Opt-out collective actions allow law firms or other “representative” bodies to bring lawsuits on behalf of a class of people meeting certain criteria. People who meet those criteria and are therefore part of the class must take affirmative steps to opt out if they do not wish to be represented – meaning that many may not even be aware that they are included in the lawsuit.
Allowing opt-out collective actions in the UK would open up the legal system to the worst abuses of the US class action culture:
- Loss of claimant control: Claimants in opt-out collective actions generally have more limited control than in other litigation because their cases are aggregated with those of many other individuals and are often run by a representative rather than the claimant.
- Abuse of the system: International experience has shown that collective litigation is prone to serious abuse, largely due to the opportunities it creates for third parties to generate profit.
- Risk of “blackmail settlements”: Faced with the possibility of aggregated claims on behalf of hundreds, if not thousands, of individuals, a protracted, complicated and expensive lawsuit and negative publicity, some defendants will choose to settle, even if they believe that a claim would ultimately be defeated on its merits. In the US, speculative cases are regularly filed with a view to extracting such settlements, rather than because of any genuinely held belief in the merits of the claim. These are known as “blackmail settlements”, the prime beneficiaries of which are often the claimants’ lawyers or those third parties funding the claims.
- Forum shopping: If the UK takes steps to facilitate greater use of collective actions, England and Wales would increasingly be targeted by “forum shoppers” as lawyers and funders seek to bring claims in the jurisdictions they perceive as providing the best possible environment for them to profit, clogging up the UK’s courts and diminishing the reputation of the British legal system.
In April 2012, the Department for Business, Innovation and Skills (BIS) published a consultation on proposals to allow opt-out collective actions in competition cases in the UK.