Caution urged on ‘opt-out’ group proceedings in Scotland

Last month, a group of legal and business bodies wrote to the Scottish Civil Justice Council (SCJC) and the Scottish government calling for a full consultation before considering whether to allow ‘opt out’, as well as ‘opt in’, mass actions. The Scottish Chambers of Commerce, European Justice Forum, BritishAmerican Business and the US Chamber Institute of Legal Reform warned of the impact that rushed legislation could have on both the justice system and the Scottish economy.

Rules allowing for opt-in group proceedings – to which individuals with the same, similar or related claims must consent before they can be considered part of a single action before the courts – were introduced in Scotland last year. However, the legislation governing the change, 2018’s Civil Litigation (Expenses and Group Proceedings) (Scotland) Act (the 2018 Act), allows the Court of Session to also make provision for opt-out proceedings, potentially applicable to a far greater number of individuals. This makes Scotland the only opt-out-ready jurisdiction in the UK, which appears to be the source of the concerns expressed by the authors of the letter.

The availability of the opt-out model in the UK is currently limited to claims relating to breaches of competition law raised in the Competition Appeal Tribunal (CAT), and requires CAT certification. Should Scotland choose to amend the new rules to allow for opt-out claims, similar safeguards will undoubtedly be an important feature of any discussion and consultation – although it is worth noting that the permission of the court is already required before opt-in group proceedings can get underway in Scotland.

Scotland’s group proceedings rules

The 2018 Act allowed the Court of Session in Scotland to make provision in its rules for group proceedings for the first time. Previously, litigants were only able to proceed individually or by means of a test case. The new rules laid down in the 2020 Act of Sederunt (Rules of the Court of Session 1994 Amendment) (Group Proceedings) (2020 Rules), which came into force on 31 July 2020, apply to opt-in proceedings only, although the 2018 Act makes provision for both.

The SCJC working group which developed the 2020 Rules has said that its decision to initially provide rules for the opt-in model only was an attempt to give the courts and the legal profession an opportunity to become more familiar with group proceedings in general. However, the potential to introduce amendment allowing for opt-out proceedings too has not been discounted..

The introduction of group proceedings in Scotland by way of opt-in only is unsurprising, as these are significantly less controversial and easier to manage than opt-out proceedings. However, the opt-out model is one that is gaining in popularity internationally, particularly in the US, and litigants and their lawyers will see a number of attractions to this approach. Opt-out actions cover all individuals who fall within the scope of the proposed class definition unless they expressly choose to opt out, significantly increasing the number of people covered – an individual could even become a claimant without even knowing of the existence of the proceedings. The scale of liability faced by defenders is potentially huge, and it is not surprising to see business groups voice their concerns over the prospect of an opt-out system.

To give an example, in the ongoing Mastercard v Merricks competition proceedings, the proposed class potentially includes over 46 million consumers seeking around £14m in damages. The case reached the UK Supreme Court last year after the CAT declined to grant a collective proceedings order. The Supreme Court, overturning the CAT, allowed certification – however, it did not do so unanimously, with grounds for dissent given by Lord Sales and Lord Leggatt no doubt echoing some of the concerns felt by businesses in Scotland.

The judges noted that, while the opt-out model is “designed to facilitate access to legal redress for those who lack the awareness, capability or resolve required to take the positive step of opting into legal proceedings”, it brings “a risk that speculative actions may be brought claiming large amounts of damages even where there is no realistic prospect of recovering such damages, but where the size of the claims and the heavy costs of defending the action may be used as a threat to induce the defendants to settle”.

As matters stand, the SCJC has not committed to introducing the opt-out model in Scotland, or even to further consideration within a particular time period. However, developments in this space will be watched closely by businesses in England and Wales, as well as in Scotland. It is not unusual for there to be significant differences between the two legal systems – indeed, group proceedings have been available in England and Wales for some time – but given the potential impact on consumer redress, courts south of the border could find themselves under considerable pressure to follow suit should Scotland proceed with an opt-out system.

Co-written by Gabriele Geceviciute of Pinsent Masons, the law firm behind Out-Law.