The rise of class actions

6 July 2020

The UK has had a growing ‘claims culture’ for the last 20 years. Aided by technology and the ease of identifying affected groups through data and targeted advertising, US-style class actions are fast becoming an accepted part of the English litigation landscape, whether it be through group litigation orders, representative proceedings or mass claims. Reflecting this trend, new rules are soon to come into force in Scotland that will make provisions for group proceedings in a legal system that has hitherto always resisted this form of litigation.

The growth of class actions has caused disquiet in some quarters. In Australia, where a thriving and well-funded class action culture has developed, the Australian government has commissioned a full inquiry by parliamentary committee into litigation funding and the regulation of the class action industry, looking at its impact on society and the economy. In a move that has been dubbed “bizarre”, in June litigation funders in Australia were informed that they will soon need to hold an Australian Financial Services License and comply with managed investment scheme regulations. This has evoked a strong defence from the industry, which argues that the class action system should be encouraged, not inhibited, enabling access to justice for those who individually could not afford to seek redress from large businesses and ensuring that such businesses are properly held to account.

As the UK makes its first tentative steps out of lockdown, the time fast approaches when we will need to resolve the uncomfortable question of who should pick up the tab for the costs arising out of the coronavirus pandemic. Whilst there may still be some nervousness about the optics of bringing claims now, as we pointed out in our blog in May, there is little doubt that the pandemic will generate a wide array of disputes and see a further rise in the popularity of class actions over here.

Perhaps the highest profile to date are the claims against insurers over business interruption policies. In an attempt to provide clarity, the Financial Conduct Authority is to test 17 disputed business interruption policy wordings in a High Court test case later this month. As the FT points out, this will be closely followed given that  the answer will help define a global legal battle being fought across Europe and the US that is arguably the biggest to emerge from a crisis so far.

The stage seems set for more to follow and parties will need to give careful thought as to how to assert their legal position whilst protecting their reputation and relationships.

Kate Miller, DRD Partner