How France’s new class actions regime will benefit business

After 35 years of efforts to allow class actions in France, and aggressive corporate lobbying to block them, it finally became possible in early 2014 for consumers to take companies to court as a group. However, so far at least, the commercial world need not fear the kind of US-style, mass class actions that were held up for decades in France as the model to avoid at all costs.

As law firm Kennedy’s partners Anne Ware and Emilie Civatte point out in a thoughtful review of the new legislation, France has taken a different and more cautious tack. In the meantime, other EU member nations such as Spain and Portugal, both of which allow class actions in limited circumstances, are watching closely and so is, probably, Belgium.

Different procedures

Unlike in the US, only designated consumer associations are entitled to issue proceedings before the civil courts on behalf of individual consumers or an identified group of consumers who may seek financial compensation from a defendant’s breach of their legal or contractual obligations. The alleged breach can apply to sale of goods, supply of services or damage from anticompetitive practices.

Most importantly, the compensation can be determined only in terms of the economic loss resulting from material damage.

Although the framework has divided legal opinion in a judicial system that can be old-fashioned and hostile to change, it offers several benefits. First, consumers now enjoy better protection than previously, but without the excesses of the much-feared US system. Second, they will not have to bear the costs of the proceedings, which is especially important in claims for small amounts. Third, all consumers judged to be in the same circumstances are awarded the same compensation. Finally, all claims in a case are bundled into one process, avoiding the kind of massive and long-running duplication before the courts.

However, some risks exist. For instance, the approved consumers’ associations could end up competing between themselves to issue court proceedings first. Also, a concern arises that, despite the best of intentions, the system could over time become like the US one, where class actions are seen as a threat to companies and an important source of income for lawyers.

The issue of how French lawyers will be remunerated is also creating debate. Under the law, contingency fees are illegal. However, it is possible to agree on a “result fee” that would be supplementary to a minimum agreed fee. There is speculation that other forms of remuneration may emerge in due course.

Extending the system?

It is also possible that, under pressure from the French Green party, which has drafted a bill for the purpose, the system could be broadened to include public health and environmental claims. As the lawyers say, “it will be interesting to see what happens with this proposal and whether the system will be extended to cover even more types of claim”.

However, most interesting of all, will France’s diluted class action system actually serve its original purpose?