The Italian Parliament has recently passed new class action rules with Law no. 31 of 12 April 2019 (the “Reform”). The Reform will exclusively apply to unlawful conduct taking place after it goes into effect on 19 April 2020. In the meantime, the provisions currently in force shall continue to apply.
Under the previous system, introduced nearly twelve years ago, only consumers were entitled to file class actions in Italy. The Reform aims to radically change the class action system by allowing class actions to be used more broadly. To achieve this aim, the Reform provides that whoever holds “individual homogeneous rights” (not limited to consumers and users) can bring a class action to seek collective redress or restitution against all companies or providers of public services. As such, future class actions could be instrumental to protecting a wide range of contractual or non-contractual rights that go beyond mere consumer protection, including, for instance, the protection of rights in the field of financial services.
The Reform sets forth a new ad hoc opt-in procedure.
Eligible class members will have a longer time frame to opt in and may do so either after the court’s decision on the admissibility of the action or even after the court’s decision on the merits. At the same time, defendants will be entitled to specifically object to the merits of each opt-in application.
Under the new law, the action can be brought exclusively before the specialised section for corporate matters and not to the ordinary court. The proceedings shall be regulated on the merits as summary proceedings. During the evidence collection phase, the court has special powers to order the defendant to file any documents. This is unprecedented in Italy. If the action is upheld, the court will rule on compensatory relief, simultaneously providing for the appointment of a class representative. The class representative will be responsible for the allocation of compensatory relief amongst the class members.
Also unprecedented is the fact that defendants will be responsible for paying contingency fees to the common representative of the class members, and to the lead claimant’s lawyer (contingent upon the number of class members and the overall amount awarded).
The court may also award premium fees if the case is sufficiently complex.
The Reform encourages settlement agreements by enabling the competent courts and the common representative of the class members to take the initiative and submit settlement proposals to all parties and applicants. Class members, however, may always object to any such settlement proposal and refuse to be bound by it.
Whether the Reform will have a significant impact on the viability of class actions in Italy remains to be seen.Litigation funders will very likely see a pipeline of new opportunities should the Reform result in an increase of class actions in Italy. Class actions (both at the pre-litigation stage of due diligence when outcome analysis is performed, and at the class formation stage) are notoriously costly, often so economically burdensome as to prevent the procedure from moving forward without the injection of third-party funding.
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Written on October 2, 2019 by
Deminor Recovery Services – Country Manager Italy. Responsible for promoting and managing Italian cases in the three core business area of Deminor Recovery Services: Investment Recovery, Antitrust Damages and Commercial Litigation
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