Class Actions Around the Globe
The United States is notorious for excessive litigation. A 2013 study by NERA Economic Consulting revealed that the U.S. has the highest liability costs as a percentage of GDP of the countries surveyed, with liability costs at 2.6 times the average level of the Eurozone economies. Unfortunately, many foreign governments are considering adopting one of the most problematic features of the U.S. lawsuit system – class actions. read more...
Class actions permit multiple claimants with the same claim to file a single lawsuit. Well-intentioned policymakers believed this would increase efficiency and access to justice.
Unfortunately, they were wrong. Class action litigation has become a lawyer-driven business in which lawyers seek out reasons to sue and then file on behalf of hundreds or thousands of claimants. In the “opt-out” system, where claimants are in the case unless they take the initiative to remove themselves, most do not even know they are litigants. With so many claimants, the potential for huge damages looms large. Companies often settle meritless claims because taking the case to trial is risky, expensive, time-consuming and damaging to their reputation.
At the same time, class action settlements often provide little or no benefit to claimants. An April 2013 U.S. national opinion survey revealed that only 14% of those who were part of a class action lawsuit reported having received something of value, such as a cashed check or redeemed coupon. Four in five voters involved in a civil lawsuit said that lawyers benefit the most from class actions.
Some policymakers outside the United States are considering proposals to allow class actions, further burdening businesses in a difficult global economy while creating little, if any, real value for consumers. While some class action proposals differ in certain ways from the U.S. model, not every aspect of the American system needs to be present to create an unbalanced system with U.S.-type abuses.
American businesses have experienced the class action system for many years and understand its perils. As a result, ILR is urging policymakers in Europe (both in individual countries and at the EU level), Asia, and Latin America to think twice before adopting opt-out class actions.