As illustrated above, class actions may be problematic and they carry with them the risk of abuse. Therefore, such proceedings require the imposition of safeguards. These safeguards should act to bar unmeritorious actions at the early stages of the action. If the safeguard mechanism does not filter out abuses from the outset, then the defendant may be willing to settle an unmeritorious claim just in order to avoid expensive legal proceedings.
Israel’s regime provides a range of safeguards. Fears that the mechanism may be abused led the Israeli legislator to introduce a series of safeguards in order to make the procedure more credible. Under the Israeli regime, courts must examine whether the representatives can properly represent the interests of the class, and some preconditions must be met and examined in the preliminary stages of the case in a certification procedure. The preconditions for allowing class actions involve examining the prima facie merits of the case, the conduct of the representative including whether he or she is acting in good faith, and the suitability of the action for collective proceedings. In addition, every important step in the action is subject to the court’s examination. Attorney and plaintiff representative fee agreements are subject to court inspection and termination of the action - whether by voluntary dismissal or by way of a compromise - is subject to court approval.93
The following additional safeguards which are employed in the Israeli regime in order to prevent abuses of the collective procedure are also worth considering for integration at European level:
93 See also section 64 on page 16 of the Civil Justice Council's reply to the European Commission's
public consultation 'Towards a Coherent European Approach to Collective Redress' <http://ec.europa.eu/competition/consultations/2011_collective_redress/index_en.html> accessed 27 May 2011.
1. A certification process is imposed to filter out unmeritorious claims. As part of this process, the judge will have to examine the prerequisites for an action.94 These include whether the action is sound on its merits, whether it appears that the action was filed in good faith, and whether there are sufficient common questions of law or fact.
2. The requirement that notice be given to members containing information relating to all the crucial stages of the action,95 as well as an online registry containing information on all the crucial stages of the trial96 may also operate as a barrier to unmeritorious claims. Management of the case is open to public scrutiny, and no hidden arrangements between the representatives and the defendants are permitted without granting class members or the Attorney General the opportunity to express their views.
3. Compromises,97 and voluntary dismissal of the action,98 are regarded as carrying the risk of abuse. Representatives may act in bad faith or for their own benefit at the expense of class members. The law therefore imposes strict supervision on compromises and voluntary dismissals which include using expert evidence99 in order to examine the economic benefits of the suggested settlement to the class members. Judges should not allow arrangements between the parties unless they benefit the class members who are not normally present at trial. In addition, the parties and the lawyers on both sides are required to confirm by sworn affidavit that there are no additional agreements which remain undisclosed to the public.
4. Where the judge finds that a representative is not acting in the interests of the class members, but the nevertheless claim seems to be meritorious, he may replace the representative.100
94
Class Action Law 5766-2006, s 8 (Israel).
95 Class Action Law 5766-2006, s 28, (Israel). 96 Class Action Law 5766-2006, s 25, (Israel).
97 Class Action Law 5766-2006, s 18 and s 19, (Israel). 98
Class Action Law 5766-2006, s 16, (Israel).
99 Class Action Law 5766-2006, s 19(b), (Israel). 100 Class Action Law 5766-2006, s 8(c)(2), (Israel).
5. Where the court finds that conflicts of interest exist between class members, due process allows the judge to divide members into subclasses.101
6. In order to prevent the misallocation of funds, the judge has the power to appoint trustees in order to supervise the collection of damages.102
7. The principle of the "loser pays," which refers to a mechanism whereby the loser pays the expenses of the winning party, applies to class actions other than in special circumstances where the action, though dismissed, has brought some benefit to the members or to the general public.103
8. The requirement to introduce an online registry which was recently adopted in Israel is quite innovative. A registry of Group Litigation Orders (GLO) exists in the U.K. and Norway also has such a registry. In Canada a voluntary database system is operated by the Canadian Bar Association.104 This innovative idea will be examined in due course as one of the positive aspects of the Israeli model. The registry also includes information (mainly decisions or settlements) on new decisions for cases submitted before March 2007.
However, these safeguards do not appear to be sufficiently robust to prevent the huge numbers of claims which are now flooding the Israeli market. It is therefore necessary to examine the consequences of using these safeguards in Israel in order to fine-tune the model before transposing it to Europe. The main change required in the Israeli system is the introduction of a mechanism to filter the flood of claims which is currently inundating the Israeli court system following the introduction of Israel's new class action law in 2006. The aim of the improved safeguard mechanism is to filter out unmeritorious actions right from the outset and create a barrier even before such actions reach court. The filtering may be achieved by prioritising out of court dispute settlements and introducing a compulsory procedure for submitting a claim to a public body even before allowing the dispute to be submitted to court.
101 Class Action Law 5766-2006, s 10(c), (Israel). 102 Class Action Law 5766-2006, s 20, (Israel). 103
Class Action Law 5766-2006, s 22(c), (Israel).
104 For the Canadian Bar's database, see <http://www.cba.org/classactions/main/gate/index/about.aspx>