Response of Assuralia to the consultation on collective redress, towards a coherent European approach

Transcription

1 SS Response of Assuralia to the consultation on collective redress, towards a coherent European approach This paper contains the response of Assuralia to the consultation on collective redress that DG Justice has launched on 4 February Assuralia is the representative body for mutual, co-operative and jointstock insurance and reinsurance companies in Belgium, representing more than 98% of the Belgian market (local business excluding FOS premium and reinsurance premium income). For more details please consult the Commissions register of interest representatives under number Preliminary remarks 1. Assuralia welcomes the European Commission s (EC) consultation on a coherent European approach to collective redress. We are pleased that it is a common initiative of DG Justice, DG Sanco and DC Competition. We understand from the consultation paper that the EC defines collective redress as a broad concept encompassing any mechanism that may accomplish the cessation or prevention of unlawful business practices which affect a multitude of claimants or the compensation for the harm caused by such practices. We distinct two main forms of collective redress in the Commission s paper. On the one hand, injunctive relief, where claimants seek to stop the continuation of illegal behavior. On the other hand, compensatory relief, where claimants seek damages for the harm caused. 2. A horizontal approach is needed to avoid any inconsistency between previous EC s initiatives in this area, i.e. on consumer collective redress (DG SANCO) and anti-trust damages actions (DG Competition). The Commission should ensure from the outset that any possible proposal in this field, while serving the purpose of ensuring a more effective enforcement of EU law, fits well into the EU legal tradition and into the set of procedural remedies already available for the enforcement of EU law. 3. For Assuralia the case for satisfactory redress (injunctive and compensatory) of harm suffered by customers private consumers as well as businesses, including SME s is self-evident. Though, we are not convinced that there is a need for judicial collective redress. In terms of effectiveness and efficiency alternative dispute resolution (ADR) is a better solution. Deze informatie is strikt voorbehouden aan de leden van Assuralia en mag alleen worden verspreid met haar toestemming HUIS DER VERZEKERING ADR is faster, cheaper and, due to its voluntary and consensual character, less confrontational than a courtroom battle. That s why Assuralia de Meeûssquare, 29 Beroepsvereniging van verzekeringsondernemingen B-1000 Brussel Wettig erkende beroepsvereniging Tel Fax info@assuralia.be

2 2 calls upon the Commission to promote and improve sectoral ADR schemes for the settlement of individual as well as mass claims. 4. In this respect, we welcome the Commission s consultation on ADR. We would like to refer to our position paper in which we call for an improved alignment of ADR schemes throughout Europe. Whenever possible, disputes should be settled via out-of-court procedures, certainly when the damage suffered by the individual customers is low and fragmented. In this context, the Dutch approach1 offers valuable food for thought. However, a copy-paste of the model at a European level should be avoided. 5. Assuralia is in favor of sectoral ADR schemes. We are convinced that professional businesses will easier join a sectoral ADR scheme voluntarily because, in comparison to general ADR schemes, it is the best way to guarantee expertise in terms of knowledge of the content of the sector related complaints. For example, the Belgian Insurance Ombudsman and his staff are familiar with insurance law and the specificities of the different insurance branches. Sectoral ADR schemes encourage also the development of sectoral networks at EU-level to deal with cross-border complaints, such as the FIN-Net network for the financial services sector. 6. If the outcome of the current consultation and a comprehensive impact assessment would prove that there is a real need for judicial collective redress at EU-level, Assuralia requests the European Commission (EC) to take our considerations hereunder into account. They are bundled under the three main topics of the Commission s consultation paper: 1) added value of collective redress; 2) general principles on collective redress; and 3) the scope of collective redress. The Commission should realize that whether legal expenses and liability insurers will be able to cover the risks associated with a European-wide collective redress system will depend largely on the design of the judicial collective redress procedure. 7. In this context, Assuralia is pleased that the consultation aims to identify common principles for collective redress at EU level. In our view, these principles should be the following: limitation of the scope of collective redress mechanisms to consumer protection law (no body damage) and competition law only; a framework directive with maximum harmonisation regarding the common principles; alternative dispute resolution schemes (ADR) should be exhausted first before going to court. Therefore, judicial collective redress should be a last resort solution; the collective redress procedure, be it through ADR or in front of the court, should be organised on the basis of an opt-in, unless the defendant prefers an opt-out formula; the introduction of a collective action should be reserved to persons and organisations that are representative for the group of harmed consumers. The tribunal should be responsible for the 1 See:

