I INTRODUCTION TO CLASS ACTIONS FRAMEWORK
The class action scheme under Danish law is a form of legal civil procedure that entered into force on 1 January 2008. It was part of the largest reform of the Danish judicial system since 1919. The regulation on class actions has not been significantly amended since it was introduced.
The Danish class action regime is a genuine mass claim process with an opt-in mechanism as the general rule. Any private individual or legal entity that is a holder of a civil claim or credit can commence class actions with the ordinary courts with a request for approval of a class action and appointment of a class action representative to be the formal party to the court case.
Under Danish law there are, however, several ways in which multiple claimants may commence legal proceedings. Generally, three forms predominate:
- multiple parties and the defendant agree on a test case concerning one or a few individual claimants;
- multiple claimants sue individually and have all claims joined in one court proceeding; and
- multiple claimants file a class action.
In practice, all of the above forms have been used.
There may be several advantages for a party to advance its claim by way of a class action rather than having to pursue the claim by way of individual litigation. However, the following circumstances may be reasons why class actions are avoided in some instances:
- As opposed to, for example, US law, Danish law does not provide for a standardised way of computing losses. Given the fact that alleged losses must be documented individually, class actions are often not the preferred approach.
- Under Danish law, attorneys are not entitled to charge fees as a specific share of the profits made from the outcome of a given case. Accordingly, the attorney cannot fully share the procedural risk of the case with the client. Since the client must bear all risks with regard to the case, there may not be much advantage to initiating a class action as opposed to awaiting the outcome of a potential test case or initiating individual litigation by those who have had the greatest losses.
In practice, matters have been filed as individual cases as an alternative to class action and in other cases both individual cases and class actions have been filed simultaneously or consecutively – often with the individual cases being a precursor for the class action.
Where many identical cases are filed, a test case could be chosen by the parties or a test case simply emerges from the fact that where several cases have been initiated by several independent claimants, one case is processed while others are stayed.
Mass litigation has in practice also been organised by one lawyer representing several plaintiffs initiating one joint action on behalf of these specific plaintiffs.
None of these mechanisms procedurally prevents others from initiating separate lawsuits.
ii THE YEAR IN REVIEW
Although the class action regime has been available in Denmark since 2008, only few cases have been initiated and finalised in Denmark.
To our knowledge, no empirical study is available on the mechanisms that result in parties opting for the route of class action, following other procedures or abstaining from making a claim. It is therefore an open question, what is the cause of the relatively scarce amount of cases, hereunder whether individual cases are filed instead of class actions. However, it is the general impression that an increase in investor-related cases has been seen over the past 10 years. This may be due to the fact that a number of foreign companies and organisations have been increasingly active with financing and managing such cases. The market has also seen funding of commercial litigation filed and run as one joint action by multiple plaintiff parties, but managed through the financing company, which also instruct the representing lawyer. In such cases, the financing company is, however, not formally a party to the proceeding.
In 2018, a decision in substance was reached in the Amagerbanken class action (under appeal), and the Eastern High Court rendered two important decisions (the AP Pension case and the OW Bunker case) on limits for the frame for prospectus liability class actions. These decisions are dealt with in more depth in Section III.ii). The decisions generally set out clear distinctions between cases, where individual factual or legal assessments are required, which are not eligible for class actions, and cases where the facts and legal assessments are of an identical nature, where class actions can be held to be the best option depending on other available options and the amount of claimants.
There is a substantial difference between litigating in Denmark and common law countries such as the UK and the US. The differences mainly relate to the process including the forms and types of evidence and how they are provided, the timing, the risks, the costs and the way a claim or loss is calculated and documented. A Danish case can be initiated as one case, several individual cases or as a class action. In any event, the plaintiffs will have the burden of proving that (1) as a consequence of a negligent act (2) a loss has been suffered. It should be expected that there will be (or can be) an exchange of information between plaintiffs in different jurisdictions and despite the cases being independent of each other, it is recommended that there is some coordination between the lawyers on the different defence teams.
Under Danish law, a class action is characterised as a legal action where a number of uniform claims are heard as one case by the court without the members of the class action having to meet all of the ordinary procedural requirements for a plaintiff.
