The new Italian class action bill (Law no. 31 of 12 April 2019) was passed in 2019 and – after a number of postponements – finally entered into force on 19 May 2021. Although class actions are available in Italy since 2007, they had not proven successful due to the strict admissibility test for class certification.
Thus, the new reformed law may be seen as a true revolution in the Italian litigation arena. It is particularly favourable to claimants as it provides for (i) a broader scope of application and (ii) incentive mechanisms aimed at encouraging the use of the class action system.
Among the main innovations of the new law:
- The new class action is no longer reserved to consumers and end users, and is open to all kinds of damage claims: from now on, class actions may be brought for the enforcement of “homogeneous rights” by anyone (including legal entities and in B2B relationships) claiming damage redress against the “author of the harmful behaviour” or seeking injunctive measures.
- The new class action provides for a double opt-in window. Claimants can now join the class once the action is admitted, right before the proceedings on the merits start, and also up to 5 months after the decision on the merits is issued.
- The new bill introduces economic incentives by providing for a monetary reward, if the action is successful, for the lead plaintiff’s lawyer and for the “common representative” of the class.
The reform entails important criticalities for businesses including banks and financial institutions, which need to prepare to potentially face a greater number of collective actions with no certainties as to the number of potential class members (and hence, as to the potential exposure) and increased difficulties in reaching early settlements. It is therefore advisable that they adopt internal policies to mitigate risk exposure and conceive new defensive strategies.
Class actions and Italian banks
In Italy financial institutions had to face class actions even before the entry into force of the new law. In the past, bank customers have brought class actions against Italy’s first and second largest financial institutions seeking to annul contractual clauses prescribing overdraft fee charges to clients. Class actions brought in 2010 and 2012 against Unicredit bank and Intesa San Paolo bank before the Courts of Rome and Turin ultimately did not pass the admissibility test whilst another class action, brought by a primary Italian consumers association against Intesa San Paolo bank once again before the Court of Turin, was considered admissible in September 2013, was carried out, and was definitively upheld in 2019 by the Italian Supreme Court of Cassation. Recently, the Court of Appeal of Turin - pursuant to the 2019 Supreme Court ruling - also admitted to the class a number of opters-in who had previously been excluded as lacking the signature notarization requirement on the relevant contracts. Thus, the bank was ordered to repay the unlawful charges in favour of all the members of the class including opters-in.
Recently, Italy has experienced an increase in cybersecurity and data breach litigation which is expected to further expand. In many cases banks have been sued by customers for alleged abusive access to their personal data. In particular, on 10 June 2020 the Italian Data Protection Authority (Garante Privacy) sanctioned Unicredit bank to pay €600,000 for the data breach occurred in 2016 to the detriment of about 700,000 customers. Despite the bank having denounced abusive access to its databanks, the Garante Privacy proceeded with sanctioning Unicredit having found numerous violations of the Italian Privacy Code.
In recent times, Italy is also experiencing an increase in cryptocurrency-connected litigation; investors allege breaches of the Italian Consolidated Financial Act and AML Regulation by financial entities and seek return of converted and/or invested amounts.
More and more disputes may arise in the above contexts in the near future as a consequence of the entry into force of the new Italian class action, characterised by a broader scope and which will allow customers seeking to pursue collective claims and damage redress to benefit from increased pro-claimant procedural rules and substantial economic incentives to plaintiffs’ lawyers and class representatives.
International update and next steps
24 November 2020 marks the final approval of EU Directive 2020/1828 of the European Parliament and Council on Representative Actions for the Protection of the Collective Interests of Consumers (and repealing EC Directive 2009/22) regulating the initiation by ‘qualified entities’ of injunctive and redress collective measures through stand-alone and cross-border collective actions covering infringements by traders of the provisions of 66 European regulations. The Directive requires EU Member States, including Italy, to adapt their procedural collective action and redress mechanism by 25 December 2022, with application as from 25 June 2023.
It remains to be seen how the implementation of the Directive and the reformed Italian class action system will combine.
Authored by Filippo Chiaves.