DRRT's Global Loss Recovery Blog

When on March 14, 2018, after almost 6 months without a government, the two biggest parties in Germany signed their coalition agreement (“Koalitionsvertrag”) and formed the 24^th and current government of the Federal Republic of Germany (“Bundesregierung”). Most people paid little attention to a half-page proposal buried on page 124. According to the proposal, the new government would be committed to establishing a class action system in Germany. On May 9, 2018, and with the biggest scandal in German automobile history still fresh in everyone’s mind, the federal government met to discuss a draft proposal leading to a definite law on November 1, a particularly sensitive deadline, seeing as most claims against Volkswagen based on the Dieselgate scandal will expire on December 31, 2018. On June 14, Parliament approved the proposal after very little debate and news agencies have been booming ever since with stories and explanations about the proposed class action system. Sadly, for those familiar with the U.S. model, the current developments from Germany will prove greatly disappointing.

Switzerland as a venue for collective redress litigation:

Although not a member of the European Union, thanks to a series of treaties, Switzerland is a member of the European Single Market, participating in its free movement of goods, services and capital. Additionally, because of the Lugano Convention of 2007, Switzerland also forms part of what could be called a “Single Legal Area” in which court decisions are mutually recognized and executed without need of any special procedure. This frictionless interaction between Switzerland and the rest of the EU, combined with the world-renowned Swiss efficiency and discretion, has made the country a great venue for litigation, especially as regards to civil and commercial arbitration.

The new South African Constitution of 1996, in its article 38.c, gives individuals and legal persons the right to file a class action. Originally, these were only filed in connection with violations of constitutional rights, however, in Children’s Resource Centre Trust and Others v Pioneer Foods (Pty) Ltdand Others (2012), the South African Supreme Court expanded their availability to all kinds of civil cases, potentially including securities claims. Nonetheless, South African courts will only authorize a case to be tried as a class action when such a mechanism proves the most effective way to adjudicate the controversy.

History and expansion of arbitration in the United States

The U.S. Federal Arbitration Act (FAA) was passed on 1925. Since then, the Supreme Court has interpreted it on a number of cases, finding that the FAA prevents state legislation from prohibiting or limiting the use of arbitration clauses in all sort of contracts, even those designed to protect workers’ rights (Epic Systems Corp. v. Lewis 584 U. S. ____ (2018)), or consumer’s rights (AT&T Mobility v. Concepcion, 563 U.S. 333 (2011)). Consequently, arbitration clauses have become more common. It has become almost impossible to challenge arbitration clauses, even if they hinder access to justice and while challenges may still be brought, the arbitration panel itself must examine them.