Collective actions: from theoretical debate to structural risk
The advancement of collective actions requires Spain to define how to balance consumer protection, legal certainty and business impact
by magalí bujía sica
The development of collective actions in Spain has ceased to be situated on a theoretical level and has become a structural discussion on the functioning of the legal system and the balance between consumers and companies.
Iberian Lawyer addressed this issue with several in-house lawyers with direct experience in managing this type of risk, in the framework of the event held on 24 March, “Class Action: an emerging phenomenon”. The debate featured Javier Ramírez, vice president and associate general counsel for litigation globally (excluding the US) at HP and head of advocacy at ACC Europe; Carlos Menor Gómez, legal director and compliance officer at Groupe Renault Spain; Teresa Mínguez Díaz, general counsel and compliance and integrity officer at Porsche Ibérica and member of the governing board of ICAM; and Jaime López de Villarreal, global head of legal at Loewe.
For Javier Ramírez, the “opt-out” mechanism provided for in the Draft Bill in Spain marks a turning point. Unlike the prevailing approach in Europe, based on “opt-in” systems, this mechanism implies that consumers are automatically bound by a collective action unless they expressly choose to opt out. In his view, this change only significantly broadens the potential scope of these proceedings, but also alters the traditional logic of litigation and raises questions about the interaction between the different elements of the system, particularly when external funding and automatic participation mechanisms coincide.
From this perspective, Ramírez takes the experience of the United States as a reference point to assess how far this type of litigation can scale. There, the volume of class action settlements exceeds $40 billion annually. However, this volume does not necessarily translate into effective benefit for consumers: only a very small percentage of those represented actually receive compensation and, in many cases, a significant part of the agreed amounts ends up being absorbed by legal costs and litigation funding.
WHERE TENSIONS BEGIN
For Javier Ramírez, litigation funding is one of the most sensitive aspects of the development of collective actions, not only because of its growth in Europe, but also due to the impact it may have on how these proceedings function. In his view, at least from a theoretical standpoint, this mechanism is justified by serving a clear function: it allows claims to be brought before the courts that would otherwise not be viable, particularly where individual damage is small but the aggregate impact is significant.
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