Class Actions as Efficient Judiciary Practice: Legislative Initiatives
by Borys Malyshev
In 2017, new procedural codes were passed in Ukraine. They significantly simplified the administration of justice. However, legislators did not take into account one of the best practices of world justice — the institution of collective claims (by multiple parties, a group, or representatives) known as a class action.
The scientific doctrine emphasizes that class actions are a synthesis of two procedural institutions — joint participation (without involvement of all parties), and representation (in the absence of formal authorities).
There are two types of such actions:
“Opt-in” class action — members of the group acquire this status in a class action only if they directly express their desire to join (English law model).
“Opt-out” class action — all potential members of the group are implied, unless they declare their unwillingness to be members of the group (US law model).
Ukrainian legislation does, in part, contain norms that allow class actions. Thus, the Acts of Ukraine On Consumer Protection and On Environmental Protection have been providing an opportunity for public environmental organizations and consumer associations to file claims to protect their members’ rights since the 1990s. However, the lack of judicial procedure for such actions and the peculiarities of filing them undermine the efficiency of the actions in terms of proper judicial protection of violated rights and the interests of an indefinite group of persons.
In September 2021, in order to plug this legislative gap Ruslan Stefanchuk, who is currently the Speaker of the Verkhovna Rada of Ukraine, announced changes in the judiciary system regarding the introduction of elements of direct democracy, including class actions that exist around the world. For example, according to him, it can be used when it’s not individual interests that are being violated but rather the environmental rights of residents in a certain area, or when people can act together as a group plaintiff.
It should be mentioned that the first legislative attempt to resolve the procedural issues of filing and hearing class actions was made in 2019. The Verkhovna Rada of Ukraine registered draft law No. 10292 of 15 May 2019 On Amendments to Certain Legislative Acts of Ukraine on Group Judicial Protection of Consumer Rights and Right to a Safe and Healthy Environment. But legislators did not hear the draft act.
By taking into account the objective set by Stefanchuk, a new draft act is currently being developed on the procedural regulation of class actions.
Thus, the need for such an law is substantiated by the following factors:
(1) the current Civil Procedure Code of Ukraine is not adapted for hearing class actions on moral or material damage caused to a group of persons. For example, it may be an environmental or man-made emergency or catastrophe, when one offense causes proprietary and moral damages to dozens, hundreds, and sometimes thousands of citizens. The Civil Procedure Code does not clearly regulate the mechanism of public access to justice in the form of public organizations (environmental or consumer protection public organizations) or by individual citizens to protect group interests without establishing a public organization;
(2) the institution of class actions has significant social and political potential:
(2.1.) it enables the general public to use litigation instruments to control environmentally hazardous enterprises, unscrupulous sellers, and to use it as a preventive mechanism against potential offenses; (2.2.) it is capable of partially replacing functions of supervisory government agencies, because in this case the monitoring of compliance of legislation in the environmental protection and consumer protection area is carried out by the parties of the respective legal relations.
(3) the institution of class actions has significant potential in terms of developing Ukraine’s legal system:
(3.1.) it would relieve courts of hearing a significant number of similar cases in identical legal relations in the event of multiple violations of environmental and consumer rights;
(3.2.) a possibility to combine claims and represent them collectively would mean better access to justice, particularly when the costs of individual claims are very high and they deter affected persons from addressing courts;
(3.3.) it would establish a mechanism for situations where one offense causes proprietary and moral damages to a significant number of citizens;
(3.4.) it would set up a procedure of public access to justice either in the form of public organizations in the environment or consumer protection areas, or in the form of initiative by individual citizens;
(3.5.) it would ensure adaptation of Ukraine’s legislation to EU legislation, particularly in compliance with Directive 2020/1828 on representative actions (claims) to protect the collective interests of consumers, etc.
When developing the main provisions of the draft law, existing world practices of class actions were used, taking into account the specific procedures of Ukrainian legislation. They imply the following:
An individual plaintiff or a public organization have the right to apply to courts to protect a group’s rights and interests without their procedural participation in the case (class action).
A class action may be filed solely for protection of: (a) the right to a safe and healthy environment; (b) consumer rights. But it should be admitted that the objectives of a class action are not restricted. They can include antitrust disputes and appeals against regulations.
A class action may request termination of the infringing action and compensation for proprietary and moral damages. A class action is deemed as such if: (a) a plaintiff is joined by at least 25 individuals with similar claims based on similar grounds against one or more defendants; (b) a public organization addresses a court as established by law jointly with at least 25 of its individual members, with similar claims based on similar grounds against one or more defendants.
Also, a plaintiff (different from a public organization) has the right to file: (a) a class action jointly with a certain number of persons (at least 25) who join him/her at the time of the action’s filing; (b) an open class action, i.e. under the term whereby the original 25 persons may be joined by an unlimited number of persons whose rights and legitimate interests are in question after a court initiates the relevant proceedings.
It is proposed that appellate courts of general jurisdiction would serve as courts of first instance to hear class actions. A discussion is also taking place about commercial courts playing this role, since their procedures are quite straightforward.
In class actions, the defendant’s general intent applies. The plaintiff is only required to provide factual evidence confirming that the consumer rights or the right to a safe and healthy environment have been violated. There is a fixed court fee for filing a class action and for joining it. A class action can be heard without the presence of the persons who joined the action.
Remission of the original plaintiff from the class action or his application to dismiss the action would not deprive the remaining interested persons of the right to hold a meeting and to choose another plaintiff within 15 days thereafter. A public organization has the right to drop its class action or to file an application to dismiss the class action only if the majority of its members, whose rights and interests are in question, would vote for that at their meeting.
In the event that compensation of proprietary and moral damages is awarded, a court allocates the awarded payments among the group members in accordance with the terms they reached with the original plaintiff, the public organization, or in accordance with the published terms of the class action’s adhesion.
In terms of practical implementation, one can admit that such class actions are still admissible even though at the moment the legally established institution of class actions does not exist, because the Civil Procedure Code and legislation do allow such actions. In particular, this includes class actions on behalf of an environmental public organization whose members were hurt by violations of their rights and interests, and who requested compensation for non-pecuniary damage. There was case No. 754/8602/18, which resulted in an amicable settlement and payment of
USD 1 million to aggrieved persons, as well as case No. 487/69/70, where USD 300 million in non-pecuniary damages were awarded. The latter case is pending cassation review.
Thus, class actions form an efficient mechanism for use in civil society to protect the property rights of affected individuals in the relevant legal relations. The application of the mechanism ensures law and order and it’s a powerful tool of social justice, which undoubtedly meets sustainable development goals. Therefore, adopting the relevant act is a priority both in terms of existing social and legal needs to protect an indefinite number of people, and in terms of the need to introduce the institution of class actions in Ukrainian procedural legislation.
Borys Malyshev is an expert in Public Law and Human Rights, Doctor of Laws