all three of those are litigators, we like litigated cases, and we get asked by clients, “How do I avoid this?” And it's actually quite difficult to answer in this context, I think, because the answer is “Don't do bad stuff, really,” which isn't a very helpful answer.

Nell: Or be super honest about it.

Olly: Or at least be careful what you say about it or how you relay the good stuff, because that might come back to bite you. But it's quite a difficult question to answer.

So I'll ask maybe not an easy one, but one that we all have more experience in. If clients are facing these kind of claims, what things should they be mindful of? Or what strategies — either on the defense side or to be aware of on the claimant side — should our clients be thinking about?

Christoph: Olly, I think as we developed over the last few minutes, there is a combination of two things. One is a trigger event: could be a data breach, could be a product failure, could be a stock drop, something like that, and then scale. So think holistically about how many people are potentially affected by your trigger event. Is it a lot of customers? Is it a lot of investors? Is it users, employees, or even outside people who are not customers?

And then that may trigger regulatory intervention, and then it may trigger market disclosure obligations. It may follow on with mass claims.

And so every regulated business needs to have a defense strategy to address these issues if and when they arise. And that means a rapid reaction regime: knowing what you need to do in terms of information, making sure that you have your PR strategy ready, making sure that you think through all the issues from all the standpoints.

And this is where I think the interdisciplinary approach comes into play. You need an assessment from many experts from many different fields, and we lawyers are just one of them. And you need to do it across all the affected jurisdictions.

So, you may need legal expertise in more than one country and having a plan ready for when that trigger event happens, I think, will make your response to the scenario and your assessment of the potential effects much more rapid and concrete.

Olly: And now, we've talked about stock drop cases. So obviously listed companies need to be aware of this. And we've talked a bit about consumers. Are there particular sectors or areas that our clients operate in who should be more mindful of this than others?

Nell: No, I mean, I sort of say it comes down to: if you have data, if you deal with consumers, if you're listed...

Olly: Almost everyone, right?

Nell: Yeah, exactly. You should be thinking about these sorts of claims. So, I think it really is any kind of corporate that should be thinking about them, both in terms of how to prevent them, and then also, because they will happen, making sure you have all your things in place that Christoph is talking about.

Olly: And what about other areas of potential expansion of these kind of regimes? We're obviously now talking about expansion for consumers in the UK. Are there other areas we think are ripe for this?

So that's a very difficult question. Christoph, any insights from the EU in that respect?

Christoph: I don't know what you have in mind.

Olly: I mean, one thing I'm thinking of is obviously product liability and personal injury claims have been a thing for as long as anyone can remember. They are one of the first types of non-criminal cases that were brought, certainly in the UK. But they're not an area that has previously been seriously big money and probably not big money enough to justify instructing Latham & Watkins on the defense side. But that's something we are seeing now. And I guess, is that an area that's maybe ripe for — I wouldn't say more of these because they've already always been a thing — but more big scale of them and global in nature?

Christoph: There's two effects that I see that usually in the past helped contain these issues more than maybe will be available in the future. One is the availability of technical tools — AI, to use the buzzword — on the plaintiff side, which will make it much easier to bring claims at scale very quickly, and to find the affected people very quickly on social media, for example, something we didn't have.

When you're traveling to the US and you turn on the TV, you still see those good old-fashioned “Have you been taking this medicine? Call this lawyer.” With social media and everything that's possible on social media advertising, you can be much more targeted. In data breach scenarios, for example, you only need to get hold of the breach data. That may be illegal, but I have seen it happening. Plaintiff firms got access to the breach data, and then you have the list of all the people that are affected, and you can do very targeted marketing with that.

And then you're seeing damages being expanded to — what in Europe used to be a very narrow set of circumstances, and damages awarded. Bodily damages even were super low. I think we're seeing that that is a little bit on the rise. And obviously the legislator, with everything that's happening on the data side where you can get damages for what we call “immaterial damages” where this is the first time you get an expansion of damages into damages that are no longer specific and concrete because you suffered an injury, but they are immaterial. And so we see that expansion.

I'm not being overly pessimistic for our clients in the sense that they will see a mass new influx of cases in all these areas. Definitely. But what I would say is, all the technical tools that we have available make it much easier for plaintiff firms to target customers and bring claims. And then the expansion of the law and being more lenient with what is a damage is certainly a legislative tendency that we're seeing, that may make it harder to defend and make it more lucrative for plaintiffs on the other side.

Nell: I think building on that, I would say it is those kind of legal issues of loss, reliance, causation that mean that this doesn't just mushroom in England. And often we see in terms of case management, claimants are wanting to put those sorts of things to a second trial or postpone them being dealt with. And acting for defendants, we tend to make sure they are being brought forward, mostly because I think where you have a big opt-out regime of any sort, loss is always going to be a real problem.

And especially when you're doing the kind of reaching out that Christoph is talking about, where you're not actually asking people, “Did you suffer any loss?” You can end up with a huge claimant body where actually there is no loss, but the cost of the litigation ends up being so much that it's worth paying something to get rid of. And I think that's kind of why it is important, and the courts are making sure that claimants aren't just postponing all of those difficult issues for another day and are encouraging them to be dealt with upfront, because otherwise you do open the floodgates.

Olly: Yeah, I think that's right. And that seems to me why we maybe haven't seen, certainly in the UK, the influx of data breach mass litigation I think everyone predicted we might have when GDPR (UK General Data Protection Regulation) came into force. I think certainly on the defendant's side, there was a fear that this would mean claim after claim for data breaches and mass claims coming in, and they haven't really happened. I mean, they have happened, but not quite in the scale that we thought. And I think a large part of that is probably because of the difficulty of actually showing loss, or at least showing loss of uniform themes across all claimants.

Christoph, Nell, thank you for joining us today.

Christoph: Thank you.

Nell: Thank you very much for having me, Olly. Lots to be thinking about for us lawyers, lots to be thinking about for clients, I think.

Olly: Thank you to the listeners for listening to this episode in our Connected with Latham podcast series. You can subscribe and listen to new and archived episodes of Latham's podcasts on Apple Podcasts, Spotify, or wherever you get your podcasts. If you'd like more information about the topics in this podcast, please email us from links located in the show description. We hope you'll join us again next time.

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