By Andrew Longstreth
NEW YORK, Feb 4 (Reuters) - A groundbreaking proposal in
Britain making it easier to bring antitrust class actions has
business groups worldwide fearful that London will become a
center for litigation abuses.
Last week, Britain's government proposed a system of
"collective actions" that would allow individuals and businesses
be part of a class of plaintiffs even if they do not participate
in the lawsuit. The proposal, which has yet to be drafted into
legislation, would make it easier for individuals and small
businesses to recoup damages from price-fixing cases.
The proposal would move Britain closer to the American class
action system, which Europeans have long resisted and derided
for what they call its excesses. Under the current system in
Britain, all members of a collective action must actively opt
into a case and participate.
The government said changes are needed because it has become
too costly to bring private lawsuits alleging anti-competitive
"What is needed from government is to create the legal
framework that will empower individual consumers and businesses
to represent their own interests," wrote Britain's business
minister Vince Cable in a paper outlining the government's
CHAMPION AND CRITIC
Cable, a Liberal Democrat in Conservative Party Prime
Minister David Cameron's coalition government, is seen as a
champion of the average citizen and a critic of the financial
sector. Cameron has not publicly commented on the proposal.
Business groups in Britain and abroad have already lambasted
the proposal. Confederation of British Industry Chief Policy
Director Katja Hall said in a statement the government's
proposal had "let the litigation genie out of the bottle by
adopting U.S.-style collective actions."
The U.S. Chamber of Commerce Institute for Legal Reform
echoed those concerns in a statement, predicting it would bring
Britain closer to the "toxic U.S.-style litigation culture" and
that it would burden business and hurt consumers.
Between 2005 and 2008, there were only 41 antitrust cases of
any kind that reached a judgment, according to the British
government. By contrast, there were 677 private antitrust
lawsuits filed in the United States last year alone, according
to statistics compiled by the Administrative Office of the
United States Courts.
The government stressed it wanted to guard against
"frivolous or unmeritorious litigation." The proposal would not
allow two basic features of the American class-action antitrust
practice: contingency fees which allow plaintiffs' lawyers to
earn around a third of damages collected in many lawsuits; and
treble damages which automatically triple damages under U.S.
Taking away those elements will make Britain "less
attractive" to some American trial lawyers thinking of moving to
London, said Jon Lawrence, a litigator at the London corporate
law firm Freshfields Bruckhaus Deringer.
'LOSER PAYS' RULE
The proposal also keeps Britain's "loser pays" rule that
makes those who bring unsuccessful cases pay the other side's
costs. Few small businesses will want to risk losing, said
Robert Lande, a law professor at the University of Baltimore
School of Law who specializes in antitrust.
Another element of the British proposal that could
discourage American class-action attorneys is a judicial test to
assess the adequacy of the representative plaintiff, said
Vincent Smith, a partner at the London law firm Sheppard &
Smith. The goal of the provision, according to the government,
is to prevent unmeritorious lawsuits from going forward.
American class-action attorneys who are used to choosing
their own clients without a high degree of scrutiny will have to
be prepared to change how they operate, Smith said.
"They will need to think hard before they dip their toes in
and harder before they take a swim," Smith said.
Many have described the British government's proposal as a
radical departure from the current system, and some lawyers said
they expect the government eventually to take more steps to make
the system friendlier to plaintiffs.
Michael Hausfeld, one of a few American plaintiffs' lawyers
with operations in London, said he was "cautiously optimistic"
about business opportunities for his firm under the plan.
Hausfeld played down the prohibition against contingency
fees and treble damages. He noted that Britain allows for
plaintiffs to collect interest on damages accrued prior to a
judgment, which could help make up for the lack of treble
He also noted that under Britain's rules, successful lawyers
can seek a multiplier of their regular hourly fees.
But Hausfeld suggested the biggest victory to come from the
proposal may be a shift in thinking about the value of class
actions. He said he first raised the idea of introducing more
American-style class actions in Britain 13 years ago at a
gathering of parliamentarians and lawyers.
"We were called nutters," Hausfeld said.
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