The concept of class action was introduced in India under the Companies Act, 2013. But this article analyses the same under the heading “collective redress” on the basis of” European Commission’s 2013 Recommendation on Collective Redress” in Europe. In a lay man’s language, the class suit is initiated by an individual or a small group acting on behalf of a large group. How does the system work in top 10 countries of European Union, namely, France, U.K., Netherlands, Belgium, Germany, Austria, Spain, Poland, Italy and Bulgaria? These countries accounted for 79% of the population and 82% of the GDP of European Union. Tax Guru has excellent articles on class action suits in India and one has heard a lot of the same in U.S.A. and hence the author’s obsession with European Union (EU). Why not?

Obviously, the member states of EU were advised to adopt a collective redress frame work on the basis of EU’s recommendations and to report back for proper evaluation. It has long been a known fact that collective action involved attendant risks like litigation abuse, a fact known from USA’s long litigation history and experience on class action suits. Certain safeguards were also recommended to reduce the abuse. Exactly what happened to these recommendations and what safeguards were in operation were studied by a survey undertaken by U.S.Chamber Institute for Legal Reform and duly coordinated by Sidley Austin LLP in Brussels and expertise from all practitioners.

The survey indicated that collective redress is a growing business and has attracted the attention of leading lawyers, U.S. Class action firms, many litigation funding industry stalwarts, experimentation with opt-out systems, erosion of ‘loser pays’ rule and steady dilution of time- tested traditional safeguards.

The survey focused on six issues and interestingly on horizontal basis among member states. (The article will end up with details of present practices in all member states from the survey for your satiating desire to know the results)

How does the system work in general? (General observations)   

Who may file a claim?

Depending upon the country in operation, some have different procedure as to who can file the claim. It is possible an individual can file the claim under collective redress or a small representative of a large claimants will file the claims. There were many instances where law firms or private equity/hedge fund investors being the true instigators or main beneficiaries of mass claims since the law permits them.

Compensation of representatives

“Well, what do I get for backing your claim for injustice, physical harm or damages on account of the heinous actions of large entities to you as a client, a patient or investor or any stake holder?”. This is a common refrain among hedge funds, leading law firms from U.S.A. or a high net worth individual who back public redress claims in courts. Yes, your assumption is the same like mine that increasingly law suits are most likely commodities to be traded for private profit of unknown proportions. Also, it is a fact that many countries under discussion have weakened or eliminated traditional rules for preventing “contingency fees”. Due to continued pressure from common man, this development has taken place.

Loser pays principle   

The principle that the loser in a case who voluntarily initiated the case is to pay the opponent’s cost has long been held as a hedge against misuse but the survey indicated a declining trend to uphold this noble principle in EU and in practice, it is aptly applied against corporate defendants.

Opt-in or Opt-out

For a simpleton, this means one willingly joins a litigation that is being organized to share the cost, sign the petition or plaint, and actively participate as demanded by judiciary. This is an opt-in principle.

For reasons otherwise, the opt-out enables one to have the fruits of labor being shared without even active participation except that he had the same suffering like the other one. Under the latter process, the main beneficiaries turned out to be the vulturine lawyers, hedge funds or other entrepreneurs underwriting the risk.

Admissibility and certification standards

Some of them do insist on meeting certain standards like being a member of an entity which alone can take up the cases related to collective redress so that in future the cost of litigation or cost of failure are met combined together. Some of the countries have not embraced this system. Only time with lots of judicial attempts with resultant scores would justify the systems. The system prevailing in all top 10 countries have been enlisted at the end of the article.

Jurisdictional overreach/forum shopping

True to international practice, claimants do run around to get a sympathetic center to hear the cases with a cost to be borne by plaintiff firms or litigation funds. Some judges do consider the claims simply because the firm functioned in the place where the claims had been lodged though their corporate office would have been at some other country as well.

How do we know what is in store for every one of the top 10 countries in Europe in terms of above criteria mentioned above? Let us analyze.

Country and type of action: some basic facts from the survey 


In case of common representative action, only approved consumer associations could file the petition meaning one has to enroll with an association to get the benefits. Yes, though contingency fees are not allowed, reasonable remuneration of the services performed and fixation of complementary fees depending upon the outcome are allowed. Therefore, third party funding is allowed though not very common. Opt-in, application of loser pays principle and same court deciding admissibility of the case as well as analysis of the merits of the case are common attributes. Webs based action is encouraged for filing. For consumer class action, one has to be a member of approved association. Expectedly, members of healthcare system may initiate class action for health-related issues.


Any party may apply and the court may order that pending proceedings be treated as a representative claim. Yes, lawyers are permitted to enter into Damages based agreements and allow conditional fee agreements. Also, there is virtually no cap on funder’s income from outcome. Opt-out system, loser pays principle and no test on admissibility of the claim at early stage itself are common practices in vogue. Group litigation orders and UK, Class action suits are also allowed. Collective proceedings can be brought only if the CAT certifies them to be any proposed class representative.


Any one to establish an entity to initiate the collective claim. Lawyers are allowed to adjust their remuneration to cover the costs of litigation on the basis of successful outcome. With third party litigation funding unregulated, Opt-in and loser pays principle in vogue, Netherlands tops the country with few restrictions on collective redress in EU.


