Collective redress to pick up pace in Europe

Now the EU directive on collective redress is in force, increased volumes of class actions are expected, notably for cyber liability and greenwashing cases.

Next year is likely to see the first really significant tranche of collective redress actions across Europe following the enactment of the EU Directive on Representative Actions. We expect to see increased interest from claimant groups in bringing actions stemming from the potentially systemic risks that are occupying the minds of lawmakers, companies and individuals around the world – namely, environmental, social and governance risks and cyber. 

As an example, the EU Directive on Representative Actions makes it simpler for groups of individuals whose data privacy has been breached to bring collective actions. In particular, the Directive and its implementation into domestic laws now allows for actions for collective compensation of damages.

In addition to this, the first actions brought on the basis of the EU’s General Data Protection Regulation (GDPR), Article 82, are already in the pipeline and expected to be brought in 2024. 

Until now, most cyber-related cases in Europe have centered on first-party losses such as business interruption. But fresh actions for immaterial damages are posing a new and significant exposure for cyber insurers.

It is also likely that collective actions will become more commonplace for breaches in other areas, such as Environmental, Social & Governance (ESG) pledges and so-called greenwashing actions. Several mechanisms already exist to require companies to make disclosures about their sustainability reporting, including the EU’s Corporate Sustainability Reporting Directive. In addition, EU institutions are currently working on a directive that would require companies to substantiate the voluntary ‘green’ claims they make to consumers. 

This proposed ‘Green Claims’ directive and the crackdown on potential greenwashing, alongside efforts to prevent companies from ‘greenhushing’ – under-reporting ESG information – could also result in an increase in collective redress actions now that such a mechanism is more readily available in Europe. An ever-increasing focus from consumers on the ESG and sustainability credentials of the companies that they buy from and interact with will likely fuel this.