This presentation given at the Belrim/CRE event about claims management on 19 September 2013 is dealing with with the consequences of the Recommendation published last June by the European Commission to the member states. First part was dedicated to the theory on consumer redress (how to define redress? How to define collective actions? How to enforce consumer redress?) and the reasons why it is so popular in the US. Then the second part presented the situation of consumer redress in 8 EU countries and explained how the recommendation in June should be interpreted and what the key points were for FERMA.

1. Collective Redress
In The European Union
Julien Bedhouche
FERMA EU Affairs Adviser

2. « Redress is not an
option, it is a
requirement »
Professor Christopher
Hodges, University of Oxford

3. Agenda
I- How to achieve consumer protection
II- State of Play in the European Union

4. I – How to achieve consumer protection

5. How to define redress?
Consumer redress is an objective and it
means fair and swift reparation for any
harm suffered

6. How to define collective actions?
They belong to Courts, a.k.a. the Private
Litigation world
They’re one technique among many others to
achieve consumer redress

7. A bit more
theory…

8. How to enforce consumer
redress?
Public
Regulation
Alternative
Dispute
Resolution
Private
Litigation

9. The US precedent…

10. US Cultural drivers
Compensation
go to « shout » in court to
enforce your rights
Deterrence
« Don’t do it again… »
Mistrust
regulators seen as
weak, underfunded
and ineffective

11. II - Collective Redress In the
European Union…
• Collective Redress in 8 Member States: quick overview
• The 3 key points for FERMA
• The legal action of the EU

12. Collective Redress in some EU
countries
• Germany
• Spain
• Sweden
• Poland
• Netherlands
• Belgium
• Uk
• France

13. Germany
• The “KapMuG”, Capital Market Model Proceedings Act since
2005 and revised in Nov. 2012 until 2020 (“sunset” clause).
• Collective actions are to be built on pre-existing cases brought
to law. It’s a start in mass litigation (Deutsche Telekom case)
• Safeguards against abusive litigation exist: “loser pays”
principle.
• Many Germans have a legal fees insurance policy, and the
insurance companies have a scrutiny right to see if the case is
valid.

14. Spain
• For 13 years now, this Act is the closest class action system to
the US system.
• EU Authorities put Spain as an example but for many
commentators the Spanish “class action” does not work
• Spanish courts have put some limitations with safeguards: opt-
in framework, need for an individual focus to preserve the
defendants, consumer associations must show every personal
notification from each plaintiff.

15. Sweden
• Around 20 Collective Redress cases per year are raised since
2003
• But only 12-15 cases have really reached court in 12
years, most against the government.
• Some took several years.
• One reason why the class procedure is not used is the
existence of very efficient consumer ADR schemes

16. Poland
• Class Action Act adopted in December 2009. 60 cases up to day.
• Too much emphasis on a court-based justice (mainly for historical
reasons, post-communist era, strong appetite for access to justice)
• There is no pressure to settle and ADRs are not appreciated by the
public opinion (lack of credibility: independence)
• There is a “Security for costs” system that can be requested by the
defendants (up to 20% of the case value to be paid in cash). Not
always granted by courts though.

17. Netherlands
• The Netherlands’ class settlement procedure
(WCAM) has been used in six large cases since
2005
• There is an extensive ADR system in the
Netherlands, and a general culture of
settlement.

18. Denmark
• The public consumer ombudsman has a dual and
complementary role:
– hard law (binding powers, act as deterrence)
– soft law (sectorial negotiation with the industry for guidance, efficient
because of the hard law part)
• Good safeguards for collective redress (court approval, “loser
pays” principle”, no punitive damages).

19. Belgium
• No class action yet but new proposal in July 2013
• Other approach: mix of public enforcement and
ADR with regulators in energy, telecom, financial
services, environment
– Setting a fund, take out some particular claims out of
courts (disasters, medical malpractices...)
– Piggybacking technique during criminal proceedings
(request based on the evidences of the public
prosecutor, victims join the case and just have to
demonstrate they are victims (damages and causes)

20. UK
• Sectorial consumer dispute resolution schemes: public
sector, financial services, energy…
• Close link between ADR body and the correspondent
public regulatory authority
• Different ombudsman approach:
-Powers (investigation, information, administrative orders)
-Instruments (binding or not, simple recommendation)
-Relation between traders, consumers and the ombudsman
(business codes of conducts, guidelines)

21. France
• New collective claims proposal in May 2013
• Only for consumer associations, harmed
consumers could benefit from the decision
afterwards
• Health & Environment are excluded

22. 3 Key points for FERMA
1. Out of court settlement are best both for
consumers and companies
2. Proportionality to the nature of the offence and
the harm caused: no punitive damages in order to
limit effect on the professional liability insurance
market
3. Compliance is a priority for companies and first as
a reputational tool

23. The EU Recommendation
• Non-binding legal instrument released on 11 June 2013
• 4 years implementation phase before any new binding action
(June 2017)

24. No harmonisation but a horizontal
approach
• The scope of the Recommendation is very
wide
• The principles are applying to every
sector, Financial Services and the Environment
are explicitly mentioned in the document
(recitals 7 & 23)

25. Concerns have been heard…
Safeguards are here:
Article 13 - « Loser Pays » principle
Article 21 - Opt-in system
Article 27 – Time limits suspension for ADR
Article 31- Ban on punitive damages
Article 32 - Ban on contingency fees

26. But still…
Central role given to courts when everybody
knows they are already flooded with cases and
under budget constraints
Beware of a Catch 22 situation regarding
safeguards

27. Conclusion

28. Collective Redress should not become a
profitable business for some
professions.
Litigation is a back stop and must be a
last resort solution

29. Compliance: the 4TH pillar to
achieve consumer protection?
• Obvious but common sense: companies do things, they
don’t do litigation, and it’s not in their business model.
• Never forget that going to courts is highly inefficient and
expensive.
• Private litigation does not reward all the good compliance
work.
• Reputational damage has become the main driver for
compliance.

31. Legal Notice
2013 FERMA. All rights reserved. You are not permitted to
create any modifications or derivatives of this presentation or to
use it for commercial or other public purposes without the prior
written permission of FERMA.
Although all the information used was taken from reliable
sources, FERMA does not accept any responsibility for the
accuracy or comprehensiveness of the details given.
All liability for the accuracy and completeness thereof or for any
damage resulting from the use of the information contained in
this presentation is expressly excluded.
Under no circumstances shall FERMA be liable for any financial
and/or consequential loss relating to this presentation.