Class actions are back on the agenda after the Civil Justice Council (CJC), the body responsible for advising the Lord Chancellor on the modernisation of the law, recently published proposals to make it easier for consumers and small businesses to seek redress through the courts.

The report, Improving Access to Justice through Collective Actions, was keenly awaited in legal and business circles. Those interested parties are now asking whether changes are needed and what impact they will have. Or, to put it another way, will they lead to a huge increase in litigation and the introduction of American-style excesses? The answer to both questions is a cautious no.

The CJC is anxious to close what it considers to be a gap in "access to justice” affecting a wide range of consumers, small businesses and employees who are prevented from bringing difficult but meritorious lawsuits because of the costs involved. Under the current system, a patchwork of regulators, ombudsmen and consumer protection groups can go some way to bridging this gap. But often they lack the desire, powers or resources to bring the sort of lawsuits on behalf of consumers that we could see if the rules are changed.

The current civil procedure rules already permit collective actions but they require individual consumers to "opt-in" to the claim. As a result, there have been only a small number of successful such cases in England and Wales. Even in those, only a tiny number of potential claimants signed up. Fewer than 600 individual claimants joined in Which?'s claim against JJB Sports over its overcharging for football shirts, out of 1.5 million people who purchased the shirts. The proposed changes will go some way to remedying these problems.

One of the boldest proposals is for the introduction of a new generic form of collective action that would permit lawsuits to be brought under an “opt-out” system. Courts would therefore assess damages suffered by an entire class, not just individuals as would normally be the case.

This approach, which is used in the US, means that any claimants who fall within the definition of the group or class would automatically be included in the claim unless they specifically elect not to participate. For instance, if a class action was brought on behalf of 10,000 people who bought a particular computer, all 10,000 buyers would be included in the lawsuit unless they asked to be excluded.

Supporters of this system say that it saves time because it avoids each individual claimant having to come forward and give details of their exact loss. However, it raises the thorny issue of what to do with money that remains unclaimed from a collective damages pot. This is a common problem in opt-out systems. Not all claimants actually come forward to claim their share, even if they have been automatically included in a lawsuit. Ideally, all deserving claimants could be tracked down from sales records and given their share of the damages, but this is often not possible.

What to do with this often huge pot of unclaimed money is controversial. The CJC recommends that it should be distributed by a trustee according to general trust law principles. For example, any unclaimed damages following an environmental lawsuit could go to an environmental charity. But some would argue that this blurs the boundary between compensation and punishment, which is not usually an acceptable reason for civil damages awards.

The headline effect of the proposed changes may be more claims and bigger damages awards. Yet it would be overly simplistic — and wrong — to say that they would lead to a deluge of unmeritorious claims brought by aggressive and mercenary lawyers to force settlements from corporate defendants.

The CJC is alert to that perceived risk and recommends that group lawsuits are carefully monitored. It proposes that claims should be closely supervised by specialist judges, including court certification that collective action is the most suitable method of resolving a particular dispute. It also recommends fairness hearings to approve any settlements and to protect the interests of all parties.

Yes, the proposals are likely to result in more class actions. And yes, UK Plc, as the natural defendants to such claims, may have to make larger provisions for settlements and damages awards. But the proposals are sufficiently finely tuned that their overall impact is likely to be positive, resulting in an increase in claims with genuine merit that could otherwise not be brought. It is difficult, at least in principle, for anyone to argue against that.

Antony Corsi is a partner and Ian Pegram is a professional support lawyer in the litigation and disputes practice at Fulbright & Jaworski International

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