By implementing the EU Commission’s recommendations on common principles for injunctive and compensatory collective redress mechanisms, on April 3, 2019, the Italian Parliament approved Law no. 31 of April 12, 2019, regarding “Provisions on class actions” (the “Law”) [1].
The Law may have a significant impact on companies investing in Italy and may radically change the dispute scenario. Under the previous system[2], only consumers were entitled to file class actions, which have been used sparingly and represent a tool of very limited use for consumers. Currently, companies operating in Italy have, in fact, had to deal with collective actions on a very sporadic basis. However, the new Law is aimed at radically changing the class action system by allowing class actions to be used more broadly.
The reasons for the previously rare use of class actions are mainly due to the lengthy and unclear procedural steps (particularly regarding the admissibility requirements), as well as other significant issues, such as, the absence of punitive damages[3] in Italian legislation. The goal of the Law is to instead increase the use of class actions by simplifying the processand broadening the range of parties that are entitled to file them.
To this end, the Law provides for an extension of class actions from objective and subjective perspectives:
– from a subjective perspective, it is telling that the class action system, which was previously regulated by the Italian Consumer Code, is now governed by the Italian Code of Civil Procedure. This implies that the provisions regarding class actions no longer refer exclusively to consumers and now address a much wider audience. Specifically, the Law provides that not only consumers, but even non-profit associations and organizations (to the extent they are registered on an ad hoc list held by the Ministry of Justice) will have legal standing;
– from an objective perspective, while under the previous system class actions were pursuable exclusively for specific cases of tort law liability (namely, cases concerning the contractual rights of a plurality of consumers, product liability, unfair commercial practices, and unfair competitive behavior), the Law now extends its enforceability to all tort law liability scenarios, on the sole condition that the petitioners’ claim concerns rights that are correspondent for the whole class.
Procedural Issues
Whether this reform will actually result in companies facing an increasing number of class actions or not mainly depends on the duration and length of the new procedure. In this respect, the Law establishes that:
– the action shall be presented exclusively before the specialized section for corporate matters and not to the ordinary court. The intention of the lawmaker is to ensure that class action cases will be heard by judges with specific and extensive expertise;
– the proceedings shall be regulated as summary proceedings on the merits. Differing from ordinary proceedings, summary proceedings are thought to be faster because the petition and the defendant’s defense must be based solely on the evidence provided by the parties in their initial briefs. In addition, the judge does not have to conduct a full and detailed taking of evidence phase. This type of proceeding allows much more flexibility in guiding the trial.
– Three main stages are involved: (i) the admissibility stage; (ii) the analysis of merit; and (iii) liquidation of damages stage.
– the opt-in procedure significantly changes, with the option of adhering to the action also available after the court has made its final decision. In other words, this means that opting-in is now possible not only after the order admitting the action (as already provided for by the previous regulations), but also after the issuance of the judgment that establishes the liability of the defendant.
Potential impact on companies and conclusions
Some contrasting measures make it difficult to know, at this stage, how the Law may affect companies.
On one hand, the measure concerning the opt-in procedure, which appears to be the key feature of the new class action, of course seems capable of markedly encouraging recourse to class actions. In this respect, a potential critical issue for companies arises from the fact that, by allowing the opt-in procedure to apply after the judgment, it is impossible to understand the actual size of the class action and, subsequently, the impact the judgment may have on the company’s revenue[4].
On the other hand, however, the procedure still appears to be rather cumbersome due to its division into three steps. In concrete terms, this could mean that applications for class action may have a long way to go before a final judgment is even issued[5].
In conclusion, even though, as detailed above, there are contrasting views on the Law’s actual impact, this development should incite companies to adopt a more prudent approach and to be prepared to face a new dispute scenario. These objectives may be achieved by paying greater attention to potentially unfair contractual terms by monitoring the guidelines issued by authorities, such as the AGCM (the Italian Competition Authority) and the Garante per la protezione dei dati personali (the Italian Data Protection Authority), in order to assess trends and guide the business accordingly; establishing appropriate governance and compliance measures (training, task force, and so on) in order to be prepared in case a class action is pursued; understanding how the class action works in other jurisdictions which are already in line with the EU’s recommendations and whose case-law could be followed by the Italian courts, etc. Therefore, the measures that should be taken are demanding and may even require ad hoc investments. Nevertheless, the timeframe before the law enters into force, which will take place in the spring of 2020, should allow companies the time needed to best prepare.
[1] The official text has been published in the Italian Official State Gazette on April 18, 2019. The Law will enter into force 12 months after its publication.
[2] Sec. 140-bis of the Italian Consumer Code, introduced by Italian Legislative Decree no. 206 of 2005.
[3] A more in-depth analysis of the previous Italian class action regime is available at the following URL: https://iclg.com/practice-areas/class-and-group-actions-laws-and-regulations/italy
[4] Because of this measure, the Law has been highly criticized by the Italian employers’ federation (Confindustria).
[5] For this reason, some members of the consumer associations are currently rather skeptical about whether the reform will actually achieve the goal of increasing recourse to class actions.
