Strong support from UK public for consumer class actions, while half back third-party funding

European Commission: bringing forward collective action proposals

There is strong public support for collective consumer actions in the UK, new research has found, although most want it, and any third-party litigation funding that supports a case, to be subject to controls – many of which already exist here.

The survey of 6,177 people in the UK, France, Germany, Spain, the Netherlands and Poland found that Britons were the keenest of all on such actions, which are now allowed since the Consumer Rights Act 2015.

However, the 1,022 respondents in the UK indicated a preference for collective actions to be opt-in, rather than opt-out, as are permitted under the Act.

Some 76% in the UK said they supported collective action lawsuits with safeguards, while 50% said the same for third-party funding. A third of UK consumers backed a ban on funding, the highest of the six countries polled.

In June, the first attempt to bring an opt-out class action in the UK failed after a decision of the Competition Appeal Tribunal that meant the claim would not be worth enough money to proceed.

The following month, the tribunal dismissed an application for allow a £14bn collective action over concerns about the expert evidence. The decision is being appealed.

The survey by WorldThinks, a global public opinion research firm, was commissioned by the Institute for Legal Reform, part of the US Chamber of Commerce. The chamber has been campaigning in the UK against collective actions and particularly third-party funding for several years.

The report, launched in Brussels, is targeted at European Commission plans to require all member states to create a collective action system.

The report said “many consumers see potential benefits when they think and hear more about collective action cases, and are generally positive about any mechanism (legal or otherwise) which helps consumers secure redress”.

But consumers were “more cautious about the way in which these mechanisms are likely to be used in practice”.

The report said: “Specifically, consumers express concerns that these cases might be open to abuse and may not operate in consumers’ best interests, particularly if the model requires consumers to ‘opt-out’ of collective action cases rather than ‘opt-in’, and if consumers belonging to the class are unknown to one another at the outset of and in the process of the case.

“This concern is strongly felt in the UK, where consumers spontaneously describe an increasing commercialisation of the legal system. This is evidenced by a growing ‘compensation culture’, seemingly ‘opportunistic’ claims management, and legal firms looking to make a profit from consumers seeking redress in relation to workplace accidents, travel delays and the mis-selling of payment protection insurance.”

On collective actions, there was broad support for safeguards such as requiring cases to meet threshold criteria before a judge will allow it to go forward and directing that only consumer groups, rather than lawyers, can initiate cases – as under the 2015 Act regime – and that consumers opt in to cases. The new UK regime allows for opt-out.

Consumers also backed controls of litigation funding such as requiring funders to be licensed and to publicly disclose funding in cases; requiring funders to remain in cases through to completion without being able to withdraw; and ensuring that the consumers’ lawyers, not the funders, are in control of the legal decisions and strategy in cases. English law is already very clear on the last of these.

Lisa A. Rickard, president of the institute, said: “Europe must learn from the mistakes of the United States when it comes to class action lawsuits, and not duplicate a system like ours that rewards lawyers and robs from the consumers on whose behalf they are suing.

“Without protections, class action lawsuits will be harmful to consumers as well as businesses.”

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