Class actions and collective redress

In this chapter of our Annual Insurance Review 2024, we look at the main developments in 2023 and expected issues in 2024 for Class actions and collective redress.

Key developments in 2023

2023 saw further developments in cross-border environmental/ ESG group litigation brought against multinational companies and the impact of litigation funding.  A highlight has been the progress of the Municipio de Mariana -v- BHP case, concerning the Fundao dam collapse in Brazil in 2015.  This continues the trend for carbon majors to be targeted by group litigation in the English courts in relation to alleged torts in other jurisdictions, subsequent to the Vedanta [2019] and Okpabi [2021] cases involving pollution in Zambia and Nigeria.

Following the Court of Appeal's 2022 judgment[1], group litigation brought by Brazilian litigants has been allowed to proceed against BHP and others in the English Courts.  The BHP case is a ground-breaking piece of litigation in both the environmental/ESG sphere and for the English courts.  Its scale is unprecedented, and it concerns one of the largest environmental disasters in Brazil's history, with over 700,000 claimants and damages now projected up to GBP£36bn.  Despite parallel litigation and a compensation scheme already established in Brazil, the English Courts permitted the case to proceed amidst concerns regarding access to justice and adequate compensation for the myriad types of damages claimed.  Although trial is scheduled for October 2024, it is speculated that BHP will negotiate a final, encompassing settlement.

We are still very far from a US "opt-out" class action for civil claims in the English courts (this mechanism is only available in a competition context) and "opt-in" group litigation orders remain the main mechanism.  Representative actions can still only be brought in relatively limited circumstances.  Most recently, the claimants in Lloyd-v-Google[2] and in Jalla -v Shell[3] concerning data protection and pollution claims, respectively, failed to satisfy the "same interest" test, in order to bring a representative action on behalf of a class of claimants.  However, the BHP case has undoubtedly demonstrated the shift in the approach of the English courts to mass litigation, particularly in an environmental/ESG context.  2023 also saw an 'opt-out' competition class action brought against six water companies on behalf of homeowners, on the basis that they have abused their position and under-reported sewage emissions to regulators, in order to avoid penalties and continue overcharging customers.

Litigation funding continues to drive the expansion of group litigation globally.  A long running class action brought by Indonesian farmers against PTTEP Australasia, in relation to 2009 oil spillages in the Timor Sea, was settled in 2022 for AUS$192.5 million.  Harbour Litigation Funding had invested in the litigation and reportedly received two-fifths of the settlement.  In 2023, Gramercy announced a £450 million litigation funding investment in Pogust Goodhead (the law firm which has led the litigation against BHP in the English courts and Braskem in the Dutch courts). The competition class action brought against six UK water companies is reportedly being funded by Bench Walk, a US based litigation funder.

However, the Supreme Court's 2023 decision in R (on the application of PACCAR Inc and others)-v-Competition Appeal Tribunal and others[4], has cast some doubt on the enforceability of litigation funding agreements (LFAs) which were held to fall within the statutory definition of damage-based agreements (DBAs)[5].  The definition of DBAs includes "claims management services" which are defined as including "the provision of financial services or assistance"[6].  Consequently, the court held that LFAs fall within the definition of DBAs and are not enforceable, unless they comply with the Damages-Based Agreements Regulations 2013.  This raises questions regarding the enforceability of both existing and future DBAs. The court also clarified that DBAs are prohibited in opt-out collective actions, pursuant to section 47C(8) of the Competition Act 1996.

What to look out for in 2024

Although the BHP case may be resolved without a substantive trial on liability during 2024, the way has been paved for similar large-scale environmental litigation.  We will likely see more historic pollution cases and it is possible that the representative action mechanism could be explored further where claimants seek injunctive relief (and therefore have a more obvious common interest).  We are still yet to see a "historic GHG emissions" case brought in the English courts, such as those issued in the Swiss and German courts.  The use of the "opt out" competition class action in an environmental context will be tested against the water companies and it remains to be seen whether such claims will gain traction more widely.  Litigation funders will also have to grapple with the structure of their arrangements and compliance with the regulations on DBAs.  It will be interesting to see to what extent this affects the pipeline of large-scale group claims in the English courts.