Born in the USA
American-style litigation reforms are not coming to Europe – they’re already here. And practitioners should be preparing their clients now, argues New York law firm partner LOUIS SOLOMON
uropean and global companies doing business in Europe take heed: US-style laws and litigation are affecting fundamental aspects of your corporate life. To assess whether European law is being ‘Americanised’, all one need do is consider whether three of the most unwelcome aspects of ‘American-style’ litigation reforms have come to Europe – private damage remedies for violations of public laws and regulations, the enhancement of those remedies (allowing, for example, punitive damages), and ‘class’ or ‘collective’ actions. I could perhaps be accused of slight overstatement to suggest that we can stop wringing our hands over these innovations and debating whether they are welcome or wise. The landscape isn’t changing – it has already changed, in these respects and others. Ask European lawyers or clients about these reforms and you will still get opinions ranging from the jingoistic, to the resigned, to the annoyed. The reforms would be yet another example of the US forcing its exports on foreign markets; they simply would not be practical owing to European legal models and traditions; and practitioners here have no desire to go in that direction. However, the reality is that the collective momentum of the market as well as legal forces within the EU have made these views moribund and almost quaint. Whether because US plaintiffs’ firms have set up shop in Europe or have joined forces with European law firms – as they have, quite effectively, since 2005 – or whether it’s the inevitable, natural by-product of a single, unified market and system of justice, the transformation to what has been characterised as ‘American-style’ litigation is alive and well in Europe. This is amply illustrated in some key areas. For instance, the benefits of private damage remedies are now openly acknowledged by senior EU officials. And the point is no longer theoretical.
The seminal EU green paper on antitrust damages actions was issued in late 2005 and will become a formal white paper this year. My firm’s Paris office is now litigating far-flung antitrust actions asserting precisely such private damage claims in France. Enhancing private remedies such as punitive damages – once considered the bane of US litigation and wholly unacceptable to any ‘civilised’ regime –
LOUIS SOLOMON is now being considered in various jurisdictions (for example, France, the EU, as well as non-EU countries such as Australia and Canada), upheld in others (Germany), and recognised in enforcement proceedings in others still (Spain). Class or collective actions are here to stay. There are more than 500 million consumers in the EU. When they are faced with generally applicable conduct, they may have, or believe they have, legitimate collective claims. That is exactly the environment in which class actions will thrive, both for plaintiffs and for defendants (who can get class-wide relief – witness the Netherlands’ Royal Dutch Shell settlement). The concept of collective litigation is not as foreign to European law as it has been to authors writing about it. France, Spain, Germany, Austria, the Netherlands, Denmark, and Finland, to name a few countries, already have laws or practice accommodating class or collective actions in one form or another. Last November, the UK’s Office
of Fair Trading published a report urging the same thing. Similarly, EU officials openly express the need for a unified means of collective redress. Competition commissioner Neelie Kroes has said a collective redress system is essential for an effective antitrust policy. True, she has likewise urged that the EU follow its own cultures and traditions rather than importing the US system wholesale. Respectfully, that feels like what the sticking plaster said to the bursting dyke. Last November, EU consumer protection commissioner Meglena Kuneva said collective redress goes hand-in-hand with the Community’s objectives of creating a single market that benefits consumers. Indeed, the EU is studying whether differences in the rules of various European countries regarding collective redress constitute barriers to achieving this goal. The EU will undoubtedly establish some form of collective redress for claims brought by both consumers and businesses – a topic that the influential Paris-based legal profession think-tank, Cercle Montesquieu, will be addressing at a seminar in March. But whether or not EU-initiated rules are promulgated quickly will not stem the tide of collective actions in member countries. These will inevitably find their way into the larger pan-European debate. The corporate and juridical structure of European companies and global entities doing business in Europe, how they have structured their legal relations with other companies and with the ultimate consumer, how and through whom their goods are distributed, and a host of other issues, such as company privileges and document retention – in short, how to avoid or reduce risks flowing from a culture that increasingly is looking to private legal redress rather than social programmes and public regulation – must be, and can be, effectively addressed. The paradigm has shifted. The future is now. Companies act at their peril by ignoring this.