Class actions raised in Scotland have doubled - what's going on?
Graeme MacLeod looks at a trend that has our judges very intrigued
US-style class action lawsuits are on the rise across Europe and are beginning to make a significant impact in Scotland. CMS's 2024 European Class Action Report, released last month, highlighted 133 such claims filed across Europe in 2023 marking a 10 per cent rise from the previous year and a staggering 93 per cent increase since 2019.
In the UK, class actions in the Competition Appeal Tribunal account for almost half of the total value claimed between 2016 and 2023 (nearly €72bn). More than 540 million individuals are represented in these cases, a figure bolstered by the rise in so-called ‘opt-out’ class actions, whose claimants will not have been asked if they wish to be involved and who will often be unaware of the existence of the case.
In Scotland, class actions (also known as ‘group proceedings’) were introduced four years ago. Since then, we have seen a number of such cases being presented to the Scottish Court, where judges have shown a significant interest in the new procedure.
The first phase of Scottish judgments has been dominated by the certification stage of the proceedings with some clear trends emerging, including the application of a low bar for certification by the Scottish Court. To date, no application has been refused at the permission stage in Scotland.
This claimant-friendly approach is evident in the court’s approach to questions of costs and funding. When deciding whether to certify a class action, one factor the court requires to consider is whether the representative party has the financial resources to meet the other side’s costs if the case is unsuccessful. In the cases that have come before the Scottish Court to date, relatively little information has been required from representative parties to satisfy the Court on this question.
The decisions to date make it clear that the Scottish Court intends to develop its own distinct approach to class actions. In a recent decision by Lord Ericht, to allow customers of a German carmaker to raise class action proceedings, he stated that English class action procedure was “not a good guidance as to how the court will deal with group proceedings in Scotland.”
While class actions in Scotland are presently only available on an opt-in basis, the Scottish Parliament has passed legislation that will permit opt-out procedure to be introduced. An opt-out class action automatically includes all potential claimants within the scope of the action unless they expressly choose to be excluded, significantly increasing the sums at stake.
Ministers are required to report on the operation of the group procedure regime to the Scottish Parliament by next summer. This may prompt debate on whether the time is right to expand Scottish class action proceedings to include opt-out actions. Importantly, a Scottish opt-out regime could facilitate claims for any cause of action, not just for competition class actions as is currently the case across the UK. If opt-out class actions for all causes of action were introduced in Scotland it would significantly increase litigation risk and impose pressure on the rest of the UK to follow suit.
As the CMS European Class Action Report shows, no sector is immune from a potential class action lawsuit. Companies across all sectors must be prepared for heightened risk. Proactive legal strategies and robust risk management processes will be essential in helping safeguard against the growing threat of such proceedings.
Graeme MacLeod is a partner and disputes resolution specialist at CMS