Deze informatie is strikt voorbehouden aan de leden van Assuralia en mag alleen worden verspreid met haar toestemming

HUIS DER VERZEKERING

de Meeûssquare, 29 Beroepsvereniging van verzekeringsondernemingen

B-1000 Brussel Wettig erkende beroepsvereniging

Tel. +32 2 547 56 11 Fax +32 2 547 56 00

info@assuralia.be www.assuralia.be

SS11008

14.03.2011

Response of Assuralia to the consultation on collective redress, towards a coherent European

approach

This paper contains the response of Assuralia to the consultation on collective redress that DG Justice has

launched on 4 February 2011. Assuralia is the representative body for mutual, co-operative and joint-

stock insurance and reinsurance companies in Belgium, representing more than 98% of the Belgian

market (local business excluding FOS premium and reinsurance premium income). For more details

please consult the Commissions‟ register of interest representatives under number 0026376672-48.

1. Preliminary remarks

1. Assuralia welcomes the European Commission‟s (EC) consultation on a coherent European approach to

collective redress. We are pleased that it is a common initiative of DG Justice, DG Sanco and DC

Competition. We understand from the consultation paper that the EC defines collective redress as a

broad concept encompassing any mechanism that may accomplish the cessation or prevention of

unlawful business practices which affect a multitude of claimants or the compensation for the harm

caused by such practices. We distinct two main forms of collective redress in the Commission‟s paper.

On the one hand, injunctive relief, where claimants seek to stop the continuation of illegal behavior. On

the other hand, compensatory relief, where claimants seek damages for the harm caused.

2. A horizontal approach is needed to avoid any inconsistency between previous EC‟s initiatives in this

area, i.e. on consumer collective redress (DG SANCO) and anti-trust damages actions (DG

Competition). The Commission should ensure from the outset that any possible proposal in this field,

while serving the purpose of ensuring a more effective enforcement of EU law, fits well into the EU legal

tradition and into the set of procedural remedies already available for the enforcement of EU law.

3. For Assuralia the case for satisfactory redress (injunctive and compensatory) of harm suffered by

customers – private consumers as well as businesses, including SME‟s – is self-evident. Though, we are

not convinced that there is a need for judicial collective redress. In terms of effectiveness and efficiency

alternative dispute resolution (ADR) is a better solution. ADR is faster, cheaper and, due to its

voluntary and consensual character, less confrontational than a courtroom battle. That‟s why Assuralia

2

[EC consultation on Collective Redress – 2011]

calls upon the Commission to promote and improve sectoral ADR schemes for the settlement of

individual as well as mass claims.

4. In this respect, we welcome the Commission‟s consultation on ADR. We would like to refer to our

position paper in which we call for an improved alignment of ADR schemes throughout Europe.

Whenever possible, disputes should be settled via out-of-court procedures, certainly when the damage

suffered by the individual customers is low and fragmented. In this context, the Dutch approach1 offers

valuable food for thought. However, a copy-paste of the model at a European level should be avoided.

5. Assuralia is in favor of sectoral ADR schemes. We are convinced that professional businesses will easier

join a sectoral ADR scheme voluntarily because, in comparison to general ADR schemes, it is the best

way to guarantee expertise in terms of knowledge of the content of the sector related complaints. For

example, the Belgian Insurance Ombudsman and his staff are familiar with insurance law and the

specificities of the different insurance branches. Sectoral ADR schemes encourage also the development

of sectoral networks at EU-level to deal with cross-border complaints, such as the FIN-Net network for

the financial services sector.

6. If the outcome of the current consultation and a comprehensive impact assessment would prove that

there is a real need for judicial collective redress at EU-level, Assuralia requests the European

Commission (EC) to take our considerations hereunder into account. They are bundled under the three

main topics of the Commission‟s consultation paper: 1) added value of collective redress; 2) general

principles on collective redress; and 3) the scope of collective redress. The Commission should realize

that whether legal expenses and liability insurers will be able to cover the risks associated with a

European-wide collective redress system will depend largely on the design of the judicial collective

redress procedure.

