‘Representative’, ‘class’ or ‘group’ actions allow collective redress in civil litigation in England & Wales, Australia and the United States. However, there are critical differences between the rules that govern such actions in these jurisdictions, not only in relation to the procedural hurdles but also regarding the role of litigation funding.
We have highlighted the key distinctions in the table below, but start with some general points:
- It is more difficult to get a representative action started in England than it is in the United States, where the threshold for certification is lower, and in Australia where no certification is required at all. The rules in England require potential claimants to “opt in” to a representative action. By contrast, the “opt out” regimes in Australia and United States only require a single plaintiff, making class actions much easier for lawyers to commence.
- The absence of the “loser pays” principle in United States litigation removes the need to consider the critical issue of who will bear adverse costs, an issue that often prevents or delays class actions in England and Australia. However, in England, the usual order under a Group Litigation Order that each claimant is severally liable for an equal (or pro rata) share of adverse costs only, is pro-claimant and promotes the commencement of group actions. No such order will be made in Australia meaning that almost all class actions require a third party litigation funder to indemnify the lead plaintiff(s) for adverse costs.
- The availability of damages-based agreements (DBAs), under which lawyers can charge a percentage of compensation received, enable class actions to be brought in England and the United States without the involvement of a third-party litigation funder. However, in practice, DBAs are rarely used in England and law firms are usually reluctant to fund counsel fees, ATE insurance premiums and other cash disbursements and so funders are involved in most representative actions. Australia has the most restrictive rules for contingency fee arrangements which has increased the role and importance played by funders in class actions.
- The availability of jury trials and punitive damages in class actions in the United States means that super-sized awards are more likely than in England and Australia where trials are determined by judges-alone and punitive damages are generally not available. However, unlike in England and Australia, successful plaintiffs in United States class actions cannot recover the (often significant) costs of pursing these actions.
The team at Balance Legal Capital has considerable experience in relation to international class actions and issues that commonly arise in funding these proceedings. Please feel free to get in touch if you would like to discuss this further.
| England | Australia | United States | |
| Class certification required? | Yes
A “Group Litigation Order” (GLO), the mechanism by which the court manages individual claims where the claims give rise to common or related issues of fact or law, is required.
Another collective action approach called a ‘representative action’ is available, but only where the claims, fact pattern and remedies sought by the group are identical to those of the representative plaintiff. Due to this requirement, GLOs are more common.
|
No
A plaintiff only needs to demonstrate one substantial common issue of law or fact to commence a class action. Onus is on the defendant to establish that the claim should not proceed as a class action. |
Yes
Plaintiff must establish that claim brought satisfies the class action rules. Common issues must predominate individual issues for a class action to be certified. |
| “Opt-out” regime | No – in the High Court. Claimants must “opt in” and each must individually make their own claim.
Yes – for consumer claims in the Competition Appeals Tribunal (CAT) |
Yes
A class action may be commenced by a lead plaintiff on behalf of a defined class of people that may or may not be aware that they are part of the class. |
Yes
As per Australia |
| Adverse costs | Loser pays
Under a GLO, each claimant is severally liable for an equal (or in appropriate cases, pro rata) share of any adverse costs. |
Loser pays
The lead plaintiff(s) is liable for any adverse costs. |
Parties bear their own costs |
| Alternative fees allowed? | Yes
Both damages-based agreements (DBAs), where lawyers can charge a percentage of damages and conditional fee agreements (CFAs), where lawyers can get an uplift on their fees, are allowed.
DBAs not allowed in CAT competition law opt-out proceedings. |
Yes, but limited
DBAs not allowed. CFAs only allowed with maximum “uplift” on success of 25%. |
Yes
As per England |
| Punitive damages in shareholder class actions? | Generally no in the High Court (but depends on the cause of action).
Yes in the CAT |
No | Yes |
| Trial by jury? | No | No | Yes |
| Court must approve settlement | No in the High Court
Yes in the CAT (opt-out regime) |
Yes | Yes |
Simon Burnett is a partner of Balance Legal Capital LLP, a provider of third party funding for international arbitration and litigation, headquartered in London, UK. Simon was previously a disputes lawyer in the commercial disputes group at Freshfields Bruckhaus Deringer LLP in London. He went on to complete an MBA at London Business School, during which he consulted to leading international law firms on developments and innovation in the legal sector.
