Saturday, September 20, 2008

Class Actions in Australia and Finland

Peter Spender of Australian National University has written an article titled "The Class Action as Sheriff: Private Law Enforcement and remedial Roulette," which discusses class actions in Australia, Canada, and the U.S. Mikko Valimaki, of Helsinki University of Technology, has written a piece titled "Introducing Class Actions in Finland - Lawmaking without Economic Analysis." Here's the abstract of Peter Spender's piece:

In this essay I will explore the effect of developments in class action law and practice upon remedial law, and investigate the state of health of the compensation principle.

The compensation principle requires that plaintiffs should as nearly as possible be awarded a sum of money that will place them in the same position as if they had not suffered a wrong. The principle has occupied a central position in modern private law to provide standing to plaintiffs and to limit the powers of courts. Yet commentators such as Berryman argue that the compensation principle is in decline and suffering a death by a thousand cuts. Some of the deepest cuts have been inflicted by the modern class action.

I will examine this argument by reference to class actions in Australia, Canada, and the US, using the vitamins antitrust litigation in those jurisdictions as a case study.

My overall hypothesis is that whilst the compensatory principle is being assailed by the calls for the class action to deter corporate misconduct, the principle still acts as a moral compass. Corrective justice has not entirely yielded to instrumentalism, but the current autonomous, individualistic, and substantive law model of corrective justice under private law needs to adjust to group procedural justice as practiced in law firms and in the courts.

And here's the abstract for Mikko Valimaki's article:

Finnish Parliament accepted in February 2007 a new law on class actions (literally group actions), which entered into force 1 October, 2008. The legislative process was particularly slow. Finland has been preparing a law on class actions since the early 1990s and this was - depending on the criteria of counting - the fourth try. Some fifteen years ago the idea of class actions was something new in Europe. Time passes quickly however, and the new Finnish law cannot be described as radical by any meaning of the word. Many European countries have changed their existing procedural codes and enacted new laws to make class action litigation possible.

The new Finnish class action law differs from the mainstream in fundamentally limiting its scope of application. Although the law is titled as being a general law on class actions, it only applies to consumer cases where the government-funded Consumer Ombudsman is acting as the lead counsel. This was not the case in the beginning. Years ago, the first law proposals had much broader scope of application but as the lobbying between potential defendants (the industry) and plaintiffs (consumer agencies etc.) became polarized, it became evident that there can be either a major compromise or no law at all.

This article analyses the Finnish lawmaking process from comparative and economic policy viewpoints. First, the article discusses how did the Finnish legislative process end up with a certain outcome. It is argue that neither well-founded economic nor empirical arguments had any relevant role. Instead, partisan claims on class action cases in the United States and their potential implications to companies were used as a strong argument to restrict the law's scope of application. The official preparatory documents did not present any study on experiences from the United States. There was non-partisan empirical evidence of the use of class actions only from Sweden.

Second, this article compares the claims presented in the Finnish lawmaking process to studies and legislative work made in other countries. The article concludes that the most of the claims were based on partisan opinions, not on well-founded studies. The examples of other Nordic countries however show that there is nothing uncommon in implementing class actions in a Northern European legal system. Misuse of class actions is not likely due to e.g. fundamental differences in the substance of accident law and the rules regarding the indemnification of legal costs in litigation.

Third, this article argues that the main reason why the Finnish class action law failed was the dynamics of the legislative process. The idea of reaching a consensus in preparatory work before a law is submitted to the parliament means that if certain interest groups are able to form a strong opposition, the law may never enter the parliament no matter of the substantial arguments. The result is that an unknown number of cases are not litigated at all in Finland because the scope of application of the law is restricted. Regulatory authorities have no resources to provide as extensive preventive threat as would a complementary private mechanism.


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