The legal basis of the Danish class action regime is Chapter 23a, Sections 254a to 254k, of the Danish Administration of Justice Act (AJA), which provides the possibility of initiating class actions in Denmark, provided certain criteria are met.
Pursuant to the provisions of the AJA, class actions may only be instituted where
(1) the venue or jurisdiction for all claims is in Denmark, (2) the court is the geographically competent court for one of the claims and (3) the court holds subject matter competence in respect of one of the claims.
The Danish courts decide whether a case may be heard as a class action, based on the following criteria:
- the claims are uniform (i.e., not necessarily identical, but arising from the same legal and factual basis);
- class action is believed to be the best way to hear the claims;
- the class members can be identified and notified in an appropriate way; and
- a class representative can be appointed.
In the preparatory remarks to the bill on the introduction of group litigation, a non-exhaustive list of typical actions where a class action could be expected to be relevant is included.2
Regarding the requirement that a class action must the best way to hear the claims, the court makes an assessment of the advantages and disadvantages of a group action compared to other legal procedures available.3 In the court's assessment, a number of considerations are taken into account including the advantages of a 'package solution' and concentration of many claims in one case, the concentration of the procedural rights with the class action representative, and low costs per individual. The disadvantages traditionally include the slow start of a class action case and the risk that the opposing party may sue the individual group members for counterclaims. In addition, the assessment may somewhat overlap with the assessment of 'uniformity', given that non-uniform claims will per se not be considered to be fit for a class action under this requirement.
Case law shows that class actions have been found to be the best way to hear claims when the claims are nearly identical and the claimants comprise a large number of persons. For instance, questions related to the lawfulness of share redemptions or the overcharge of land registration acts have been tried as class actions.
The class action members are not parties to the case in the traditional way. As set out in the above, they are represented by the class action representative who is the legally competent party to the court action, having capacity to act as such in the class action proceeding and being responsible for conducting the action on the plaintiff's side. The AJA provides the persons who can be appointed as class action representatives.4 The class action representative has the authority to instruct an attorney, decide what arguments to be made, etc.
Importantly, the class action members are not, as such, competent to instruct the representative. However, in recent years, the prevailing method of mounting a class action representative has been to form an association established and funded by class members with the purpose of acting as class action representative.
Once appointed, only the court can release the class action representative from the assignment. In opt-in class actions, the court must decide whether it is necessary to appoint another class action representative if a minimum of 50 per cent of the members of the class action having opted into requests. The request must be accompanied by a proposal for another class action representative who is willing to accept appointment.
It is difficult to indicate the time span between the filing of a lawsuit and a final decision. Unless settled, it is most likely that cases of this type will be appealed and thereby dealt with by two instances. Owing to formal issues in respect of accepting a case as a class action, such cases will normally require more time than individually filed cases.
The prospectus liability action BankTrelleborg was commenced on 14 February 2008 and decided by the Supreme Court in 27 January 2012. The case on land registration fees was initiated on 12 August 2011 and is still pending. The Amagerbanken class action was initiated in 2013 and was decided in first instance in 2018. In comparison, an older landmark prospectus liability action concerning Hafnia (which was not a class action but two individual claims) was filed in 1997 and a final judgment was rendered in by the Supreme Court in 2002.
i Types of action available
In principle, all types of civil claims may be heard together under the class action provisions, if the claims are uniform and made on behalf of several persons. The rules do, however, not apply in:
- marriage and parental rights cases;
- paternity cases;
- guardianship cases;
- review of administrative detention;
- review of decisions on adoption without consent;
- acquiring judgment for declaration of null and void of documents;
- acquiring judgment for confirmation of ownership; and
- private criminal cases.
There are no particular limitation periods of procedural or substance law nature applicable to class actions. In matters against public authorities for cancellation of administrative decisions, particular limitation periods for filing court actions will apply depending on the relevant statutory provisions of the area of law relevant for the decision to be challenged.
ii Commencing proceedings
The class action is initiated by submitting a writ of summons or claim form to the court with a request to examine the writ as a class action. The writ may be filed by any person who is eligible to be appointed as class representative. In addition to (or as part of) the writ, the following information must be included:
- a description of the class (group) to be encompassed by the action;
- information on how the members of the class can be identified and be informed about the action; and
- a proposal for the class representative to be appointed and a statement confirming that this potential representative is willing to accept the appointment or assignment.