3 3 admissibility examination, the organisation of the notification procedure and the control of the fulfillment of the representation criteria; the collective redress method has to exclude: - any system of punitive damages; - any recovery of unlawful profits beyond the compensation of the damage suffered; - any system of contingency fees; - the creation of a war fund; the compensation should only cover the proved harm of identified victims of incriminated conduct. 2. Topic 1: The potential ADDED VALUE of an EU collective redress initiative 8. In our view an EU collective redress initiative would not have much added value. Assuralia prefers the collective deal (use of ADR) above the courtroom war (judicial collective redress). We also recommend awaiting the outcome of the consultation on ADR before taking further action on judicial collective redress. Both dossiers should be treated in parallel. 9. In comparison to judicial redress, out-of-court settlements offer a quicker and cheaper way to settle disputes. Hence, we request the EC to further recommend the use of ADR, for individual as well as collective claims, in future legislative work. Many economic sectors have already their own kind of sector related ADR mechanisms operating according to the EU recommendations. For instance, the Belgian insurance sector has its own ombudsman that can rely on the FIN-Net network for cross-border disputes. 10. An improved version 2 of the Dutch Class Action Act (WCAM 3 ) may be an effective and efficient tool to settle mass damages claims across Europe. The procedure supplies a good balance between an out-ofcourt arrangement and a judicial procedure. That is to say, the WCAM provides a facility whereby an agreement which provides for the settlement of a mass damages claim, and which is concluded between an organisation representing the interests of those who have sustained a loss and the responsible party or parties, may be declared binding by the court in relation to the entire group of victims. These victims can then arrange for payment of their losses by virtue of the agreement. 11. If the EC would decide to take action, then Assuralia prefers a legally binding approach above nonbinding recommendations. We favor maximum harmonisation as it is the best way to avoid forum shopping and to settle cross-border disputes. However, we prefer a directive above a regulation because the Member States should be able to implement the legal provisions in the most appropriate way in line with their own national legislation. In this perspective, a framework directive that gives a clear outline 2 On the basis of an opt-in instead of the current opt-out procedure (See infra, Topic 2 General principles). 3 See: of de Nederlandse Wet Collectieve Afwikkeling Massaschade van 27 juli 2005.

4 4 of the minimum conditions that the Member States must respect seems to be the best and most feasible approach. 3. Topic 2: The GENERAL PRINCIPLES to guide any such initiative at EU level 12. Assuralia agrees that any possible EU initiative on collective redress (injunctive and/or compensatory) should comply with a set of common principles established at EU level. We took the principles that the EC has already identified by means of previous consultations as a starting point for our comments and reflections: Regarding the importance of information and the role of representative bodies: the introduction of a collective action should be restricted to persons and organisations that are representative for the group of victims. Those representative actions should be brought by qualified entities that fulfill strict conditions, such as being recognized on the national level, being legally and financially capable of introducing a claim, etc Assuralia holds the view that the court should centralize all the information relating to new, pending and ongoing collective actions. Still, this does not necessarily have to mean that the court itself should be responsible for the back office of collective actions. The tribunal could indicate a responsibly party such as a representative organisation, a law firm or even a legal expenses insurer as the manager of a collective action. Those actors can use a wide variety of media to reach a maximum of victims. For example, advertisements can be published/launched on national TV-channels, in national newspapers, on stakeholders websites, etc. Though, the court should not allow abusive media coverage which only has reputation damaging purposes. For cross-border cases networks such as ECC-Net and FIN-Net should play an active role In our view an opt-in procedure, that is limited in time (cf. infra, 12.13), is most suitable to manage a collective redress procedure, unless the defendant himself prefers an opt-out procedure. For several reasons it is important that victims expressly have to decide to combine their individual claims for compensation of the harm they suffered into one single action. This holds true for in-court as well as out-of court mass claims settlements. To begin with, an opt-out collective action would be contrary to one of the main principles of Article 6 of the European Convention for Human Rights. People can only be bound by a judgment of legal proceedings if they were involved in that lawsuit. An opt-out formula does not fit in the Belgian legal system either. The legal principle nul ne plaide par proceur demands a personal interest to act before court. As a result, the identity of the claimants must be known, which is only possible with an opt-in procedure. Besides, in Belgium the judgment can only apply to the plaintiff and the defendant. Hence, third parties cannot be bound by a judgment An opt-in collective action is the best tool to prevent the creation of war funds. In case of optout the risk exists that not all victims are aware of the collective action and thus not claim their part of the compensation. As a result, representative organisations might see an opportunity to enrich them unduly with the retained part of the compensation. Such practices should not be the scope of collective redress, neither in-court nor out-of-court mass claims settlements Finally, an opt-in procedure is the best guarantee for fair compensation without putting the survival of the defendant at stake. Only the correct calculation of the due compensation enables

