Focus on France

How effective is the French class action regime?

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The evolution of class action legislation in France

17/07/2023

The French-style class action could soon evolve through a recent bill reflecting the European Directive on representative actions.

The introduction of class action legislation in France in 2014 marked a significant development in the country’s legal landscape. Initially limited in scope, the legislation gradually expanded to encompass a variety of sectors, including health, environment, personal data protection, workplace discrimination, and housing tenancy disputes. However, despite these advancements, the effectiveness of the French class action regime has been called into question – with only a limited number of successful cases to-date.

…this bill could lead to a renewed interest in class actions, with corporates potentially facing litigation in areas beyond consumer rights and healthcare.

New legislation will soon aim to solve the Mille-Feuille within existing laws, as well as to implement the long-delayed EU Directive. The proposed legislation seeks to broaden the standing for class actions, streamline procedures, and encourage the use of mediation. If enacted, this bill could lead to a renewed interest in class actions, with corporates potentially facing litigation in areas beyond consumer rights and healthcare.

However, the possibility of increased mediation and the potential expansion of class action sectors indicate a changing landscape where corporates and associations may seek alternative methods to resolve disputes.

The Story So Far…

The first rules for class actions in France were introduced in 2014, with a very strict framework as regards the associations with standing to act and the nature of the damages that could be awarded. In 2016, it was extended to health, environmental, personal data protection and workplace discrimination disputes and then, in 2018, to housing tenancy disputes. Whatever the class action considered, two stages follow one another: a judgment on the liability of the corporates and the determination of the class concerned, then the implementation of this judgment via membership of the class (the “opt-in” system) and individual damages.

However, there are still differences between the various sectoral class actions in terms of the definition of standing, the nature of the damages that can be awarded, whether or not there is a compulsory prior formal notice procedure, and the procedural methods for compensating damages.

The introduction of the French class action regime has been closely monitored with the setting up of a ‘mission of information’ on the outcome and prospects of class actions. Its conclusions were presented in June 2020 and the report described the results of this new procedure as disappointing.

On the one hand, the report highlighted the low number of class actions implemented: 21 class actions filed since 2014, including 14 in the consumer field and 3 in the health sector. By the end of 2022, there had been 32 class actions, 20 of which were in the consumer field. On the other hand, the report noted that no corporates had yet been held liable in a class action. Since then, in a non-final judgment dated January 5, 2022, the Paris Court has held liable a company operating in the health sector.

Associations and corporates have multiplied the number of procedural issues (i.e. those unrelated to the merits) regarding the statute of limitations, the conditions required to bring a claim and the disclosure of documents. This illustrates an uncertain scope of application and the excessive complexity of the French class action regime.

The use of group mediation has led to the signing of approved settlement agreements in several cases.

Rather than initiating a class action, practitioners have tended to favour collective actions grouping together a large number of individual complaints without the need for consumers to turn to an association.

The Depakine case in France was also a significant landmark in the history of French class actions. It centres around a drug called Depakine, which contains the active ingredient valproic acid or sodium valproate. The drug was taken by many pregnant women for epilepsy, but it was later found to potentially cause congenital malformations and neurodevelopmental disorders in children exposed in utero.

The Association for the Support of Parents of Children Suffering from Anticonvulsant Syndrome (APESAC) filed a class action against a pharmaceutical company in May 2017. On January 5, 2022, the Paris Court ruled against the company, marking the first decision to rule on the merits against a professional entity subject to a class action in France. However, Élodie Valette, BCLP Disputes Partner in Paris, notes, “whilst an interesting case, it is not yet a final decision. This means there is, at this point, no precedent”.

The Legislative Landscape

In contrast to the UK and US systems, the French system presents distinct characteristics. In the US, class actions have a longer history and are more deeply ingrained in the legal system. The Federal Rules of Civil Procedure, established in 1938, have long facilitated class actions, and they are widely utilized across a range of sectors, including securities, consumer goods, and labour. US class actions are generally more plaintiff-friendly, with broad rules of standing, and potential for high damages, which can lead to substantial settlements.

In some types of claim, the UK has moved closer to US-style, opt-out class actions since the Consumer Rights Act of 2015. However, Valette believes there is little appetite for opt-out actions amongst French legislators.

There is no current proposal for an opt-out regime, nor is there likely to be anytime soon. The French legislators have made it clear they do not want a US-style system, and the widely accepted view is that the existing process for collective actions offers sufficient redress, says Valette.

