Pioneering voluntary collective redress

When a number of businesses faced serious allegations of a common nature, several approached Pinsent Masons for advice. Each organisation was confronted with the prospect of defending mass tort claims in the courts. To most, this seemed futile. As well as the expense, severe reputational damage seemed inevitable. An approach was needed that addressed the wider commercial and reputational risk of the issue, as well as the legal aspects. Our clients needed advisers who could engage with the wider commercial and reputational issues, and think differently about resolution.

The challenge

Group actions and other means of formal collective redress can give rise to costly and time-consuming litigation. This can seem particularly senseless where a party has admitted fault or otherwise chosen to pay compensation.

This was the case in respect of one significant matter in which a number of businesses faced similar allegations. When several of those organisations approached Pinsent Masons for support, we proposed the design and delivery of an industry-wide resolution scheme through a consortium.

What followed was pioneering voluntary collective redress scheme which has changed the way corporates think about resolving large-scale disputes.

The solution

The scheme broke ground in several respects. It:

• was the first multilateral scheme of its type;
• required a precedent-setting application to the High Court to obtain information from the Information Commissioner's Office. Without this, the scheme could not exist. Pinsent Masons did the drafting and advocacy;
• required an extensive analysis data, using cutting-edge technology, to ascertain the consortium members' relative contributions to the scheme;
• led to the development of market-leading precedents by Pinsent Masons, including a binding Applicant Agreement, Scheme Rules and Data Protection Act Compliant enquiry forms;
• required a unique form of co-operation, settlement and contribution agreement for and between consortium members.

The unique nature of the challenge also meant that a highly commercial approach was required for the management and implementation of the scheme. A 'traffic light' system was developed for giving instructions by the group's co-ordinating solicitor, so each member was not required to sign-off on instructions.

We engaged a wider network of professionals on behalf of the consortium such as specialist communications advisers to advocate the scheme and encourage participation. This included significant media work and engagement with key stakeholders within the government.

The result

The advantages of developing this scheme were:

• Impacted individuals were given a route to swift and cost-effective resolution instead of a litigious and uncertain claims process;
• Alleged transgressors were seen to be quickly and efficiently addressing perceived 'wrongs', thus protecting their reputations;
• The risk of escalating and uncertain legal costs was reduced;
• A swifter approach to dispute resolution was delivered, both in terms of court and management time;
• An overall reduction in financial outlay for damages and costs was achieved in the vast majority of cases;
• The prospects of favourable outcomes in regulatory and criminal proceedings were increased; remedial actions are relevant when prosecution authorities decide whether or not to take further action.

Many similar schemes have since been designed or considered in respect of victims of faulty medical devices; phone hacking; corporate surveillance; and mis-selling of financial and other products.