Towards a Class Action System for Product Liability Claims?

1) With some amendments, both essentially reproduce the provisions of a bill proposed by the previous government, 2) which was also aimed at providing consumers affected by the same unlawful event with a greater level of legal protection.

From Representative Actions to Class Actions

Under the Consumer Code, if a number of consumers suffer damages as a result of the same unlawful event, the relevant consumer associations are limited to bringing representative actions for injunctions to prevent the offending conduct from continuing; they are not entitled to claim damages on behalf of consumers. Damages may be claimed only directly and individually by the consumers affected. This creates a risk of conflicting judgments in cases involving identical issues, as no judicial precedent system applies in Italy, and may result in longer, more expensive and less efficient proceedings.

The adequacy of the existing system, which restricts consumers or investors damaged by the same unlawful event to the pursuit of individual actions, was particularly called into question following the financial collapse of two leading Italian food manufacturers. Such events raised political awareness of the need for greater protection for consumers, which led to the submission of the bills.

Both bills provide that, if a number of consumers are affected by the same unlawful event, consumer associations are entitled to act as their representatives to claim damages.

Procedure

The main procedural phases of the class actions proposed in the bills are as follows:

Under Bill 679, having filed their statements, parties must undertake a binding out-of-court mediation attempt. If it succeeds, individual consumers will be prevented from bringing individual actions during the period indicated in the agreement.

If the defendant is found liable, a generic award is made by the court, which will specify the criteria for determining - in a separate second phase - the amount of compensation due to each individual consumer and the terms of payment.

Following the publication of the generic award, parties may commence a further attempt at mediation in order to reach agreement on the terms and amount of compensation to which individual consumers are entitled.

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If further mediation fails or (under Bill 679 only) there is an objection to the agreement reached, each consumer may bring a claim to assess whether he or she is entitled to compensation and to determine the amount to which he or she is entitled.

The Bills: Key Issues and Differences

The two drafts are at the initial stage of a process that could ultimately lead to the enactment of a law on class actions. The proposals are likely to be amended, but it is clear at this early stage that the proposals in Bill 1495 are more favourable to consumers, in that:

both bills allow consumer associations which are registered on the lists maintained by the Ministry for Productive Activities or published in the European Union's Official Journal to represent consumers and bring class actions on their behalf, but Bill 1495 also allows professional associations and chambers of commerce to bring class actions on behalf of consumers; Bill 1495 does not require a compulsory attempt at mediation to be carried out by the parties at the beginning of proceedings and the class does not operate on an opt-in system;

class actions under Bill 679 require that a contractual relationship exist between the class members and the defendant, whereas under Bill 1495 class actions may also be brought in relation to tort or violations of provisions which are specific to commercial and/or competition law; and under Bill 1495 the judge is entitled to fix in a generic award the minimum amount of damages each consumer may receive and must be awarded, whereas under Bill 679 the generic award sets only the criteria by which damages must be quantified and allocated to individual consumers. Both bills provide for the exclusive jurisdiction of the court where the defendant's registered office or residence is located; this is clearly an attempt to prevent forum shopping.

Comment

Although both bills represent a significant step towards greater consumer protection, Bill 1495 seems more favourable to consumers, as it proposes a wider range for the cause of action and locus standi (ie, the right to be heard), as well as a simpler procedure.

Perhaps the most striking difference between the drafts is that Bill 1495 allows for class proceedings in respect of tort as well as contract claims. In principle, this would open the door to class claims against product manufacturers and distributors, as well as to claims against providers of public services in sectors such as banking, insurance, transport and telecommunications.

The bills will be discussed and in all likelihood amended by Parliament in the coming months in an attempt to settle on single, final text.

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