5 5 the defendant to make necessary provisions in advance. This goes a fortiori for liability and legal expenses insurers if and in so far as they could be involved on either side. To be precise, the insurers involved have to be able to foresee sufficient provisions for their defendant-clients who are covered for their professional liability and/or in legal expenses Regarding the need to take account of collective consensual resolution as alternative dispute resolution: we would like to refer to our comments on DG SANCO s most recent consultation on ADR in the EU. In our position paper we call upon the Commission to stimulate ADR schemes, for individual as well as for collective claims, across sectors and jurisdictions throughout Europe In our opinion the best way to promote recourse to ADR in situations of multiple claims is fostering the set-up of sectoral schemes (e.g. the Belgian Insurance Ombudsman) at national level and through umbrella organisations, such as the FIN-Net network for financial services, at European level. Those sectoral schemes and networks should make more publicity on their website and through several media (e.g. on TV, in newspapers, etc.) to raise consumer awareness. Businesses that are part of an ADR scheme should mention this on the company s website, in pre-contractual information documents and in general contract conditions The attempt to resolve a dispute via collective consensual dispute resolution should be a mandatory step in connection with a collective court case for compensation. This should be imbedded in all new European/national legislation. However, if it is clear from the start that an agreement between parties is not achievable, then an efficient exit should be foreseen in the legislation in order to avoid unnecessary formalistic procedures, delays and costs. It may not be a good idea in all circumstances The fact that an ADR decision is binding or not should be the outcome of a consensus amongst parties, the plaintiff(s) as well as the defendant (trader). It should also be up to them to choose if they want to settle their dispute through the ombudsman, via mediation, by means of arbitration or by going to court. Mediation is based on a non-binding procedure designed to stimulate parties to reconcile and could be applied in all sectors. In contrast to arbitration it is up to the parties and not to the mediator to decide if they can agree (for example, with the settlement that the mediator is proposing). In case of arbitration, parties agree that the arbiter will take a binding decision (arbitral award) However, if the mediation of collective claims results in an agreement between both parties, then that agreement could be made binding on both parties by a third, judicial party (e.g. court) like in the Dutch case (cf. Supra, 10). Such judicial confirmation should only be possible if the following conditions are mutually fulfilled: 1) both parties agree with the request for judicial confirmation; and 2) the confirmed agreement only binds the parties and does not have any effects erga omnes That option could also be applied on our own insurance ombudsman if the policyholder and involved insurance company mutually agree on this. Currently, the decision of the Belgian Insurance Ombudsman is a mere advice. The advice is neither binding nor enforceable, but agreement between parties is being complied with Strong safeguards against abusive litigation: the aim of collective redress should only be the compensation of harm of identified victims. Therefore, regimes that encourage the introduction