7. In this context, Assuralia is pleased that the consultation aims to identify common principles for

collective redress at EU level. In our view, these principles should be the following:

limitation of the scope of collective redress mechanisms to consumer protection law (no body

damage) and competition law only;

a framework directive with maximum harmonisation regarding the common principles;

alternative dispute resolution schemes (ADR) should be exhausted first before going to court.

Therefore, judicial collective redress should be a last resort solution;

the collective redress procedure, be it through ADR or in front of the court, should be organised on

the basis of an opt-in, unless the defendant prefers an opt-out formula;

the introduction of a collective action should be reserved to persons and organisations that are

representative for the group of harmed consumers. The tribunal should be responsible for the

1 See: http://www.rijksoverheid.nl/onderwerpen/wet-collectieve-afwikkeling-massaschade-wcam/documenten-en-

publicaties/circulaires/2008/06/24/the-dutch-class-action-financial-settlement-act-wcam.html

3

[EC consultation on Collective Redress – 2011]

admissibility examination, the organisation of the notification procedure and the control of the

fulfillment of the representation criteria;

the collective redress method has to exclude:

- any system of punitive damages;

- any recovery of unlawful profits beyond the compensation of the damage suffered;

- any system of contingency fees;

- the creation of a war fund;

the compensation should only cover the proved harm of identified victims of incriminated conduct.

2. Topic 1: The potential ADDED VALUE of an EU collective redress initiative

8. In our view an EU collective redress initiative would not have much added value. Assuralia prefers the

collective deal (use of ADR) above the courtroom war (judicial collective redress). We also recommend

awaiting the outcome of the consultation on ADR before taking further action on judicial collective

redress. Both dossiers should be treated in parallel.

9. In comparison to judicial redress, out-of-court settlements offer a quicker and cheaper way to settle

disputes. Hence, we request the EC to further recommend the use of ADR, for individual as well as

collective claims, in future legislative work. Many economic sectors have already their own kind of sector

related ADR mechanisms operating according to the EU recommendations. For instance, the Belgian

insurance sector has its own ombudsman that can rely on the FIN-Net network for cross-border

disputes.

10. An improved version2 of the Dutch „Class Action Act‟ (WCAM3) may be an effective and efficient tool to

settle mass damages claims across Europe. The procedure supplies a good balance between an out-of-

court arrangement and a judicial procedure. That is to say, the WCAM provides a facility whereby an

agreement which provides for the settlement of a mass damages claim, and which is concluded between

an organisation representing the interests of those who have sustained a loss and the responsible party

or parties, may be declared binding by the court in relation to the entire group of victims. These victims

can then arrange for payment of their losses by virtue of the agreement.

11. If the EC would decide to take action, then Assuralia prefers a legally binding approach above non-

binding recommendations. We favor maximum harmonisation as it is the best way to avoid forum

shopping and to settle cross-border disputes. However, we prefer a directive above a regulation because

the Member States should be able to implement the legal provisions in the most appropriate way in line

with their own national legislation. In this perspective, a framework directive that gives a clear outline

2 On the basis of an opt-in instead of the current opt-out procedure (See infra, Topic 2 – General principles).

3 See: http://www.rijksoverheid.nl/onderwerpen/wet-collectieve-afwikkeling-massaschade-wcam/documenten-en-

publicaties/richtlijnen/2008/06/24/de-nederlandse-wet-collectieve-afwikkeling-massaschade.html of de Nederlandse Wet

Collectieve Afwikkeling Massaschade van 27 juli 2005.

4

[EC consultation on Collective Redress – 2011]

of the minimum conditions that the Member States must respect seems to be the best and most feasible

approach.

