Collective proceedings are a long-standing mechanism for bringing claims in the USA and Australia. They are now a feature of many legal systems around the world, including in the EU, England and Wales, and, most recently, Scotland.
Collective proceedings are typically used by multiple claimants who have the same or similar ground or grounds of claim against the same party, to seek redress for their losses.
Some recent high-profile examples of collective proceedings include claims against Apple for allegedly selling defective iPhones, Google for allegedly using unlawful tactics to block competition, and Amazon for alleged misleading advertising surrounding its Prime subscription service. Often, the loss suffered by each individual within the claimant group will be too small to make it economically viable for them to bring the claim alone. However, the combined loss of all claimants is normally significant, which makes it economically attractive and cost-effective to bring the claim collectively as a group.
Given the economies of scale that can be achieved by collectively pursuing a larger claim on behalf of a group, these proceedings will usually be attractive to external litigation funders. They will often finance the collective proceedings, in return for a proportion of any award of compensation/financial settlement agreed.
In this way, collective proceedings enable access to justice for claims that would not otherwise be pursued. This removes a significant hurdle for wronged consumers seeking compensation, but it also exposes businesses to claims they would not ordinarily face.
As more and more jurisdictions provide for collective proceedings, the number of such actions is increasing rapidly worldwide.
Climate change litigation
Also on the rise in recent years is climate change litigation – court cases against public bodies and corporations whose actions have allegedly had an adverse impact on the prevention of climate change – as concern around climate change continues to build globally. According to the UN, the number of climate change court cases initiated more than doubled between 2017 and 2020. This uptick has seen no sign of abating.
Recent years have seen a flurry of claims brought by environmentalist groups against their national governments, either for failing to achieve environmental targets they have set to tackle climate change, or for failing to set environmental targets that are ambitious enough. Since 2019, the Swiss, Dutch, and German governments have all been the subject of successful claims. Similar claims are ongoing in European jurisdictions against multinational oil corporations.
Use of collective proceedings to pursue climate claims
The growth in climate change claims brought by environmentalist groups against governments and corporations indicates that people are minded to hold powerful bodies to account when it comes to climate change. It is unsurprising, therefore, that, in jurisdictions with established collective proceedings procedures, climate change proceedings are emerging as a key theme.
The USA has a history of collective proceedings (known there as class actions) dating back to the 19th century. No jurisdiction is more useful to those with younger collective proceedings regimes for predicting future trends, a current one being class actions against corporations for alleged ‘greenwashing’ practices (misrepresenting or exaggerating ethical and environmental credentials). Starbucks and Colgate are both presently facing class actions for alleged ‘greenwashing’. The former, raised in the District of Columbia, relates to Starbucks advertising its tea and coffee as ‘ethical’ despite allegedly being sourced from farms accused of human rights violations. The latter, raised in California, relates to assertions by Colgate that its plastic toothpaste tubes are ‘recyclable’, when it is alleged, in reality, almost no recycling facilities in the USA accept them.
The future of climate change collective proceedings in the UK
The viability of these types of claims in the UK will be determined by the outcome of the cases raised in the USA, and in other jurisdictions with developed collective proceedings regimes. In Australia, a ‘greenwashing’ class action is currently pending against a major gas company, Santos, after it allegedly misleadingly claimed to produce ‘clean fuel’.
Central to the viability of these types of claims will be whether litigation funders are incentivised to back them.
The size of the claimant group is a relevant factor in securing funding. The bigger the claimant group, the larger the compensation payout if the claim is successful. Given the widespread impact of climate change, and the public awareness and activism in this space, claimant groups in these cases could be huge.
The likelihood of very large claimant groups is even greater where claims are brought under ‘opt-out’ procedure. Under ‘opt-in’ procedure, which is currently used in the UK (apart from for collective proceedings brought in the Competition Appeal Tribunal (CAT)), claimants are required to ‘sign up’ to be part of the claimant group. Representative claims, a type of collective proceedings in England and Wales which involves one or more claimants raising a claim as representatives of other claimants with the same interest, are also raised by way of ‘opt-in’ procedure. Claimant groups under ‘opt-out’ procedure are typically larger, because anyone who meets the class requirements will become part of the group, without needing to actively ‘sign up’. A move to ‘opt-out’ in the UK is expected, with Scotland’s legislative framework already providing for this approach.
Climate change collective proceedings have the potential to give rise to very large claimant groups (especially if brought in jurisdictions that use ‘opt-out’ procedure), and, therefore, will attract significant awards of compensation if successful. This presents a potentially lucrative opportunity for litigation funders that choose to back them, as well as a significant financial exposure to the entities they are brought against.
UK governments (Westminster, and devolved governments in Scotland and Wales with responsibility for environmental matters), and corporations (especially those operating in sectors such as oil and gas and transport) should view collective proceedings relating to climate change as a relevant legal and financial risk.