France Finally Embraces Class Actions
France is one of the last western European countries to introduce a class action system. After decades of debates, two failed attempts by both left wing and right wing Parliament majorities, nine months of legislative procedure and thousands of amendments, it should soon, finally, be possible to launch a group action in France.
After decades of debates, two failed attempts by both left wing and right wing Parliament majorities, nine months of legislative procedure and thousands of amendments, it should soon, finally, be possible to launch a group action in France. On 13 February 2014, one day after the French Senate, the French National Assembly adopted the loi Hamon (the French Consumer Act), providing for the introduction of group actions in France. The Act is currently under review by the French constitutional council. If promulgated, which is likely, the Act will impact several, diverse areas of French law, ranging from insurance to distribution.
France is one of the last western European countries to introduce a class action system. French public authorities and French companies have historically been anxious not to reproduce the proliferation and presumed excess of class actions seen in America, and have therefore avoided introducing the option of group actions until now.
The previous French Government attempted to introduce group actions but did not have enough time to do so, as former French president Nicolas Sarkozy was not reelected. The introduction of a collective redress system then figured as a campaign promise made by the current French president, François Hollande. The bill was pushed hard by the Hollande government, especially by Benoit Hamon, the minister in charge of social and solidarity-based economy and consumer affairs who gave his name to the bill.
Despite this high level support, the French Consumer Act is still under fire. Although it has not yet been promulgated, it has already been challenged before the French constitutional council, and there may be grounds for a censure by the council. If it is partly censured, the Act may still be promulgated, provided that the censured provisions are removed from the text and replaced with constitutionally compliant provisions. If and when it is promulgated, a decree by the Conseil d’Etat will detail the terms of implementation of group actions.
Despite the ongoing constitutional review however, there is no real doubt that the French Consumer Act will be promulgated.
The fear of excessive class actions based on the American model, and the supposedly diverging interests of consumers and companies, has compromised the efficiency of France’s group action structure. The scope of the bill is limited to group actions relating to consumers and competition law. In addition, consumers can only file their claims through consumer groups that are represented by government-approved associations. This is to prevent lawyers from representing consumer groups and, amongst other things, adopting the American model of excessive variable fees. At present, only 16 associations will be entitled to represent consumers.
These provisions are being challenged on the basis that the limited scope of the law infringes the right of the victims to be fully compensated for the damage suffered. Moreover, the monopoly held by the government-approved associations may infringe the principle of equality if the prevention of lawyers from being involved is not considered to be necessary and proportionate by the French constitutional council.
Because only consumers may file group actions, the implication is that companies that are victims of anticompetitive infringements would not be able to join together and sue the infringing company(ies) through a group action. This exclusion has been criticised as there is no alternative option for companies to jointly file a suit.
The bill provides for a time limit of five years for follow-on actions initiated before French civil courts, starting from a decision taken by the European Commission, National Competition Authorities (NCA) or national courts.
Future Article L. 423-17 of the French Consumer Code provides that, with regard to group actions, professionals should only be liable on the ground of a “definitive” decision by one of these competition authorities or courts. Under Article L. 423-17, a decision is definitive if all appeals relating to the facts have been exhausted at the time the group action is filed. If an ongoing appeal is limited to the fine or the procedure, the appealed decision is still considered as definitive under this meaning. Such provisions make the process unclear, as the distinction between facts, fine and procedure may be very thin.
It seems likely that the incentive to settle with NCAs or the European Commission will be reduced, as settling negates the possibility for parties, in the course of their appeal, to challenge the facts, and could therefore shorten the period between the NCA or European Commission decision and the initiation of group actions. In France, settling can already be viewed as less attractive than appealing a decision on the facts, as parties are only granted a 10 per cent reduction of their fine, possibly increased by an additional 15 per cent reduction if commitments are entered into. The possibility to delay a group action, which could result in damages being awarded, may also affect a party’s decision to refuse settlement.
In addition to a classic opt-in procedure, the bill provides for a simplified procedure when the court is aware of the identity and the number of victims, and when victims have suffered damages of the same amount.
After having ruled on the liability of the professional(s), the court may impose on them the obligation to directly and individually compensate the victims within a specified timeframe and according to terms decided by the court. Prior to any compensation, however, victims who have been informed individually by the court must accept the compensation within the terms of the court’s decision. This simplified procedure is therefore not an opt-out procedure but a specific and unique opt-in procedure.
Potential Extension of the Scope of French Group Actions
The bill provides that, 30 months after the promulgation of the law, the French Government will draft a report on the enforcement of group actions that will consider, amongst other things, the extension of its scope to cover health and environment. In addition, two bills were submitted to the National Assembly on 14 January 2014 with the intention of widening the scope of potential collective redress in France to include health, environment and discrimination.
The impact on companies of the introduction in France of group actions remains unclear, not only because the scope of the bill is very limited, but also because some provisions of the text are rather vague and leave room for interpretation by the French courts. Despite this, as it is likely that the law will be widened to health, environment, discrimination and, later, to any type of damages suffered by consumers, it should be assumed that the bill will have a significant impact. UFC, one of the most important consumer associations that has been approved by the government to introduce group actions, has already declared that several group actions are ready to be filed and that it is simply waiting for the promulgation of the law to introduce them. Companies should brace themselves.