3. Topic 2: The GENERAL PRINCIPLES to guide any such initiative at EU level

12. Assuralia agrees that any possible EU initiative on collective redress (injunctive and/or compensatory)

should comply with a set of common principles established at EU level. We took the principles that the

EC has already identified by means of previous consultations as a starting point for our comments and

reflections:

1122..11.. RReeggaarrddiinngg tthhee iimmppoorrttaannccee ooff iinnffoorrmmaattiioonn aanndd tthhee rroollee ooff rreepprreesseennttaattiivvee bbooddiieess:: the introduction

of a collective action should be restricted to persons and organisations that are representative

for the group of victims. Those representative actions should be brought by qualified entities

that fulfill strict conditions, such as being recognized on the national level, being legally and

financially capable of introducing a claim, etc. .

12.2. Assuralia holds the view that the court should centralize all the information relating to new,

pending and ongoing collective actions. Still, this does not necessarily have to mean that the

court itself should be responsible for the back office of collective actions. The tribunal could

indicate a responsibly party – such as a representative organisation, a law firm or even a legal

expenses insurer as the manager of a collective action. Those actors can use a wide variety of

media to reach a maximum of victims. For example, advertisements can be published/launched

on national TV-channels, in national newspapers, on stakeholders‟ websites, etc. Though, the

court should not allow abusive media coverage which only has reputation damaging purposes.

For cross-border cases networks such as ECC-Net and FIN-Net should play an active role.

12.3. In our view an opt-in procedure, that is limited in time (cf. infra, § 12.13), is most suitable to

manage a collective redress procedure, unless the defendant himself prefers an opt-out

procedure. For several reasons it is important that victims expressly have to decide to combine

their individual claims for compensation of the harm they suffered into one single action. This

holds true for in-court as well as out-of court mass claims settlements. To begin with, an opt-out

collective action would be contrary to one of the main principles of Article 6 of the European

Convention for Human Rights. People can only be bound by a judgment of legal proceedings if

they were involved in that lawsuit. An opt-out formula does not fit in the Belgian legal system

either. The legal principle “nul ne plaide par proceur” demands a personal interest to act before

court. As a result, the identity of the claimants must be known, which is only possible with an

opt-in procedure. Besides, in Belgium the judgment can only apply to the plaintiff and the

defendant. Hence, third parties cannot be bound by a judgment.

12.4. An opt-in collective action is the best tool to prevent the creation of war funds. In case of opt-

out the risk exists that not all victims are aware of the collective action and thus not claim their

part of the compensation. As a result, representative organisations might see an opportunity to

enrich them unduly with the retained part of the compensation. Such practices should not be the

scope of collective redress, neither in-court nor out-of-court mass claims settlements.

12.5. Finally, an opt-in procedure is the best guarantee for fair compensation without putting the

survival of the defendant at stake. Only the correct calculation of the due compensation enables

5

[EC consultation on Collective Redress – 2011]

the defendant to make necessary provisions in advance. This goes a fortiori for liability and legal

expenses insurers if and in so far as they could be involved on either side. To be precise, the

insurers involved have to be able to foresee sufficient provisions for their defendant-clients who

are covered for their professional liability and/or in legal expenses.

1122..66.. RReeggaarrddiinngg tthhee nneeeedd ttoo ttaakkee aaccccoouunntt ooff ccoolllleeccttiivvee ccoonnsseennssuuaall rreessoolluuttiioonn aass aalltteerrnnaattiivvee ddiissppuuttee

rreessoolluuttiioonn:: we would like to refer to our comments on DG SANCO‟s most recent consultation on

ADR in the EU. In our position paper we call upon the Commission to stimulate ADR schemes,

for individual as well as for collective claims, across sectors and jurisdictions throughout Europe.