Expectedly Belgium ranks among the most conservative while considering class action suits. Only a class representative who has been declared fit and proper can bring a collective redress action. Lawyers have their say if they win the cases. Third party funding has not caught up in the country though there is no bar on it. Interestingly, Belgium allows opt-in as well as opt-out systems. You are right if you have arrived at the conclusion that within two months of filing the application, the court decides the admissibility of the claim and also certification process where class action is preferable to normal justice procedures.


With KapMug system, a model case which is not a collective claim may be initiated by any claimant. Contingency fees are allowed in exceptional case where both state funding is not allowed and the applicant could not provide for the same. Process financing by third parties are allowed. Loser principle applies with the caveat that all claimants share the cost of the case in case of a failure. Both opt-in and opt-out allowed. The court may deny the admission of the case, if it decides so.


No specific limitations as to who can initiate Austrian collective action. Success fee arrangements among lawyers and litigants is a routine procedure. Third party funding is a routine way of legal life. Loser principle reigns the rule. If agreed, costs can be shared. No admissibility procedure at court level exists. But Austrian supreme court has upheld certain conditions to be met to bring in a collective claim.


An abomination that only public prosecutor could bring in collective action seeking compensation for consumers exists. Clients may agree to pay the lawyer a minimum and also extra in case of a win, is the practice. Though loser pays principle is in vogue, courts do not insist on the same on consumer associations. Opt-out with no admissibility criteria are the norms.


A class action may be initiated by a representative of the class. A member of the class or a local consumer ombudsman may act as representative of the class. Lawyers may enter into no win no fee agreements but their total remuneration must not exceed 20% of the awarded amount. Polish laws do not interfere with financing of class actions by third parties. In general loser pays but judicial discretion has been given even to award a portion or no costs to loser is bestowed upon the judge. Certification stage exists to verify the admissibility of the case.


A class action may emerge out of an individual, a representative or a group like consumer’s association. Contingency fees do exist but measures would be taken to make the lawyers take an active interest in class action suits by creating an economic interest for lawyers by introducing bill number 1335. Yes, third party financing of litigations are not illegal but not frequently used. Though loser principle rules but courts avoid giving costs to losing plaintiffs. Opt-in and the necessity to prove the admissibility even on first appearance are normal procedure.


A collective claim may be initiated by any person claiming to be a member of an injured class or by an organization which claims to protect the injured persons or harmed collective interests. Lawyers have their say in arranging fees based on success of the suit and third- party financing of litigation exists. Loser pays the principle exists. Both opt-in and opt-out systems operate. Courts do verify expected criteria have been met before commencement of the suit.

The survey emphasized the following safeguards for effective implementation of the collective redress suits.

  • Implementation of stringent certification standards
  • Preserving loser principle
  • Favoring opt-in over opt-out
  • Mandating closure for defendants
  • Restricting contingency fees and regulating litigation funding investors
  • Banning punitive damages
  • Curbing jurisdictional overreach or forum shopping

Expectedly, stringent conditions to be imposed on litigation funders including licensing arrangements, claimants directing the management of the case or promoting transparency or placing limits on recovery were also recommended by the survey.

It is remarkable that a virtual sleeping society like EU has waken up to face the commercial interests of its consumers, health stakeholders or depositors or related financial management investors. The detailed analysis of 10 nations was intentionally shown to emphasize the enormous difference in approach of various countries, its administrators or the general public which has allowed variation from its earlier stand of only believing the government to take initiative to settle common good. A general feeling that funders who finance exorbitant claim cases deserve monetary rewards is a new one meeting the new aspirations of the younger generation which has a 360-degree view of the world.

Conclusion with relevance to our nation

We have witnessed massive frauds, unlimited greed of the managements of financial intermediaries to loot the capital, wanton amassment of medical charges on innocent public or the lack of even basic care by local/central governments to safeguard interest of the general public. Thousands of Crores of deposits by home buyers languish and have delayed endless wait for houses. Matter has reached supreme court or in some cases high court for effective remedy. All these situations may require public class actions as per Companies Act 2013 which would be initiated by brilliant lawyers, young ones with greed but proper legal thinking to achieve successful completion of suits. We have failed so far to think beyond boundaries to serve the common man. Yes, some unscrupulous lawyers, litigation funders or quick minded judges may expedite the process. We have been showing cowardice to cover up our ineffective behavior towards our weaker sections of the society.

My purpose of writing this article from EU experience is to motivate us to think beyond boundaries. The day is not far when the government either at state or central level will shiver of its laziness which may even be challenged by a common man or group of men. Suitable changes may be needed to meet future needs. Even the laws may allow class action suits against the government what to speak of entities which even now face the heat of their failure.


  • Fifth edition of National Company Law Tribunal and National Company Law Appellate Tribunal by Prachi Manekar Wazalwar, published by Bloomsbury Publishing India Pvt. Ltd, New Delhi, 2018 edition. (Main inspiration came from this monumental book)
  • 80 page booklet on “The growth of Collective Redress in the EU: A survey of developments in 10 member states” prepared by U.S.Chamber Institute for Legal Reform.(Though maximum and relevant coverage was given by me, I request every one to read this booklet thoroughly to get full understanding of class action suits in EU)
  • Companies Act 2013, section 245.

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Qualification: Post Graduate
Company: subramanian natarajan cpa firm
Location: NEW DELHI, Delhi, India
Member Since: 09 May 2017 | Total Posts: 183
A banker with 27 years of experience, a CPA from USA with specialization in US taxation, individual, partnership, S corporation or LLC taxation etc View Full Profile

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October 2021