Barling: PACCAR action needed urgently
The number of collective actions filed at the Competition Appeal Tribunal (CAT) has “collapsed” to only three this year, due mainly to the “chilling effect” of the Supreme Court ruling in PACCAR on litigation funding, a report has argued.
City law firm Stephenson Harwood called for the CAT regime to be expanded to cover data privacy breaches, consumer protection violations “and other mass harms”, estimating that it could “deter up to £24.2bn in anti-competitive harm annually”.
Its report came as the Department for Business and Trade receives responses to its call for evidence on the CAT regime – and was published before a claim against Apple over its App Store last week became the first collective action to win at trial.
Stephenson Harwood said members of its group actions and competition team had represented over 1,800 companies in the merchant interchange fee umbrella proceedings against Visa and Mastercard, and it was “acting for businesses and consumers in several other significant opt-in and opt-out CAT claims”.
While 17 collective proceedings were filed with the CAT last year, there have been only three this, while hearing days had declined by 59% from their peak in 2022.
“Canada and Australia demonstrate that collective redress mechanisms require decades to mature – their early years were marked by similar and different procedural uncertainties, lengthy timelines, and jurisdictional disputes.
“What distinguishes successful regimes from failed ones is not the absence of challenges but the willingness to address them constructively.”
The uncertainty created by the 2023 PACCAR ruling had “created a funding crisis that threatens the regime’s very existence”.
The law firm went on: “The Civil Justice Council’s recommendation for retrospective standalone legislative reversal must be adopted as a matter of urgency. Without a stable funding environment, no amount of procedural tinkering will restore confidence.”
Stephenson Harwood based Realising the benefits of competitive markets – Strengthening the Competition Appeal Tribunal on interviews with legal experts, barristers, former CAT officials and class representatives.
The law firm said pre-action protocols should be introduced to improve early case management, including costs budgeting and stricter timetabling to help contain escalating costs in complex proceedings.
The CAT should also bring forward the approval of funding arrangements to the certification stage, “benefitting class representatives by avoiding later disputes, defendants by making the economics of potential settlement clearer, and funders by giving them confidence that their contractual terms will be respected”.
To improve consumer take-up, class identification should begin much earlier in the process, “running in parallel with the substantive litigation, to build a more engaged class by the time distribution commences”.
Sir Gerald Barling, former president of the CAT, said in his foreword to the report that “the most pressing problem with the system in its current form is undoubtedly the damage to the machinery of third-party funding, crucial to the existence and efficient functioning of the collective regime itself, caused by the majority decision of the Supreme Court in PACCAR.
“It has led to costly modification or substitution of previously agreed funding arrangements, together with satellite litigation arising from the often opportunistic challenges by defendants to amended funding agreements.”
The change in the way funders were remunerated from a percentage of the damages awarded to ‘multiples of outlay’ had created “an undesirable separation” between the interests of the class and those of the funder which did not exist before the PACCAR decision.
It was “of the utmost urgency” that the Supreme Court ruling was reversed by legislation at the earliest possible time.
“Without reasonable certainty of appropriate funding arrangements for those third parties investing in collective actions, the class action regime simply cannot function.”
He added: “It is very much to be hoped that in its review the government will not be tempted to go down a path, which would be a significantly regressive step, of curtailing or removing the only means by which multiple claimants, each suffering relatively small amounts of financial loss, can achieve justice.”
Genevieve Quierin, partner at Stephenson Harwood, commented: “The regime stands at a critical juncture, facing challenges that undermine its ability to operate effectively.
“Rather than restrict, we need to nurture the system by expanding the regime beyond competition-only claims, stronger case management, improved consumer engagement, and a legislative reversal of the uncertainty permeating the system.”
Earlier this month, Stephenson Harwood was among 19 law firms to sign a letter to Lord Chancellor David Lammy, urging him to legislate to overturn PACCAR.
They warned: “Claimants with limited means are struggling to access funding to bring their cases, and investment from funders is draining away from the UK legal system…
“The [Civil Justice Council has] provided the evidence that this issue needs fixing, yet this government refuses to act, delaying justice for some and denying justice for future claimants.”
A Ministry of Justice spokesperson said: “Third-party litigation funding plays a critical role in ensuring access to justice. That is why we are committed to ensuring it works fairly for all.
“We welcomed the Civil Justice Council’s review earlier in the year which will help inform our approach to potential reforms in this area and we’ll outline next steps in due course.”
The other firms to sign the letter are: Stewarts, Scott+Scott, Backhouse Jones, Freeths, Humphries Kerstetter, Mishcon de Reya, Velitor Law, Milberg, Fladgate, Geradin Partners, Harcus Parker, Bates Wells, Phi Finney McDonald, Keidan Harrison, Asserson, Leigh Day, Cooke Young & Keidan, and KP Law.
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