On Wednesday, April 3, the Italian parliament passed a long-awaited class action law with broad application. The road to the creation of this law has taken many years, and it will not be fully in force until next year. While this is a welcome development for institutional investors in publicly traded companies, it could be significant amount of time before we see any real case develop, particularly relating to securities claims, as the law only apply to events taking place after the entry in force.
This new law is an advance of the previous class action law, in force for the past decade. That law arose out of a modification of the consumer code, passed in the wake of the Parmalat scandal that broke in 2003, and was intended to bring class actions to the Italian system. However, and as with similar to attempts in in other European jurisdictions, the application of the class action procedure was severely limited. In Italy, this did not extend the application – despite the Parmalat scandal as the impetus – to claims by shareholders in publicly traded companies. The new law removes the class action provisions from the consumer code and modifies the code of civil procedure in order to implement the class action.
The actions can be brought by any affected individuals or by any registered consumer associations acting on their behalf and these cases can only be brought in the special corporate sections of the civil courts where the defendants are based.
Once a court has approved that an action should be handled as a class action, there will be a 60-day period when other actions can be brought and consolidated together with the main case. After that time, the court will open a registration period during which other parties can opt-in to the case. It also provides an “opt in” possibility at later stages of the action, including after judgment.
The new law entering into force in 2020 has provisions for a lead plaintiff and permits contingency fees both for lawyers and added compensation of the entity appointed as lead plaintiff. The fees must be approved by the court and will follow a fee scale to be set. It is not yet clear what costs or entrance fee for the registration of additional parties will be.
Other aspects of Italian civil procedure will still be in place, which means that the class action will not be as feasible, effective or affordable as the US class action, as adverse party costs will still apply (though these are capped by statute).
While this law doesn’t affect the various cases we have underway in Italy, we will continue to monitor its implementation and beginning in April 2020 the possibilities to use this mechanism for our institutional investor clients