Professional companies or organisations often assist in the process of gathering relevant plaintiffs to act as class members, and some companies have specialised in managing or funding the court action.
There is no formal requirement to hear the defendant's view as to whether the criteria for accepting an action as a class action are met. However, in practice the court always invites the defendant to present its comments hereto. Often several pleadings are exchanged and even hearings take place on whether to approve of the class action, the appointing of the representative and the frame or scope of the action.
As an element in deciding whether to approve of the class action, the court may limit the scope of the action (for the claims to be encompassed to be sufficiently identical) and the court may order the class representative to provide security for the potential legal costs, which the class representative may be ordered by the court to pay to the opposing party and even order individual class members to provide security for costs relating to the class members' own claim. Thus, the court will determine the framework of the court action (i.e., the types of claims that may be part of the action, the relevant time period pertaining to the claims, specific criteria to be fulfilled by those who wish to participate in the class action, etc.). Court hearings in respect thereof on whether or not to approve a class action are often required. A defendant will normally be allowed to comment on whether or not to approve of the class action, the suggested class representative and the framework for the action.
The parties may also ask for permission to have the case handled by either three judges in the city courts, by the High Courts or the Danish Commercial and Maritime High Court. Permission will depend on a discretionary decision by the court that will only be granted if the matter is considered of a principal nature.
If a class action is approved by the court, the action encompasses the claims by eligible participants within the approved frame (e.g., investors having purchased shares of a company on a specific date or within a specific period).
Claimants who want to participate in the class action must register (opt in) with the court or the class action representative within a certain time frame. In this respect, the Danish rules are different from class actions known from the US, as a class in the US will normally consist of all potential class members unless they actively opt out of the class.
Conversely, approval of a Danish class action does not exclude parties that do not want to participate in the class action from initiating separate legal actions.
In addition to the opt-in class actions, the courts may, upon request from the group representative, decide that the group action shall cover all members, who have not opted out (the opt-out model).5 The opt-out model is subject to two conditions. First, the action must relate to claims for which it is evident that they normally are not expected to be processed in individual proceedings due to their small size. The preparatory remarks to the bill state that this condition will usually only be met if the individual claim does not exceed 2,000 Danish kroner. Second, it must be assumed that the opt-in model will not be a beneficial way to handle the claims. In these extraordinary opt-out cases, only public authorities specifically authorised hereto by law can be appointed as the group representative. Currently, only the Consumer Ombudsman has been authorised to act as a representative in opt-out class actions. An opt-out class action has not yet been filed or approved in Denmark.
Cases against financial institutions involving claims for recovery of investment losses have often given rise to discussion as to whether said claims fulfil the criterion of being sufficiently uniform in order for the case to be tried as a class action. Although the decision whether or not to approve the case as a class action depends on the specific circumstances of the case, in general it may probably be said that the court is more likely to approve a case of this nature as a class action if:
- the claims may be said to have the same factual and legal basis; and
- for the purpose of ruling on the merits, the court is not required to examine the individual circumstances relating to each plaintiff's claim (e.g., the plaintiff's previous experiences with investments, the plaintiff's educational and professional background, size of individual loss).
In the OW Bunker prospectus liability class action, in February 2018, the Eastern High Court, in line with the court's previous decisions, confirmed that the court may freely determine the framework of the class action and will only include those claims that – in the court's opinion – are uniform.6 See also the previous decisions in BankTrelleborg and Roskilde Bank.7 The BankTrelleborg cases are referred in more detail in subsection iv. In the Eastern High Court's decision in the AP Insurance case, the Court denied approval of the case as a class action. The claimants argued that a class action should be approved for a case concerning change of terms and conditions for a pension insurance due to misrepresentation but where the class should encompass both claimants still working, others about to retire and also already retired individuals. The High Court ruled that the claims were not sufficiently identical.8
Accordingly, a class action is dismissed if the criteria cannot be met at all or claimants who do not fulfil the criteria set by the court will be excluded from the class action.
