The latest episode of the Claims Insight Podcast by Swiss Re Corporate Solutions addressed the issue of class action lawsuits trends in Europe and the challenges ahead. Hosted by Marc Scheidegger, Chief Claims Officer of Swiss Re Corporate Solutions, this episode tried to answer key questions around the impact of the Representative Action Directive on consumers and businesses and the fast-raising industry of third-party litigation funding, together with Moya Stevenson, Senior Claims Counsel, Casualty, FinPro & Aviation at Swiss Re, and Stefaan Voet, Professor of Law at KU Leuven Centre for Public Law. Moya is, of course, the current Chair of EJF.
The Representative Action Directive, which is currently under transposition at national level, puts in place a new legal system that enforces consumers’ rights collectively while allowing cross-border actions and third-party funding of litigation. The latter, however, creates several legal uncertainties in terms of funders’ role in the claims as well as bringing the risk of conflicts of interests. It is also unclear, according to the two guests, how much third-party funders would be able to earn out of the final compensation allocated by the judge, and how a conflicting situation can be solved in case funders want to accept the settlement offered by a judge and the redress beneficiaries do not. In this new regulatory framework third-party litigation funders and their economic interests will probably become one of the main drivers of collective claims.
To the question of how businesses can lower the risks of collective litigation, the speakers agreed that regulators often do and should play an important role. They should therefore step in to design further measures to reduce harm for consumers, also reducing the need for escalation of disputes into courts. To bring an example, an interesting proposal from the European Commission within the revision of the 2013 ADR Directive would extend the outcome of an ADR case to other claims as well, preventing those others from being brought before court (being the costliest and most time-consuming way of solving disputes).
This expert episode concludes that class action litigations will be for most businesses a novelty, where numerous new players/advisors will be involved besides lawyers, such as funders and insurers. This will result in a more complex litigation procedure that will require new legal strategies and acumen. The main challenge for business will be therefore to ensure that a strategy to respond and resolve disputes is in place, in order to minimize the negative effects on justice.
You can listen to the entire podcast for more insights here.