Instead, legislators are looking to simplify and streamline the existing system for opt-in class actions.

An important step will be the implementation of the EU Directive, adopted on November 25, 2020 (Directive (EU) 2020/1828 of the European Parliament and of the Council of November 25, 2020). The directive clarifies representative actions to protect the collective interests of consumers, and repeals Directive 2009/22/EC. This text is similar to the French class action regime in several respects. In particular, it confers standing to qualified entities and follows the two-phase scheme of the French model. However the directive extends its scope to sectors not covered by the French class action regime, such as financial services. On January 27, 2023, France was censured by the European Commission for not having transposed the directive within the required timeframe.

This recent French bill was submitted on December 15, 2022. It was adopted by the Commission for Constitutional Law, Legislation and the General Administration of the Republic on February 17, 2023 and the Council of State issued its advisory opinion on February 9, 2023. The substantially amended bill was adopted by the French National Assembly in open session on March 8, 2023 and sent to the Senate for discussion. This could lead to a text by the end of 2023.

As it stands, the provisional text provides for the inclusion of the procedural regime for class actions in an ad hoc uncodified law; the extension of standing to all approved associations, representative trade unions, associations which have been established for at least two years “whose statutory purpose includes the defence of interests that have been harmed” and victims’ associations grouping together at least 50 natural persons, 10 companies or 5 territorial authorities; full compensation for damages; and the elimination of the procedural step of a mandatory formal notice in environmental, discrimination and data protection matters.

The text promotes greater publicity for class actions and proposes the maintenance by the Ministry of Justice of a public register of the class actions in progress before all the jurisdictions. The proposal provides that the public prosecutor may initiate or intervene in a class action.

The text also provides for the creation of a civil penalty that can only be requested by the public prosecutor’s office, relating to a “breach [of the corporate’s] legal or contractual obligations resulting from the exercise of a corporate’s activity” and assigned to the public treasury. For a legal entity, the amount of the fine may be up to 3% of turnover before tax.

Fines may be 3% of turnover before tax

The proposal also provides that the judge may decide to charge the costs of the proceedings to the State.

The proposal specifies the jurisdiction “in all matters” of the specialized judicial courts and requires the submission of a report on the evaluation of the reform of the class actions’ legal regime four years after its entry into force.

Finally, the proposal ensures full transposition of the directive. Based on a principle of reciprocity, it opens up standing for class actions to entities entitled to bring representative actions in other Member States. Criteria are provided for the authorisation of French associations to bring representative actions in other Member States.

Two changes have been made to the procedural regime of the French class action in order to meet the requirements of the EU Directive: the absence of an obligation to present individual cases when the class action seeks to put an end to the breach and a mechanism to ensure that there are no conflicts of interest between the third party funders of the class action and the claimant.

Looking Forward

Even though it remains to be seen whether this latest bill transposing the directive will be enough to renew class actions in France, we can already assume that corporates may be targeted by class actions not only in the consumer field or health sector, but also as regards financial services or environmental disputes. Both sectors are experiencing an increasing number of disputes.

We can already assume that corporates may be targeted by class actions not only in the consumer field or health sector, but also as regards financial services or environmental disputes.

We may also expect a rise of class action mediation. Indeed, if we have in mind the decision rendered on January 5, 2022 in the health sector; not only is this the very first decision to hold a corporate entity liable in a class action, but it is also the first decision on the merits regarding liability arising out of a health product.

It took almost five years to reach this first instance decision and it will take several more years before a final decision on compensation may be rendered as regards the corporate’s liability. It is only then, and in the absence of mediation, that the constitution of the class and its subsequent compensation can take place.

Therefore, it could be in the interests of both corporates and associations to use mediation to find a solution to the dispute between them. The use of mediation may be prompted by a question of reputation on the part of corporates, and a question of time on the part of associations.

The French system, while evolving, remains less utilized than its US and UK counterparts. The extension of class actions to financial services, particularly on ESG-related issues, may open a door to many more class actions. However, it is worth bearing in mind that we are starting from a very low point, says Valette.

The recent proposed changes in France may address some of the current barriers to more widespread use, but it will be important to monitor how these changes are implemented and how they affect the uptake of class actions in the country.

The interplay between the EU Directive, the potential for increased mediation, and the possible expansion of class action sectors in France could shape the future of the class action landscape in Europe.

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MEET THE AUTHORS

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Élodie Valette

Partner, Paris