The United Kingdom Considers Class Actions For Financial Services

The United Kingdom's Parliament recently introduced the Financial Services Bill, which includes a provision for collective actions in the financial services sector. If this Bill passes, it will introduce the first opt-out collective action procedure in England and Wales and could have a major impact on banks and other financial institutions operating in those countries.1

The Debate Preceding the Financial Services Bill

The group-litigation procedures utilized by courts in England and Wales have been in legal and legislative debate for several years. Those speaking for claimants contend that the current procedures are not adequate to provide effective means of redress where multiple claimants incur similar injuries from the same or similar facts. Partly as a result of these debates, in November 2007, the Office of Fair Trading – a governmental entity similar to the Federal Trade Commission – made several recommendations to Parliament including a procedure for representative actions brought on behalf of consumers and businesses on an opt-out basis.

In addition, the European Commission published, in April 2008, a White Paper on Damages Actions for Breach of EC Antitrust Rules and, in November 2008, a Green Paper on Consumer Collective Redress setting forth options for collective redress in competition and consumer cases, respectively, which include collective actions utilizing an opt-out procedure.

Finally, in December 2008, the Civil Justice Council (the CJC) – a public body that advises the Lord Chancellor on civil justice and civil procedure in England and Wales – published a report recommending the introduction of a procedure for collective actions, applicable to all areas of civil law, that would enable courts to adjudicate such actions on either an opt-in or opt-out basis. The CJC also recommended the use of an "aggregated damages" procedure in opt-out collective actions that would allow courts to assess class-wide damages without requiring proof of loss by each individual claimant. Parliament responded to this report, in July 2009, with a proposal to reform civil procedures, on a sector-by-sector basis, to permit collective actions.

Important Features of the Financial Services Bill

The Bill is the first step in this sector-by-sector reform. It reflects Parliament's recognition that consumer complaints against members of the financial services sector have significantly increased. The key features of the Bill are:

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