New law aims to expand the currently limited application of class actions in Italy.
The Italian Parliament recently introduced a comprehensive reform of the rules governing class actions with Law No. 31 of 12 April 2019 (the Reform). The Reform, which was published in the Official Gazette on 18 April 2019, will exclusively apply to unlawful conducts carried out after it goes into effect on 19 April 2020. In the meantime, the provisions currently in force shall continue to apply.
The Reform introduces several notable changes to Italy’s class action rules, including:
1. Extended scope: The Reform significantly widens the scope of application of the current rules, providing that whoever holds “individual homogeneous rights” (not only consumers and users) can bring a class action to seek collective redress or restitution against all companies or providers of public services. As such, future class actions could be instrumental to protecting a wide range of contractual or non-contractual rights that go beyond the mere consumers’ protection — including, for instance, the protection of rights in the fields of environmental law and financial services
2. Incentives for claimants: The Reform provides specific incentives for claimants to bring class actions by granting:
All eligible class members with the ability to join a class action even after the court’s favorable decision on the merits (hence, not only after the decision on the admissibility of the action)
Enhanced courts’ powers in the field of evidence
Contingency fees in favor of the common representative of the class members and of the lead claimant’s lawyer
3. New procedural rules: Albeit the Reform maintains the traditional opt-in system, it introduces substantive changes to the court competence and the procedural rules applicable to class actions. For instance, the Reform adds an entirely new procedural phase after the favorable decision on the merits. In essence, the current two-phase procedure is replaced by a procedure in which the first two phases relating to the ascertainment on the admissibility of the claim and the decision on the merits are followed by a third phase for the definitive formation of the class and adjudication on quantum.
4. New settlement options: The Reform encourages settlement agreements by enabling the competent courts and the common representative of the class members to take the initiative and submit settlement proposals to all parties and applicants.
The Reform is poised to provide material incentives that could significantly expand the current (and indeed very limited) application of class actions in Italy. However, the new rules could also lead to potential distortions of the system by encouraging opportunistic behaviors and complicating the management of cases.
Defendants could face particular risks under the Reform’s provisions. Not only will claimants be more likely to bring class actions against companies and public service providers, but their ability to join a class action after a favorable decision on the merits represents a serious threat to defendants. Specifically, defendants could be prevented until the end of the proceedings from knowing the actual perimeter of the class and hence the potential liabilities deriving from the relevant action. As such, the Reform introduces an element of material uncertainty for defendants that impacts their defense strategy, as well as their accounting and risk assessment abilities.