Under Danish law, the plaintiffs in, for example, securities cases must provide evidence supporting their loss, and the plaintiffs must further prove that the ordinary conditions for imposing civil liability upon the defendant (e.g., negligence, causality, foreseeability) have been fulfilled. This often renders it very difficult for plaintiffs to document an actual loss, as Danish law does not recognise standardised mathematical methods of computing losses. In securities cases, an important element with regard to the computation of losses is whether a plaintiff has kept or sold (some of) its securities shortly after the event that gave rise to the alleged claim. Strong evidence of a correlation between negligent behaviour and the development (decrease) of the stock price is normally required.
iii Procedural rules
The civil procedure rules applicable to class actions are generally the same that apply to individual civil actions.
Court involvement in class action procedures can, however, be held to be deviating from involvement in other ordinary civil litigation proceedings since the mere approval of the action requires the court to rule that class action is the best way to handle the case.
Normally, courts do not interfere with parties' decisions whether to commence proceedings or joint claims. In addition to the introduction of the rules on class actions, the courts were given authority to order joint hearing of actions and refer actions to other courts where feasible. However, the courts have not shown increased activity in that area.
The courts are also more involved with the substance in class actions than in other cases at a non-ruling level as the courts are to approve any settlement that the parties may wish to adopt. In individual cases, settlements out of court do not require court approval.
The length of procedures involved in class actions are, in theory, no different from other types of actions; however, given the requirements for class actions to encompass several claims it is very likely that the class actions generally will have a longer duration than other cases.
Issues whether to bifurcate proceedings and, for example, split liability and quantum are likely to occur in class actions but of a specific nature depending on each case. Such split of proceedings are also seen in other cases.
iv Damages and costs
There is no jury involved with Danish civil litigation and this applies to class actions as well. Damages are not computed differently in class actions than ordinary civil cases. In the white paper prepared in connection with the proposal of the bill on introduction of class actions, the following was stated: '[….] Retsplejerådet does not propose an amendment of any substantial regulation, and it is thus not proposed to introduce the option of awarding standardised (average) damages or the like'.9
Not many class action cases have decided on damages. In the only class action case to this day decided by the Supreme Court, BankTrelleborg I, the Court did not approve any damages.
BankTrelleborg was a savings bank (organised as a self-owned institution). The savings bank had been converted into a bank being a limited liability company where a prospectus had been issued. Subsequently, the shares were all redeemed by the majority owner, Sydbank as a measure to save BankTrelleborg, which had otherwise gone bankrupt. The court cases involved four different lawsuits (one individual action and three class actions). BankTrelleborg I concerned alleged liability due to illegal compulsory redemption of the majority owner (Sydbank). The three other cases concerned prospectus liability. Two class actions were filed concerning the same claim as the individual case. One encompassed claimants who only became shareholders by conversion of their position as guarantors in a savings bank by a global offer. The other class action encompassed claimants with various backgrounds who had subscribed for shares over a period of time and where both private individuals as well as companies could join. The High Court only approved the first of the two cases as a class action. These cases were never dealt with by the Supreme Court but apparently settled based on the individual case. In the case involving individual claimants, the Supreme Court also rendered a decision and ruled in favour of the claimants confirming prospectus liability and adopted a general approach to the damages of shareholders.10 The approved damages consisted of a difference of value between a later compulsory redemption of shares and the offered conversion price.
Costs are awarded in the same way for class actions as in other cases and are based on a tariff system by the courts depending primarily on the amount of the claim.
The special act on processing of damages actions concerning violation of competition law applies in follow-on damages cartel cases and sets out special provisions of both procedural and substance nature.11 According to the act, the Consumer Ombudsman is also authorised to act as class representative.
Danish lawyer fees are governed by the Section 126 of the AJA. While 'no cure no pay' is allowed, genuine success fees such as a mere percentage of a claim are not allowed as such.
For filed and approved class actions, a settlement requires court approval (see Section 254h). The court shall assess whether the settlement is fair. There are no public decisions on approved settlements.
