Different class: UK representative actions suffer a setback

The claimants, Emerald Supplies Limited and Southern Glass House Produce Limited (Emerald), import flowers from Colombia and Kenya using air freight services provided by British Airways plc (BA) and other airlines. The claimants alleged that BA was party to agreements or concerted practices with competitors to fix the prices of air freight services, contrary to Article 101(1) of the EU Treaty. The European Commission (the Commission) has since issued an infringement decision on this basis against BA and other air freight carriers (Commission decision of 9 November 2010, Commission press release IP/10/1487).

Part of Emerald's claim was formulated as a representative action under Civil Procedure Rule (CPR) 19.6. This permits a person to bring a claim on behalf of others who have the "same interest in a claim". Emerald sought to bring an action on behalf of themselves and all other direct and indirect purchasers of air freight services who had paid inflated prices as a result of the cartel practices.

At first instance, while the court was untroubled by the breadth of the proposed group and its potentially fluctuating nature, it nonetheless granted an order that the representative part of the claim be struck out.

The judge, Chancellor of the High Court Sir Andrew Morritt CVO, noted that previous cases of representative actions, many of which pre-date the CPR, concerned groups whose identity was defined completely independently of the claim in question. Having considered authorities as far back as 1901, he found that the group proposed by Emerald was insufficiently defined, as BA's liability to the members of that group was the only connecting feature, and this liability remained to be proved in the case.

Furthermore, the nature of the group members' alleged loss differed too greatly, particularly as, in respect of some of the group, BA might have a defence that loss had been passed on to others in the form of higher prices for imported goods.

The Court of Appeal has upheld this reasoning, characterising the appeal as a "bold attempt at keeping a procedural novelty alive". In the leading judgment, Lord Justice Mummery described the attempt to bring a representative action as "fatally flawed", noting that it "defies logic and common sense" to treat an action as representative where those represented could only be identified after the liability of the defendants had been determined.

He also concurred with Chancellor Morritt's view that the proposed class did not share a sufficiently common interest in the action, as BA might have separate defences against different members of the group.

The use of the existing representative action framework in England is relatively rare: the court at first instance considered only two cases reported since the introduction of the CPR in 2000. Other forms of collective action have also proved unpopular or unworkable in England.

Group Litigation Order. The primary mechanism is a Group Litigation Order (GLO), but this is a means of managing multiple cases rather than bringing representative claims. Most importantly, it requires the involvement of all the claimants, who must bring individual claims that are then included in the group register and administered together. This precludes the possibility of commencing any form of "opt-out" claim on behalf of a group whose members may fluctuate and cannot be identified by name at the outset.

With only 74 GLOs made over the decade since their introduction, they cannot be said to have changed the litigation landscape. (For background, see feature articles "Cartel damages claims: obtaining redress for loss" and “Competition litigation reform: what next for private enforcement?”.)

Opt-in actions. The other form of English collective action, specific to competition follow-on damages claims, is a representative action brought under section 47B of the Competition Act 1998 (section 47B). This allows a group of consumers to be represented by a body specified by the Secretary of State in actions before the Competition Appeal Tribunal. However, it is an "opt-in" mechanism that still requires the claimants to be named on the claim form.

The difficulties of identifying and contacting potential claimants were evident from the meagre 600 participants in the Consumer Association v JJB Sports PLC case concerning replica football shirts, despite Which?'s belief that around two million consumers were affected (www.practicallaw.com/1-380-9423). Following this case, Which?, the designated body for this type of proceeding, has not shown any further interest in bringing actions under section 47B.

Reform on hold. Against the background of the limited use of the above mechanisms for representative actions, the previous government proposed a reform of representative actions focused on a sectoral approach, with the possibility of opt-in or opt-out group actions being authorised by the court, but limited to sectors specified in legislation.

The Finance Bill (the Bill) was to have been the first step in this direction, introducing the possibility of collective redress for consumers of retail financial products. However, these elements of the Bill were dropped in the "wash up" when the legislation was passed before the last election, and the new government has yet to give any indication of whether such ideas will be resurrected. It seems unlikely to be a priority.

However, while there is clearly a great deal of resistance to anything approaching the US model, developments across Europe suggest that the issue of collective redress is not going away. The Competition Commissioner, Joaquín Almunia, called for improvements in the availability of collective redress within the EU when he announced the fines imposed on the air freight carriers on 9 November 2010. He referred to Commission proposals for a Europe-wide measure that he hoped would be published in 2011.

Those who have followed the tortuous progress of EU proposals in this field will view such statements with scepticism: disagreements on collective redress run deep across Europe.

What may be of more immediate relevance are the steps being taken by individual countries within Europe to implement their own mechanisms for collective redress.

The Netherlands has led this trend and has been the forum for several major and significant group actions, using a system where claims are brought by authorised bodies or special purpose vehicles. It is unsurprising that a claim has been commenced in Amsterdam for damages relating to the air freight cartel. But The Netherlands is no longer alone. The German courts are currently considering group actions on behalf of investors and Italy has introduced a new provision into its Consumer Code (section 140), facilitating group actions for consumers harmed by illegal practices, including anti-competitive behaviour.

Closer to home, the Scottish government has, in November 2010, following Lord Gill’s report on judicial reform published last year, endorsed proposals for "special procedures for multi party or class actions" operating on an opt-in or opt-out basis, at the discretion of the courts. The government's response noted the fact that provisions for such actions in particular types of case "are likely to arise as a result of UK legislation," and expressed a desire for a unified approach.

However, the concept of a new form of action in Scotland is "agreed in principle" and the Scottish government has undertaken to consult on primary legislation to this end. So, even if Emerald Supplies is not appealed to the Supreme Court, the UK class action may not be dead just yet.