Editors' Blog

Class actions and other scary stories

Posted 19/02/2008 by Alex Novarese

Has there ever been a more useful bogeyman for the UK business lobby than the class action monster? Whatever the circumstance or evidence to the contrary, if it involves litigation against a company or public body by individuals, policy-makers and business representatives drag out horror stories of the US litigation culture, a scary world that has supposedly been manifesting itself over here for years.

Such trends can be seen recently from MPs criticising no win, no fees deals backing an upcoming test case against the NHS from female hospital workers who claim they have been paid less than male equivalents. Never mind the considerable evidence that the claim by thousands of workers is at least substantive enough to deserve a hearing; for some Labour politicians the real issue is supposedly aggressive tactics from claimant lawyers.

Actually, litigation against the NHS has been a particularly rich seam for the lawyer-bashing brigade in recent years, especially since a National Audit Office report several years back put the total legal liability against the NHS at an eye-popping £4.4bn. This is, of course, technically true but total liability bears little relation to what is paid out (at the time of the report, the NHS’s annual legal bill for negligence was around a tenth of that headline figure). And for all the claims of lawyers, many patients that have been on the wrong side of the NHS will tell you that calling in a lawyer is the only hope of securing redress from that monolithic body.

Still, for many politicians is it is far easier to demonise ambulance-chasing lawyers, warn of hospital closures and defensive medicine (getting it right could be construed as ‘defensive medicine’ but that doesn’t count).

That’s not to say the worst elements of the US plaintiff bar are mythic. Many credible observers would say it is exactly these excesses that have done far more to cripple New York’s position as the world’s leading financial centre than Sarbanes-Oxley and its ilk ever could.

But the plain fact is that there is no equivalent to the massive incentives for aggressive and highly speculative litigation built into America’s litigation model in any other major country. So unless a European nation was to import wholesale elements of the American class action model, which no-one is even contemplating, raising such fears is akin to slaying a fairytale beast that is never going to arrive.

Instead, you have a fiction whipped up by special interests and not particularly effectively countered by the UK legal profession, mainly because lawyers are themselves split between claimant and defendant lines. And despite the fact that the last serious attempt to assess the issue - the 2004 report by the Better Regulation Taskforce - unambiguously rejected assertions that a claims culture was taking hold in the UK, such sabre-rattling has continued to shape public debate and policy-making in this area.

All of which leads to the curious situation in which it is policy-makers and regulators, among them the OFT and European Commission, that now want to lean on group litigation to improve consumer redress. Likewise, the access to justice argument for reforms to ease the path of group litigation should in theory be a no-brainer for a nominally left-wing government. And the recent JJB settlement, demonstrating the difficulty of pursuing group litigation in the UK even with plenty of publicity and a follow-on action in hand, further underlined how necessary such reforms are.

But with the debate so skewed, backing a few sensible measures to support group litigation is politically awkward. Perhaps last week’s settlement in the price-fixing action against BA and Virgin, which saw UK consumers gain redress under US jurisdiction, will help ease the path of group litigation in the UK. After all, the alternative could be that UK claimants will start looking for justice over the Atlantic, where the monsters really do lurk.

alex.novarese@legalweek.com