Introduction
DIFFERENCES IN NATIONAL LAWS
Class action procedures vary greatly among jurisdictions. These differences include how developed the procedures are; the types of claims parties can bring; the parties that can represent classes; whether classes are structured as opt-in or opt-out; and the rules governing settlement, remedies, and financing. Many countries have enacted more restrictive class procedures than the United States. There are notable exceptions, however, that present risks to defendants sued abroad. This is particularly true with respect to the requirements and procedures for class certification.
Maturity
Class action laws in the United States are highly developed. The current rule governing federal class actions is more than 50 years old, and the thousands of putative cases brought each year have created an ample body of case law discussing the nuances and protections in class action procedure.
Most class action systems are not as formal or longstanding. Some countries, like Argentina, do not have specific class action procedures on the books, but rather allow plaintiffs to assert collective interests before the court under general laws.
Other countries' class action systems are only in their infancy and will be shaped as cases arise. Japan, for example, enacted its class action statute in 2013, and the statute entered into force only in October 2016. Many European countries, including France and Belgium, have also introduced their versions of class action procedures in the last few years, with ongoing proposals for reform and development.
A few jurisdictions-like Australia and China-have had active class action regimes for some time, but these jurisdictions' procedures are not as longstanding as those in the United States, presenting not insignificant risks to those sued there.
Types of claims
Class actions in the United States are not limited to a particular area of law, but can be brought in a variety of matters ranging from securities to civil rights. In other countries, however, class actions are often limited to particular areas of law. Most commonly, class actions are limited to consumers' rights claims, including competition law, contractual liability, financial services, health protection, and product liability. Some jurisdictions also allow class actions in environmental cases. And some jurisdictions, like Brazil and Argentina, allow class actions in other defined areas, such as the protection of the rights of children, minorities, and religious groups.
Beyond legal restrictions on the types of claims that may be brought, some countries may in practice become a preferred forum for global resolution of certain types of class actions or collective claims. The Netherlands, for example, has been the site of several recent cross-border securities law class action settlements between non-Dutch companies and mostly non-Dutch investors.
Class representatives and the right to sue
Another restriction on class actions in many jurisdictions is that, unlike in the United States, private individuals may not file a class action on their own. Rather, the right to bring suit is limited to designated entities, which sue on behalf of the aggrieved individuals.
Each country that limits class actions to designated entities has procedures to give those entities legitimacy. These procedures vary from one country to another. For example, in France and Belgium, plaintiffs must bring their actions through certified associations for the defense of consumers recognized as being representative at a national level. Other countries allow non-governmental organizations (NGOs), public prosecutors, and governmental authorities to be plaintiffs. In Brazil, for example, most class actions are filed by public prosecutors.
Opt-in vs. Opt-out
Jurisdictions also differ on whether and how class or collective proceedings can bind putative class members, with only a handful of jurisdictions adopting true opt-out procedures (as in the United States). Portugal, for example, has an opt-out system, while Italy launched an opt-in system in 2020. Some countries have a mix of opt-in and opt-out procedures. In October 2015, England and Wales began using opt-out class actions for antitrust cases, but still use opt-in procedures for other types of cases. And, the Netherlands permits parties to ask the court to declare a settlement binding on others.
Settlements
In contrast to developed settlement approval and fairness standards for class actions in the United States, national laws elsewhere do not always provide specific rules for settlement. Yet many jurisdictions like the Netherlands and Mexico encourage class action settlement by generally allowing parties to reach full or partial agreement at any stage of the proceedings.
Before the High Court of England, for example, cases can be settled out of court without court authorization as long as all parties agree, and the court need only be informed. If all parties do not agree (e.g., claimant has not reached agreement with other class members on terms), then court authorization may well be necessary.
Remedies
There are also substantial differences among jurisdictions in their available remedies. The United States offers a full range of remedies, including compensatory damages, injunctive relief, and punitive damages in class cases, but remedies in other jurisdictions are often more limited. Most countries outside the United States do not allow punitive damages.
Compensatory damages are the most common remedy, but even for those damages, some jurisdictions are more restrictive than the United States. France, for example, limits compensatory damages in a class action to pecuniary damages-non-pecuniary damages must be recovered individually.
Injunctions are also a common remedy. In Spain, for instance, the court can order the cessation of the illegal conduct and, in certain cases, the publication of the judgment in public media.
Financing
Another important difference among jurisdictions in class actions is in how they treat litigation financing. Two issues in particular are notable: contingency fees and third-party financing.
