‘Stuff consumers, growth & profit come first’ : Vested interests of the CBI oppose competition class action litigation coming to the UK

THE Confederation of British Industry (CBI) has unsurprisingly, opposed the introduction of class action litigation to the UK. Class Actions have long been difficult, in the UK, and in Scotland where the topic, raised as a matter of reform in Lord Gill’s Civil Courts Review, has become all but forgotten due to undisclosed lobbying of the SNP controlled Scottish Government by business interests (& donors – Ed) who want the idea stopped in its tracks.

The CBI issued a Press Release stating : Government’s competition law proposals risk introducing litigation culture to the UK - CBI

Government proposals to move towards “opt-out” class actions for consumers could spark a new litigation industry around competition law and deter inward investment and growth, the CBI said today.

Responding to a Department for Business consultation on private actions in competition law, the CBI warned that by grouping potential claimants together without naming individuals, opt-out class actions will magnify the total amount of potential claims and fuel a culture of litigation.

The CBI says that it is absolutely right that businesses that have caused significant loss to consumers should be required to provide compensation. However, this should be done through Alternative Dispute Resolution, which offers a quicker, cheaper form of redress and better outcomes for consumers, rather than the “big stick” approach of opt-out class actions.

Matthew Fell, CBI Director for Competitive Markets, said: “At a time when the unrelenting focus must be growth, the Government should set out a strong message that the UK is open for business, not open for litigation.The Government is in danger of importing a number of features of the US class-action system into the UK, including opt-out arrangements, awarding of aggregate damages and a distribution of surplus funds.

“Victims of competition law breaches must receive proper compensation, but this should be delivered in a cost effective way, with litigation a last resort. The best way to achieve this is through Alternative Dispute Resolution methods, which are increasingly being used by business, and often result in a better outcome for both parties.”

Download "CBI private actions response July 2012" (386kb)

Scotland must lift ban on Class Action litigation as European Parliament supports proposals on competition law

As the Dean of the Faculty of Advocates, Richard Keen QC recently said himself, its time for the ban on Class Action lawsuits in Scotland to be lifted.

Although the Dean himself seemed to be more interested in taking on the banks, the long standing peculiarly Scottish prohibition of consumers banding together to take on big business and companies that breach their rights or provide sharp practice in consumer services, should now be at an end.

Over to Justice Secretary MacAskill & Holyrood for some quick legislation to bring Scots consumer protection in line with most other countries … (not ! – Ed)

Out-Law.com reports :

MEPs back consumer class actions in competition cases

OUT-LAW News, 26/03/2008

The European Parliament has backed European Commission proposals that would allow consumers to band together to take action against companies that breach competition law.

The proposals echo some of the attributes of class action law suits, cases permitted in the US in which many people affected by a company's behaviour act together against that company and share the proceeds of a payout.

The Commission's proposals specifically say that they are not intended to create a litigation culture, but say that some action is necessary to allow consumers legal protection against companies which breach competition law.

"[Competition Commissioner Neelie Kroes] shares Parliament's view that collective redress mechanisms are necessary to give consumers and small businesses a realistic and efficient possibility to obtain compensation in cases of scattered damage, and that these mechanisms must include appropriate safeguards against excessive or abusive litigation," said a Commission statement after the Parliament vote.

Parliament had received a report on the Commission's recommendations and backed them by 498 votes to 11, with 17 abstentions.

The Commission's White Paper addresses the problem that competition law breaches often harm massive numbers of people in relatively small ways. The Commission is seeking to punish those breaches without many very small cases having to be brought.

"The European Parliament confirms the Commission’s findings that many victims harmed by EC competition law infringements are currently prevented from obtaining the compensation they are entitled to under the Treaty," said a Commission statement. "The European Parliament stresses that collective redress – with appropriate safeguards – is necessary, and that proposals to help victims gain compensation must not be delayed."

"I am delighted that the European Parliament shares the Commission’s view that something needs to be done to ensure that the victims of competition breaches finally get the compensation they are entitled to," said Kroes. "I am particularly pleased that today's resolution is based on a wide consensus across most political groups."

The Commission said that victims of competition law infringements forego billions of euros a year in compensation payouts because of the ineffectiveness of the law.

The Commission published its plans in its White Paper a year ago, saying that in most EU countries there were barriers to consumers receiving compensation for competition law breaches, such as the abuse of dominant market positions.

