International Practice: Part II on Comparing U.S. & E.U. Judicial Class Action Structures (June 26).
June 26, 2010
Here is Part II on class actions and ADR in the European Union by former CPR intern Katharina Diel, who is an LLM student at Columbia University Law School in New York. CPR Intern Jan-Krzysztof Dunin-Wasowicz contributed to this Part II.
An International Practice CPR website column late last month described the current state of European class action litigation, coming off of recent U.S. developments, including the Supreme Court case of Stolt-Nielsen SA v. AnimalFeeds Int'l Corp., No. 08-1198 (April 27, 2010)(the CPR website's most recent article, which includes a link to the decision and three previous analysis pieces on the case, here).
This article projects possible developments in the area.
Given recent interest and scattered adoptions of class-action litigation mechanisms in the European Union (see Part I linked above), it is likely that there will be widespread investigation--if not a full embrace--of class arbitration within the different member states.
By tackling class arbitration directly, and banning it without consent, Stolt-Nielsen could be an influential starting point for other nations.
It's possible that the case will influence the expansion of class arbitration proceedings on an international level, as well as changes in international arbitration rules. Other nations may be more accommodating of class treatment than Stolt-Nielsen is in the United States, even if the developments don’t actively support it.
The international arbitration community generally has taken a pragmatic approach to class and consolidation issues. First, the American Arbitration Association, in the wake of class arbitration litigation seven years ago, adopted special class arbitration rules. It maintains a site to chart the matters under its administration, which can be found here.
The AAA's international division, the International Centre for Dispute Resolution, doesn't have specific class rules, but the U.S. domestic rules, potentially, are available for international cases. For example, the class arbitration rules were used as part of the basis of a “partial final award on clause construction” in an international matter, In the matter of the arbitration between President and Fellows of Harvard College v. JSC Surgutneftegaz, Case No., 11-168-T-01654-04 (Aug. 1, 2007) (available here).
Second, procedures for handling multiparty arbitrations, and provisions on consolidation authority are developing. For instance, the provisions of the Belgian Centre for Mediation and Arbitration (CEPANI, available here), the LCIA Rules (here), and the United Nations Commission on International Trade Law (Uncitral) Model Law on International Commercial Arbitration (here), as well as current interpretation of the International Chamber of Commerce (ICC) Rules of Arbitration (here), and the Stockholm Chamber of Commerce (SCC) Arbitration Rules (here) can accommodate consolidation and multiparty actions, and could provide a basis for class arbitration.
Enforcement is another issue, though a strong case could be made for a completed class arbitration to be enforced similar to bilateral arbitration under the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, better known as the New York Convention (here). For a view on equal treatment for class arbitration awards, see, S.I. Strong, "The Sounds of Silence: Are U.S. Arbitrators Creating Internationally Enforceable Awards When Ordering Class Arbitration in Cases of Contractual Silence or Ambiguity?" 30 Michigan J.of Int’l L. 1017 (2009)(available here). (This article was presented with a 2009 CPR Award for Excellence in ADR; for details, see CPR News, 28 Alternatives 26 (February 2010).)
There's also an international human rights component that could emerge to support increased class litigation and arbitration. For example, EU nations are bound to the human rights and fundamental freedoms granted by the European Convention for the Protection of Human Rights and Fundamental Freedoms, or ECHR (available here), and the European Court of Human Rights, or ECtHR (here). It's possible that the court would use a class where needed to effectuate individual rights and could accept class arbitration.
In fact, the court has dealt with a multiparty arbitration process, and it could be the basis of broader involvement with larger class matters. In the case, the ECtHR permitted the establishment of an arbitral tribunal even without some parties’ consent, as long as the individual guarantees provided in the due process clause--that is, ECHR Art. 6--were respected. Lithgow and others v. United Kingdom, EGMR 24.6.1986, application nr 9006/80, and its confirmation in EGMR v 6.2.2003, Wendenburg and others v. Germany, application no. 71630/01.
Notwithstanding the above, there are possible impacts, as well as restrictions that could arise out of national constitutional law. Generally, party autonomy is an essential element of arbitration law. In Germany, the Federal Supreme Court has found that the freedom to initiate an action, and party autonomy, are constitutionally guaranteed freedoms. See Judgment of April 3, 2000, of the Second Civil Chamber, II ZR 373/98 BGH NJW 2000, 1713 (available here).
* * *
There are indications that there is a readiness to experiment with, and reform, class action devices within the arbitration field internationally, and specifically, in Europe. EU member states will continue to examine and refine this area in the near future and, thus, that they are likely to provide an interesting and rich source of comparative study--which could benefit litigation reform worldwide.