A new mechanism for bringing group proceedings (class actions) in Scotland will come into force on 31 July 2020. Class actions represent a significant risk for corporate and public sector defendants alike. Where an event has caused mass harm, these procedures facilitate grouping of individual claims resulting both in higher value clams being filed and also claims that would otherwise not have been filed at all.
The detailed rules for the new procedure have not yet been published, but the mechanism is in principle suitable for all causes of action, including data protection (data breach), product liability and consumer claims. The COVID-19 pandemic has caused other mass harm events that could be suitable for group proceedings, such as health & safety claims by employees, claims concerning cancellation of events and claims by groups of insureds who may contest denial of Business Interruption cover.
The procedure
The most important consideration for any collective proceedings mechanism is whether it is implemented on an opt-in or an opt-out basis. The former requires the positive consent from potential class members to participate in the claim, the latter automatically aggregates all class members unless and until they choose to leave the class (opt-out). Opt-out mechanisms are particularly effective for bringing claims with low individual losses, but where total damages can be very significant if the class is large.
The enabling legislation for the new procedure is the Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018 (the “2018 Act”). The 2018 Act sets out a structure for both opt-in and opt-out mechanisms. Earlier this year the Group Proceedings Working Group established by the Scottish Civil Justice Council (“SCJC”) conducted an informal consultation process for implementing the new mechanism. In the consultation the SCJC expressed a preference for introducing the new mechanism on an opt-in basis initially, with the opt-out mechanism to follow later.
Introduction of a class action mechanism has long been under review in Scotland. Lord Gill’s Scottish Civil Courts Review published in 2009 recommended the introduction of a “multi-party procedure”. The Gill Review was followed by the Taylor Review of Expenses and Funding of Civil Litigation in Scotland in 2013. The 2018 Act incorporates a number of the Gill and Taylor recommendations, including to permit Damages Based Agreements in Scotland which came into force in April 2020 which will further encourage commercial litigation and attract the attention of litigation funders.
The availability of group proceedings in Scotland is part of a general trend towards class actions across Europe. Other key developments include:
- introduction of an opt-out class action mechanisms in the UK for competition claims in 2015 (see Law Now articles here and here);
- the English Court of Appeal ruling in October 2019 which permitted an opt-out data protection class action to proceed against Google (see Law Now article here);
- introduction of an opt-out class action mechanism in the Netherlands in January of this year; and
- continuing progress towards the Directive for Collective Consumer Redress, where a final text is expected this summer. See Law Now article for background here.
Next steps
The detailed rules for the new group procedure have not yet been published. Based on the SCJC consultation it seems likely that the mechanism will be introduced on an opt-in basis initially, but this has not been officially confirmed. CMS will review the detailed rules when published and we would be glad to further discuss the extent to which this development increases litigation risk and what steps can be taken in mitigation.
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