12.7. In our opinion the best way to promote recourse to ADR in situations of multiple claims is

fostering the set-up of sectoral schemes (e.g. the Belgian Insurance Ombudsman) at national

level and through umbrella organisations, such as the FIN-Net network for financial services, at

European level. Those sectoral schemes and networks should make more publicity on their

website and through several media (e.g. on TV, in newspapers, etc.) to raise consumer

awareness. Businesses that are part of an ADR scheme should mention this on the company‟s

website, in pre-contractual information documents and in general contract conditions.

12.8. The attempt to resolve a dispute via collective consensual dispute resolution should be a

mandatory step in connection with a collective court case for compensation. This should be

imbedded in all new European/national legislation. However, if it is clear from the start that an

agreement between parties is not achievable, then an efficient exit should be foreseen in the

legislation in order to avoid unnecessary formalistic procedures, delays and costs. It may not be

a good idea in all circumstances.

12.9. The fact that an ADR decision is binding or not should be the outcome of a consensus amongst

parties, the plaintiff(s) as well as the defendant (trader). It should also be up to them to choose

if they want to settle their dispute through the ombudsman, via mediation, by means of

arbitration or by going to court. Mediation is based on a non-binding procedure designed to

stimulate parties to reconcile and could be applied in all sectors. In contrast to arbitration it is

up to the parties – and not to the mediator – to decide if they can agree (for example, with the

settlement that the mediator is proposing). In case of arbitration, parties agree that the arbiter

will take a binding decision (arbitral award).

12.10. However, if the mediation of collective claims results in an agreement between both parties,

then that agreement could be made binding on both parties by a third, judicial party (e.g. court)

like in the Dutch case (cf. Supra, §10). Such judicial confirmation should only be possible if the

following conditions are mutually fulfilled: 1) both parties agree with the request for judicial

confirmation; and 2) the confirmed agreement only binds the parties and does not have any

effects erga omnes.

12.11. That option could also be applied on our own insurance ombudsman if the policyholder and

involved insurance company mutually agree on this. Currently, the decision of the Belgian

Insurance Ombudsman is a mere advice. The advice is neither binding nor enforceable, but

agreement between parties is being complied with.

1122..1122.. SSttrroonngg ssaaffeegguuaarrddss aaggaaiinnsstt aabbuussiivvee lliittiiggaattiioonn:: the aim of collective redress should only be the

compensation of harm of identified victims. Therefore, regimes that encourage the introduction

6

[EC consultation on Collective Redress – 2011]

of unmeritorious claims, punitive damages, contingency fees and the creation of war funds or

stimulate the financial interest of third parties should be avoided. However, public authorities

could collect unlawful profit as a fine according to applicable legal standards under consumer

law. This revenue should only be used for public purposes – such as an improved access to

justice – and not be granted to individual victims of commercial malpractices.

12.13. Another important safeguard is limiting the opt-in formula in time by installing a registration

deadline. The reason is twofold. On the one hand, a registration deadline will restrict the

administrative burden that will inevitably be a result of the organisation of the opt-in procedure.

On the other hand, a time limit will avoid abuses along the process. That is to say, it will

prevent customers from joining the procedure at a later stage only because the outcome of the

process seems to turn out beneficial for the plaintiffs who initially signed in to the opt-in

formula. Without this safeguard the procedure and the defense may be slowed down

unnecessarily and made unreasonable heavy. The most feasible way to notify seems us by

electronic means. The installation of a multilingual European register of pending collective

actions could help claimants and judges to identify and bundle cases.

12.14. A following necessary safeguard is the role of the judge. In our view the court should be in

charge of the admissibility examination, the coordination of the notification procedure and the

control of the representation criteria. According to Assuralia, the judge should verify

admissibility criteria that are related to (1) the representativeness of the designated entity for

the entire group and the registration procedure of the opt-in formula. The registration deadline

should be respected; (2) the number of plaintiffs that is necessary to introduce a collective

action. Collective actions should only be admitted if they could not better be handled

individually; (3) the conditions to leave a collective action when the defendant himself choose

the opt-out formula; (4) the control of and the access to evidence; (5) the financial strength of

both plaintiffs and defendants to pay the legal costs; (6) the availability of other legal remedies,

such as the European Small Claims Procedure (Regulation EC 861/2007), which may be equally

efficient and less costly as a mean of pursuing a claim. In this respect, judges may be helped by

a specific „case management training‟ on collective actions. Besides, similar responsibilities

should be dedicated to mediators in case of out-of-court mass claim settlements.

