UK lawyers have characterised proposals from the Department for Business and Trade to reform the opt-out collective actions regime as a rebalancing of existing arrangements rather than a major overhaul.
The proposals, outlined in a report led by Jonathan Reynolds – who replaced Peter Kyle as business and trade secretary in last week’s Cabinet reshuffle – suggested simplifying Competition Appeal Tribunal class actions to make them more straightforward and easier to finance.
They are designed to address concerns that current class actions mainly benefit claimant law firms and funders, and instead seek to shift the balance to compensating consumers and scrutinising funding at certification.
Responding to the proposals, White & Case partner Marc Israel told Global Legal Post: “The collective actions regime has not been around that long, but there are important learnings that have emerged. The consultation reflects a recognition that, as the system matures, some parts of it need to be amended to make it more effective."
This is a sentiment shared by Ashurst Perkins Coie partner Max Strasberg, who said: “The consultation shows a desire to rebalance, rather than fundamentally reshape, the regime.”
Strasberg notes, however, that “different reforms will appeal to different stakeholders”, with Hausfeld’s Nicola Boyle saying that “the regime provides a necessary complement to public enforcement”.
Boyle broadly welcomed the proposed reforms, saying that “an effective and robust collective actions regime improves access to justice for consumers and SMEs, holds rule-breaking companies to account and facilitates fair competition amongst businesses in the UK”.
Under the proposals, litigation funders would get quicker returns after damages are awarded instead of waiting for distribution, and the CAT could evaluate whether a funder’s return is reasonable when deciding whether a claim should proceed.
That, says Israel, fits the broad direction of the proposals in taking a carrot-and-stick approach, with more rigour at certification, “but also better incentives for funders to support claims that are properly thought through”.
The government is also proposing that damages-based agreements (DBAs) could be allowed for collective actions, a proposal the Civil Justice Council has long supported, alongside providing greater certainty around litigation funders’ returns.
Israel said: “Allowing damages-based agreements, and enabling funders to receive their return when damages are awarded, or a settlement is approved, should give the market more certainty and encourage stronger cases to be brought.”
That is a proposition which both Strasberg and Boyle also agree with, although Strasberg said it would be dependent on the Burnham government’s busy legislative schedule being able to accommodate it.
The proposals also call for stronger cost consequences for parties who refuse to engage in settlement discussions, penalising unreasonable behaviour as an incentive for settlement discussions.
If adopted, the reforms would require the CAT to indicate the ‘reasonableness’ of a funder’s return at the point of certification. A cost-benefit analysis at this stage could guard against claims being brought that would primarily benefit lawyers and funders, ensuring only claims with genuine merit and proportionate benefits proceed.
This, says Strasberg, makes sense: “Codifying the higher certification threshold set by the Supreme Court in Evans v Barclays may provide the more effective early filter for unmeritorious claims for which many defendant lawyers have been calling.”
He added: “The impact of that codification is likely to depend on the degree of guidance that accompanies it, to give parties a clear and more predictable yardstick,” although Boyle and Hausfeld senior partner Anthony Maton disagree, saying it may hinder the effective working of the regime.
In addition, the proposals would enable light-touch reforms to the existing jurisdiction, not expanding the opt-out regime beyond competition law but not limiting the CAT to hearing only competition law claims after infringement findings by a regulator. Other proposals include giving the CAT greater powers to promote mediation, which Israel welcomes.
“Some of the procedural proposals – such as greater flexibility in panel composition and stronger encouragement of settlement and ADR – could improve efficiency and make the tribunal process work better for everyone,” Israel said.
Also among the proposals are recommendations for faster Competition and Markets Authority investigations and the streamlining of appeals by transferring more competition-related appeals to the CAT. The government also proposes that the CAT, funded centrally, could levy court fees based on claim value and seeks views on how damages can be more efficiently distributed to class members.
Israel commented: “The tribunal has already become more alert to distribution issues, including whether class members are ever realistically going to receive an effective recovery.”
Consultation on the proposals closes on 25 September.
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