Most jurisdictions, including the United States, Brazil, England and Wales, Japan, Mexico, and Spain, permit contingency fee agreements under at least some circumstances. Each of these jurisdictions, however, puts different requirements on those agreements. Other jurisdictions, like Belgium, prohibit contingency fee agreements altogether.
Most jurisdictions also allow third-party funding under at least some circumstances, though the specific rules vary among jurisdictions. In many of those jurisdictions, however, parties rarely use third-party funding even though it is formally allowed. One exception is Australia. In that jurisdiction, third-party funding for class actions is quite common-nearly half of class actions receive third-party funding.
Third-party financing may, however, increase as class actions become more widely available and is an issue to be watched as new class devices are instituted across the globe. At least one jurisdiction, Argentina, has financial aid for plaintiffs seeking to file a class action.
Certification requirements
Although non-U.S. jurisdictions tend to have greater formal restrictions on the scope of class actions, many of them also pose their own risks because they lack the well-developed class certification requirements and procedures that exist in the United States.
Class actions seeking damages in the United States require, at a minimum, numerosity, commonality, typicality, adequacy, predominance, and superiority. Additionally, the plaintiff bears the burden to prove all of these requirements at the class certification stage. Decades of case law have clarified these requirements, with the result that defendants faced with non-meritorious class actions often have arguments that can prevent certification.
Other countries may not have these safeguards. Most non-U.S. countries do not have as many substantive requirements for class certification. In particular, many countries do not require predominance, which is often the highest barrier to class certification for damages actions in the United States. Italy, for example, requires only adequacy and that the right infringed be homogeneous. In addition, many jurisdictions do not have a U.S.-style class certification procedure where the plaintiff must prove the requirements for a class action. For example, Brazil does not require class certification; it is largely sufficient that a plaintiff otherwise specified in law as able to initiate a class action has standing. And Mexico allows defendants only five days to oppose class certification.
Australia in particular is a significant class action risk, because it lacks both the formal restrictions on the scope of class actions seen in most non-U.S. countries and the class certification requirements of the United States. Australian class actions are not limited to particular plaintiffs or areas of law. Yet Australian class actions also do not require predominance. They may proceed if there are any issues common to the class. Additionally, Australian plaintiffs face no initial certification burden. The onus instead falls on the defendant to show why the class action is not appropriate.
Towards Broadening the Scope of National Class Actions
Over the last few years, there has been widespread announcement that class actions would take off globally. History has not yet seen this wave of suits. Countries around the world implemented class action legislation, but procedural hurdles have continued to prevent widespread use. Class actions remain most popular in the United States, Australia, and England and Wales. There is still opportunity for global class action growth with countries' renewed momentum to reform their policies.
Jurisdictions enthusiastically implemented class action legislation throughout 2014-16. In May 2015, for example, the Italian Parliamentary Commission of Justice approved a bill to reform the current class action procedure and broaden its scope. In August 2015, Argentina undertook a revision of its Civil and Commercial Code to reinforce class actions. In January 2016, the French Parliament extended the scope of class actions to patients and other users of health care services and products, and then later, the French Parliament adopted a bill to further extend the scope of class actions to victims of discrimination.
However, procedural hurdles at the settlement and financing stages have made collective suits time-consuming and costly. For instance, in China, class actions are administratively burdensome because settlements require unanimous consent from each class member. And countries like Belgium and China do not permit contingency fee arrangements, making it prohibitively expensive for plaintiffs to bring a claim. Additionally, a lack of financial incentives stymied initial class action growth in France.
More, recently, countries have reformed their class action policies in the hopes of making class actions more popular and accessible. Italy implemented a new regime in November 2020 in order to encourage individuals to bring suits and lately, in June 2023, to provide consumers with broader redress rights across a wide range of sectors. This is in contrast to Italy's older class action regime, which was known for being expensive and ineffectual. In January 2020, the Netherlands passed a new class action act which broadened the scope of damages and enabled representative entities to bring claims on behalf of international parties. These recent changes represent a renewed, global momentum for class action reform. The latest development at the European Union level is noteworthy as well. At the end of 2020, the European Parliament and the Council of the European Union adopted the Directive on representative actions for the protection of the collective interests of consumers and repealing Directive 2009/22/EC (the "Directive"). This important Europe-wide harmonization will shape the future of national and cross-border consumer litigation.
Class actions remain likely to have a broader impact on companies doing business in the future. Particularly in the context of consumer products in a global supply chain, the risk of simultaneously facing class or collective proceedings in Europe, Asia, and Latin America is on the rise. A truly global and coordinated approach to the facts, law, and issues across venues worldwide will be necessary to reduce exposure risks. Jones Day's class actions practice will continue to monitor this expansion, along with the risks and opportunities it brings to our clients.
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