12.15. Finally, Assuralia believes that it is necessary that claimants bear their share of legal costs or

costs of out-of-court settlement procedures. Otherwise, the number of unmeritorious claims and

the risk of financing collective actions with war funds will increase substantially. In this respect,

Member States should keep the freedom to preserve the “loser pays principle” that is applicable

in many national legal systems.

1122..1166.. TThhee aavvaaiillaabbiilliittyy ooff aapppprroopprriiaattee ffiinnaanncciinngg mmeecchhaanniissmmss,, nnoottaabbllyy ffoorr cciittiizzeennss aanndd SSMMEE‟‟ss: the

introduction of a collective action – be it through an in-court or out-of-court settlement – should

primarily be financed by the plaintiffs themselves or their representative. The self-financing of

collective redress by means of third party financing mechanisms, war funds or the creation of

public funds would generate a litigation culture and thus jeopardize free trade and industry.

12.17. Private funders are, amongst others, legal expenses insurers. Assuralia requests the

Commission to safeguard and acknowledge the specific role of legal protection insurers on

damages actions for breach of consumer rules. Legal protection insurers are often the first point

of contact for victims. They scrutinize a potential claim and advise their clients how to proceed

7

[EC consultation on Collective Redress – 2011]

to receive compensation. If it is obvious that a case is without any merits the insurer will advice

accordingly. The case will be kept out of the judicial system. If the case is legitimate the legal

expenses insurer will try to negotiate between both parties and examine whether it is possible to

reach an agreement through an out-of-court settlement. Otherwise, the case will be sent to

court. If needed, this insurance provides for funding of the costs of formal legal procedures (i.e.

fees of technical experts to assess the extent and the cause of the damage, attorney fees and

costs of bringing cases to court) and thus helps to bear the costs of damages actions. Hence,

legal protection insurers function as a filter and so they enable the smooth running of the

judicial system by excluding unmeritorious claims. Though, legal protection insurance as well as

general liability insurance should not be abused to generate a collective action litigation culture.

12.18. Whether legal expenses insurers could cover the risks associated with a Europe-wide collective

redress system in the future depends largely on the way such a system would be designed. It is

of primary importance for legal expenses insurers to know the number of claimants beforehand,

so they would therefore consider an opt-in procedure as the most workable solution. This is also

true for the general liability insurers of the defendants and the insurance companies, which may

get involved in collective actions themselves. The European Commission should realize that

general liability insurers across Europe already do not cover claims originating from the United

States because American class actions are based on opt-out.

12.19. Finally, the costs of proceedings should be reasonable for both defendants and plaintiffs. We

are against a system of contingency fees. The fee of solicitors should not depend on the result

of the lawsuit and neither on the number of claimants. For Assuralia the aim of a collective

procedure is the compensation of harmed customers – both private consumers and businesses,

including SME‟s – and not the enrichment of law firms.

4. Topic 3: The SCOPE of a coherent EU approach to collective redress

13. The Commission‟s work on compensatory collective redress should be limited to competition and

consumer protection law, at least in the first “testing” phase. An extension to other areas of EU law

should only be possible if a thorough impact assessment proofs there is a need to extend the scope of

judicial collective redress as well that the procedure is working well in the field of consumer protection

and competition law.

14. Claims for personal injury should be excluded since the damage has to be assessed individually per

claimant and thus cannot be transferred to a multitude of cases. Hence, collective redress should be

limited to the mere compensation of material damage only.