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Regulation Through Litigation — Collective Redress in Need of a New Balance Between Individual Rights and Regulatory Objectives in Europe

Abstract The EU Collective Redress Recommendation has invited Member States to introduce collective redress mechanisms by July 26, 2015. The claim of the well-known reservations concerns the potentially abusive litigation and potential settlement of not well-founded claims resulting from controversial funding of cases by means of contingency fees and from “opt-out” class action procedures. The Article posits that apart from that claim, at bottom there may be some danger that the European Commission and private interest-groups may try to pursue the enforcement of their regulatory agendas in this way at the expense of individual claimants’ interests. However, in contrast to the situation in the United States, the need to complement regulatory enforcement by collective action may not appear as strong because of the relatively strict regulatory control and enforcement, which may explain EU Member States’ longstanding reluctance to adopt collective proceedings due to their concern for plaintiffs’ individual rights. Therefore, a comparative analysis is carried out to see to what extent individual rights as opposed to regulatory goals are taken into account in the different newly revised systems in place across Europe. As an interim result, the Dutch settlement procedure for mass damage claims, the English Group Litigation Order and the German test case procedure turn out to be relatively well-suited to dealing with mass damage claims. At the same time, none of them can quite reach an optimal balance between individual rights and regulatory goals and therefore each of them is subject to criticism. That is why the further question is raised as to how far these procedures could complement each other, thus contributing to the enforcement of individual rights without overregulating markets in Europe.