"The recommendations balance rights and obligations of both the claimant and the defendant and include safeguards against excesses and abuses of litigation," the Commission said.

“Consumers who are victims of illegal activities, such as overcharging, misleading advertising or outright scams, have a right to compensation," said Consumer Commissioner Meglena Kuneva when the Commission consulted on the proposals last year. "Currently, particularly where there are small scattered claims, this right is often theoretical because of the obstacles to exercising it in practice."

"There is a justice gap, a welfare gap and there are black holes in our redress system that is leaving consumers with nowhere to go. The present situation is clearly unsatisfactory. We must find a way to make the basic right to consumer redress a reality for more people," she said.

The Commission's research had found that privately brought antitrust claims for damages were extremely rare, meaning that companies that had broken the law were not being punished.

It said that it believed collective redress would encourage more cases to be brought.

It is now up to the Commission to decide what steps should be taken next to implement its plans.

Dean of Faculty wants Scotland’s class action restrictions removed to sue Banks

Richard Keen QC, the current Dean of the Faculty of Advocates, has come out in favour of scrapping Scotland’s infamous restrictions on Class Action lawsuits.

The Dean, however, only seems to feel Class Actions should be allowed against Banks & financial institutions … which seems to indicate the cosy relationship between the legal profession and the Banking sector has hit the rocks … no more cheap finance lads ? – Ed

We noticed an interesting version of the Class Actions story over on Peter Cherbi’s “A Diary of Injustice in Scotland” here : Dean of Faculty calls for class actions against banks as Scots legal profession turns against financial sector

The Scotsman reports :

QC: Allow class actions against banks

Published Date: 26 January 2009
By Jane Bradley and John Forsyth

ONE of Scotland's most senior lawyers is calling for ministers to scrap the restriction banning class actions in Scots law, a move that could see a wave of claims against banks.

The suggestion by Richard Keen, QC, the dean of the Faculty of Advocates, would open up the prospect of challenges by groups of shareholders against financial institutions over a lack of information about the state of their business.

It is understood that Scotland's legal profession believes there could be a raft of actions against Royal Bank of Scotland and other financial institutions on the basis that the information given out at the time of rights issues had been inadequate.

Mr Keen said: "The absence of class action certification inhibits pursuit of remedy. It is difficult to fund major litigation of that kind unless you can put together a class action."

Mr Keen's comments follow a string of calls from politicians demanding legal and political action to tackle the crisis – with RBS most in the firing line. Alex Salmond, the First Minister, said yesterday that he believed a parliamentary inquiry should be carried out into the banking crisis in Scotland.

He said any investigation should cover the Financial Services Authority and the role of politicians in overseeing the administration of the financial sector "to ask them why they were asleep on the job".

He said: "I'd rather favour a parliamentary investigation, not just into the Royal Bank of Scotland – that would be daft, as the Royal Bank of Scotland is only one of hundreds of banks worldwide which has got into serious trouble – but into the financial sector."

It emerged at the weekend that Christine Grahame, an SNP MSP, has written to Lothian and Borders Police, demanding that an investigation be carried out into RBS's conduct over its two rights issues last year, while Tavish Scott, MSP, the leader of the Scottish Liberal Democrats, has called for an investigation by the Serious Fraud Office.

Under the leadership of Sir Fred Goodwin, RBS carried out its first £12 billion rights issue in April last year, when thousands of investors forked out £2 a share for a tranche of new stock in the firm. A second rights issue, in November, was shunned by investors and the government had to underwrite the £15 billion issue. RBS's fortunes have nosedived in recent months, with investors watching shares plummet, to close at 12.1p on Friday.

Mrs Grahame's letter told police she believed RBS "appeared to have committed a fraud".

RBS revealed last week it was on course for the biggest loss in UK corporate history, as it expected to write down as much as £20 billion on the falling value of its assets.

Mr Scott said: "I think the banks across the UK must have known what their financial position was much earlier than they were letting on, and that particularly applies to RBS.

"At the time they were asking investors for more money to help their financial position, as RBS giving a full picture of how strong or weak they were as a financial institution? I genuinely don't know, but I believe that the Serious Fraud Office should have a look at it."

He warned that a political inquiry could turn the crisis into a partisan issue and could detract from solving the question of whether investors were misled.

Just last week, the veteran lawyer Ian Hamilton lodged a small-claims action against RBS, saying he had been persuaded to buy 640 shares at the £2 offer price in its 2008 rights issue.

A spokeswoman for RBS refused to comment.