After various postponements, delays and amendments, as of January 1, 2010 a class action law became effective also in Italy. So far, the Italian legal system did not provide for class actions or similar procedures. A number of attempts have been made to introduce such proceedings in recent years, but the bills in the end were not approved by Parliament. A new bill to establish collective actions was recently approved by the Senate by inserting Article 140 bis in the Consumer Code currently in force in Italy (Legislative Decree no. 206 of September 6, 2005).

Four types of consumer claims may be considered as the basis of a Class Action: (i) reimbursement or damage compensation with respect to infringement of certain (one-sided or standard form) contracts; (ii) damages suffered as a consequence of a defective product (regardless of contractual relationship); (iii) damages suffered as a result of unfair commercial practice and (iv) damages suffered as a result of anti-competitive activity.

Under Italian law, collective actions may be brought by individual class members (the previous text allowed only consumer associations or special committees to bring a case to court), consumer associations and councils.

The law provides for an opt-in system, meaning that the court decision will be binding only for opting-in consumers: each individual will maintain his own right to access the courts either by joining the proceedings in the traditional fashion or by way of separate proceedings. This provision, which is one of the main differences from US class actions, could cause confusion.

The Class Action must be brought before the court in the capital city of the Region (with the exception of a few Regions) where the defendant has his/her residence or a registered office.

No criteria are set out in the event that the defendant's business has no registered office in Italy (however, in this case, provisions established according to international private laws would apply).

Article 140-bis does not specify a minimum number of claims that can be managed under the procedure. In light of the rationale underlying the new law (i.e., facilitating the bringing of claims affecting a large number of potential claimants in the context of a single dispute), it would be reasonable to expect that courts will consider “numerosity” as an essential prerequisite in this regard, rejecting collective actions that involve only a relatively small number of individuals.

It is important to note that the law will apply only to behaviour or events which  occurred after August 15, 2009: therefore, class action rules will not apply, for instance, to the Parmalat and Cirio financial crises.

As regards the procedure, Article 140 bis of the Consumer Code envisages two phases for the collective actions procedure: a preliminary phase (assimilable to the certification phase), and a later ordinary phase.

The commencement of a Class Action will be subject to a preliminary authorisation of the Court, which may immediately reject the Class Action if (i) the claim is prima facie manifestly groundless, (ii) a conflict of interest exists among the plaintiff representative body and the consumers whose interests it purports to protect; (iii) the dispute does not relate to issues of fact or law that are common to a multitude of consumers, and (iv) the claimant is unable to represent class interests adequately.

If the judge declares the admissibility of the class action, the second phase will commence and the party that promoted the action is ordered to advertise the content of the claim to enable class members to opt in.

The judge sets a peremptory time limit within which a subscription certificate shall be filed in the court clerk’s office. Further class actions based on the same grounds and against the same company will not be allowed after the expiry of the time limit set by the Court.

The judge is also entitled to postpone the assessment of the admissibility of the claim if an independent authority is carrying out preliminary investigations concerning the same subject matter. This provision gives great importance to discovery activities carried out by independent authorities, such as the Antitrust Governmental Body, which would probably influence the opinion of the judge adjudicating the class action in cases where sanctions are imposed against the enterprise. In addition, it is predictable that the Consumers Associations (or even a single consumer) would also try to use the outcome of competition investigations in their favour and it is possible to foresee that it may likely obtain more success in the form of follow-on class action for recovering the damages suffered by victims of a cartel (more probably, in a price-fixing cartel where the competent authority had made some calculation of the illegal surcharge applied by the cartel members), given the high burden of proof that must be accomplished in stand-alone actions.

According to Article 1226 of the Italian Civil Code (which provides for an evaluation of damages on the basis of an equitable criterion), if the Court accepts the claim it may order the payment of compensatory damages or a refund of unduly paid sums. Alternatively the judge may establish a common criterion of liquidation of the damages due. Unfortunately, there is no indication of how such criteria should be established. This leaves a great deal of room for court discretion. However, it must be noted that punitive damages are prohibited by Italian courts.

The judge’s final ruling will establish the amount of damages to be awarded to all the individuals who belong to that class action. The decision will not affect the rights of class members who did not participate in the collective proceedings: they will still have the chance to bring single ordinary procedures.

The decision is enforceable 180 days after publication, but the Court may order the respondent to deposit the aggregate amount due until the decision becomes final. Moreover, the respondent who files an appeal towards the judgement, might request the Court of Appeal to stay the enforcement taking into account the total amount of the sum owed by the debtor, the number of creditors, and the related difficulties in returning undue payments if the appeal is accepted.

As predictable, the proposal of the class action legislation led to a general outcry and heavy protest from many sides and interest groups (i.e. the National Industry Entrepreneurs Association which predicted an uncertain perspective for its members’ competitiveness). The Consumer Protection Associations did not fail to stress the importance of the new provisions, but felt that they had to be considered just as a first step towards even more effective enforcement measures (i.e. the provision of ‘punitive damages’ which are presently denied by Italian Courts).

Consumers Associations (in particular, the more "aggressive" ones) are likely to bring several class actions.

Therefore, at this stage, it is rather difficult to predict the outcome of these attempts (indeed, the reform provides for a preliminary authorization of the competent Judge who will determine the admissibility of each class action). In theory, any groundless attempt would be rejected by the Judge.

The new class action provisions lack the clear guidance necessary in order to assure transparency and predictability and they also present a number of flaws. Clarification, either from lawmakers or the courts, is needed to avoid a panic situation for targeted businesses, as well as to limit the duration of the proceedings,  since proceedings might last between two and four years even without an appeal process.

In conclusion, it could be affirmed that any company operating on the market with a multitude of consumers is exposed to the Class Action risk. Companies need to be prepared to the risk management connected to “collective action”, and therefore they need to work on prevention in the first place: it will therefore be necessary to identify the specific risk situations, analyze the relevant causes and assess the effects, identifying the possible measures to be adopted. In addition, a great attention should be given to customer care relationship.

Studio Legale Tributario

G.E.LEX

Global Executive Lex

www.gelex.it

Roma - Napoli

Rome - Naples