Class actions - where innovation meets litigation

In an increasingly litigious society, where businesses, shareholders and individuals are engaging in disputes considering issues as wide-ranging as environmental disasters, financial losses, antitrust breaches and diversity and equality, class action and mass claims procedures have become an ever-more common way of initiating claims.

The last decade has seen a rapid rise in the popularity of class actions in the UK, and they now form a significant part of the legal landscape. Class actions and mass claims come in many shapes and sizes. They encompass the “opt-out” or “opt-in” proceedings that can be issued for competition claims in the Competition Appeal Tribunal (CAT), the “representative actions” that can be issued in the High Court under CPR 19.8, Group Litigation Orders (GLOs) and other forms of multi-party litigation where the courts have used their case management powers to group claims together.

Novel forms of alternative dispute resolution such as voluntary and regulator-approved redress schemes are important tools for defendants to consider when faced with these types of claims. They can assist defendants by enabling them to limit the scope of potential claims and allow them to take more control of the dispute resolution process.

BCLP has in-depth experience of working on a wide range of such cases, both in the UK and in the US. This means that we are particularly well placed to understand the strategic decisions made by both claimants and defendants when pursuing or defending such claims and to chart the best route forwards on the facts of each case.  Usually, there are analogies that can be drawn between different procedural mechanisms.

Innovation and experimentation or pushing the boundaries too far?

Managed correctly, class actions can be a good way of addressing an issue efficiently and in a way that provides appropriate compensation for consumers or injured parties.

However, there is no doubt that claimant lawyers are increasingly seeking to use class action and mass claim procedures to bring claims in new areas. One key aspect of the development of class actions over the coming years will be for the courts to clarify the boundaries between a legitimate use of the court’s class and mass actions procedures and an abuse of a system that is seeking to promote access to justice rather than allow vexatious or otherwise unsuitable claims to progress.

These claims include in particular actions relating to environmental, social and governance issues. A number of GLOs, which allow multiple claims with similar facts or legal issues to be managed together as a group or class action, have environmental angles.

Activist investors are also attempting to use the courts to force corporates to make good on their environmental pledges, and these cases could well develop into class litigation in the future. Consumer litigation over ‘forever chemicals’ is also earmarked as a possible area for action.

Separately, securities actions brought under the Financial Services and Markets Act 2000 (FSMA) are growing in number. These cases use sections of FSMA to seek remedies for investors who have suffered a loss as a result of misleading statements or omissions made in public disclosures.  This is an area of law that is likely to develop quickly over the coming years as asset owners and managers consider how their fiduciary duties interact with the claims that can be pursued and as the courts further clarify the ambit of those claims.

The growth in class actions could rightly make defendants nervous about how to prepare themselves for any claims.

The CAT collective action procedure is also now being tested with a significant increase in claims which arguably do not fall neatly into the ‘antitrust’ bucket but which are attempting to use an allegation of abuse of dominance as a wrapper in order to fit within the opt-out legislative framework. The first CAT trials are set for 2024 and will be closely watched by claimants and defendants alike.

The growth in class actions could rightly make defendants nervous about how to prepare themselves for any claims. The answer is to stay on top of developments – for instance, corporates in a position of dominance in their markets should keep an eye on how CAT collective proceedings are developing. Those in the energy and manufacturing sectors might want to take pre-emptive action to ensure they are not the target for environmental or greenwashing claims, and in particular their disclosures on environmental issues become extremely important.

Legal advice is also vital as soon as a class claim is being considered or filed. There are many effective strategies to either progress or defend a class action. The courts are testing procedure and providing increasing amounts of guidance to both sides which will be vital in the future.

In this Digest, and future editions, we will keep track of the key developments in this significant field of litigation to enable businesses of all sizes to navigate the changing landscape – and emerging risks – as easily as possible.