With reservation for the limited possibility for filing and having approved opt-out class actions, a settlement will bind all class members that have joined the class action (opted-in) unless they specifically decide to opt out of the settlement. That class members that do not accept the settlement will, within certain time limits, be entitled to continue their claims as individual civil cases (see Section 254g).
iv CROSS-BORDER ISSUES
The Danish class action rules may give rise to several issues of cross-border nature. However, to date, no ruling involving a cross-border issue as such has been made.
With respect to the exceptional opt-out actions, a limitation of the cross-border effect has been specifically provided for in Section 254f, subsection 2. In that provision it is stated that the binding effect in an opt-out action only applies to parties that could have been sued individually in Denmark concerning the substance of the matter at the time the class action was initiated.
The provisions allowing for ordering securities for costs apply to both domestic and foreign members of the class. This provision differs from the general provision on securities for costs since in individual cases normally only claimants domiciled in a country outside the EU and EEA area can be ordered to provide security for costs (see the AJA, Section 321). In an exceptional Supreme Court decision from 2018, the Court, however, ruled that even a Danish domiciled claimant could be ordered to provide security for costs (i.e., avoiding risk of circumventing cost awards), and more particularly where the claimant party had acquired the claim in question and been particularly established as special vehicle for the purpose of the court action.
One of the criteria for approving a class action is whether it is possible and feasible to notify the potential class members of the case. It may be argued that in many instances it may be more difficult to notify foreign parties of a class action in Denmark. The question does not appear to have been tested in any of the approved class actions and most of them have primarily related to potential class members residing in Denmark.
v OUTLOOK AND CONCLUSIONS
In the coming years, it remains to be seen whether there will be an increase in lodging of class actions and whether a current trend of funding litigation will have an impact on class action cases.
The decisions in the filed class actions against the Ministry of Justice and the state-owned broadcaster Danmarks Radio are expected as the next decisions in substance in class action cases. They will also be the first class actions against state entities.
Funding of class actions
Mass litigation may be funded in a number of ways. Specifically, for class actions the predominant method seen in Denmark so far has been to set up a separate association to act as the group representative, which is funded by its members – the potential class members.
In several of these cases, the group or class representative has requested that membership of the association should be a prerequisite to join the class action. In the Trelleborg cases, the Eastern High Court briefly questioned whether such a criterion could be permissible but accepted it in the specific case, making reference to the fact that the defendant had not objected to it.
As another possibility to funding class actions, the emerging trend of litigation funding should be mentioned.
Class actions – primarily in consumer cases – may also benefit from free legal aid (fri proces) to the effect that the members of the class action are not obliged to pay legal costs in relation to the handling of the case. This applies, for instance, to the Danmarks Radio class action mentioned above.
1 Christian Alsøe is a partner, Søren Henriksen is an attorney-at-law and Morten Melchior Gudmandsen is an assistant attorney at Gorrissen Federspiel.
2 See pages 214–218 of the White Paper prepared by the Commission for the Administration of Justice (Retsplejerådet) in connection with the preparation of the bill on the introduction of group litigation into Danish law.
3 Reference is made to Section I for other types of group litigation available under Danish law.
4 See Section 254 c(1) of the AJA. Other requirements, such as the financial ability to represent the class action members, apply. The Danish Consumer Ombudsman is currently the only public authority with statutory authorisation to be elected class action representative. As a consequence, only the Danish Consumer Ombudsman can be elected class representative in opt-out class actions as set out in Section 254 e(8) of the AJA.
5 See Section 254 e(8) of the AJA.
6 See the decision in the weekly periodical Ugeskrift for Retsvæsen 2019, page 962.
7 See the unpublished Eastern High Court decisions of 21 June 2012 in cases 1198/11 and 1255/11 and published Roskilde Bank case in the weekly periodical Ugeskrift for Retsvæsen 2016, page 1,014.
8 See published Eastern High Court decision in Ugeskrift for Retsvæsen 2018, page 3,361.
9 Our translation of page 24 of the white paper prepared by Retsplejerådet in connection with the preparation of the bill on the introduction of group litigation into Danish law.
10 See published decision in Ugeskrift for Retsvæsenet 2013, page 1,107.
11 See Act of Parliament No. 1541 of 13 December 2016.