6 6 of unmeritorious claims, punitive damages, contingency fees and the creation of war funds or stimulate the financial interest of third parties should be avoided. However, public authorities could collect unlawful profit as a fine according to applicable legal standards under consumer law. This revenue should only be used for public purposes such as an improved access to justice and not be granted to individual victims of commercial malpractices Another important safeguard is limiting the opt-in formula in time by installing a registration deadline. The reason is twofold. On the one hand, a registration deadline will restrict the administrative burden that will inevitably be a result of the organisation of the opt-in procedure. On the other hand, a time limit will avoid abuses along the process. That is to say, it will prevent customers from joining the procedure at a later stage only because the outcome of the process seems to turn out beneficial for the plaintiffs who initially signed in to the opt-in formula. Without this safeguard the procedure and the defense may be slowed down unnecessarily and made unreasonable heavy. The most feasible way to notify seems us by electronic means. The installation of a multilingual European register of pending collective actions could help claimants and judges to identify and bundle cases A following necessary safeguard is the role of the judge. In our view the court should be in charge of the admissibility examination, the coordination of the notification procedure and the control of the representation criteria. According to Assuralia, the judge should verify admissibility criteria that are related to (1) the representativeness of the designated entity for the entire group and the registration procedure of the opt-in formula. The registration deadline should be respected; (2) the number of plaintiffs that is necessary to introduce a collective action. Collective actions should only be admitted if they could not better be handled individually; (3) the conditions to leave a collective action when the defendant himself choose the opt-out formula; (4) the control of and the access to evidence; (5) the financial strength of both plaintiffs and defendants to pay the legal costs; (6) the availability of other legal remedies, such as the European Small Claims Procedure (Regulation EC 861/2007), which may be equally efficient and less costly as a mean of pursuing a claim. In this respect, judges may be helped by a specific case management training on collective actions. Besides, similar responsibilities should be dedicated to mediators in case of out-of-court mass claim settlements Finally, Assuralia believes that it is necessary that claimants bear their share of legal costs or costs of out-of-court settlement procedures. Otherwise, the number of unmeritorious claims and the risk of financing collective actions with war funds will increase substantially. In this respect, Member States should keep the freedom to preserve the loser pays principle that is applicable in many national legal systems The availability of appropriate financing mechanisms, notably for citizens and SME s: the introduction of a collective action be it through an in-court or out-of-court settlement should primarily be financed by the plaintiffs themselves or their representative. The self-financing of collective redress by means of third party financing mechanisms, war funds or the creation of public funds would generate a litigation culture and thus jeopardize free trade and industry Private funders are, amongst others, legal expenses insurers. Assuralia requests the Commission to safeguard and acknowledge the specific role of legal protection insurers on damages actions for breach of consumer rules. Legal protection insurers are often the first point of contact for victims. They scrutinize a potential claim and advise their clients how to proceed

7 7 to receive compensation. If it is obvious that a case is without any merits the insurer will advice accordingly. The case will be kept out of the judicial system. If the case is legitimate the legal expenses insurer will try to negotiate between both parties and examine whether it is possible to reach an agreement through an out-of-court settlement. Otherwise, the case will be sent to court. If needed, this insurance provides for funding of the costs of formal legal procedures (i.e. fees of technical experts to assess the extent and the cause of the damage, attorney fees and costs of bringing cases to court) and thus helps to bear the costs of damages actions. Hence, legal protection insurers function as a filter and so they enable the smooth running of the judicial system by excluding unmeritorious claims. Though, legal protection insurance as well as general liability insurance should not be abused to generate a collective action litigation culture Whether legal expenses insurers could cover the risks associated with a Europe-wide collective redress system in the future depends largely on the way such a system would be designed. It is of primary importance for legal expenses insurers to know the number of claimants beforehand, so they would therefore consider an opt-in procedure as the most workable solution. This is also true for the general liability insurers of the defendants and the insurance companies, which may get involved in collective actions themselves. The European Commission should realize that general liability insurers across Europe already do not cover claims originating from the United States because American class actions are based on opt-out Finally, the costs of proceedings should be reasonable for both defendants and plaintiffs. We are against a system of contingency fees. The fee of solicitors should not depend on the result of the lawsuit and neither on the number of claimants. For Assuralia the aim of a collective procedure is the compensation of harmed customers both private consumers and businesses, including SME s and not the enrichment of law firms. 4. Topic 3: The SCOPE of a coherent EU approach to collective redress 13. The Commission s work on compensatory collective redress should be limited to competition and consumer protection law, at least in the first testing phase. An extension to other areas of EU law should only be possible if a thorough impact assessment proofs there is a need to extend the scope of judicial collective redress as well that the procedure is working well in the field of consumer protection and competition law. 14. Claims for personal injury should be excluded since the damage has to be assessed individually per claimant and thus cannot be transferred to a multitude of cases. Hence, collective redress should be limited to the mere compensation of material damage only.