Towards an effective class action model for European consumers: Lessons learnt from Israel

Abstract

The class action is an important instrument for the enforcement of consumers' rights, particularly in personal actions for low sums known as Negative Expected Value (NEV) suits. Collective redress actions transform NEV suits into Positive Expected Value suits using economies of scale by the aggregation of smaller actions into a single legal action which is economically worthwhile pursuing. Collective redress promotes adherence to the law, deters illegal actions and furthers public interests. Collective redress also helps in the management of multiple cases in court. The introduction of a new class action model in Israel has proven to be very workable in the sense that it has improved access to justice, albeit that this system currently suffers from over-use, referred to in this work as the "flood problem". The purpose of this research is to introduce a class action model which brings with it the advantages of the Israeli model, as well as improvements upon it so as to promote consumer confidence in low figure transactions by individuals with large, powerful companies. The new model suggested in this work relies on the opt-out mechanism, monitored by regulatory bodies through public regulation or by private regulators. The reliance on the supremacy of public enforcement and follow-on actions over private stand-alone actions should make the system of collective redress more efficient than the current Israeli model, reducing the risk of a flood of actions whilst at the same time improving access to justice for large groups of claimants. Thus far, no unified European class action mechanism has been developed, and only some member states have developed their own systems. The model discussed in this work may be implemented as a unified set of rules in Europe, with some additional adjustments, such as those covering cross-border trade, to promote confidence in trade within the European Union.