Wanted to share a piece I have in the Wall Street Journal today on a new law which could open the floodgates to class actions in the U.K.

The American legal system—which has become infamous for absurd "hot coffee" lawsuits, exorbitant costs, and systemic abuse—is widely recognized as one American import that Europe can do without. But a movement is afoot in the U.K. to pass legislation in the next several weeks that would create U.S.-style collective-action lawsuits. If it passes, the Financial Services Bill would likely be a clarion call to the masters of U.S. litigation abuse ...Collective actions, or class actions, are an originally American legal mechanism that allows one or a few claimants to file a lawsuit on behalf of a large group of claimants, many of whom might not even know about the case. They are now a multibillion-dollar industry, and their history is rife with horror stories. These lawsuits fail to accomplish their goal of efficiently compensating consumers who have been wronged, and they play a large role in making the U.S. tort system the most expensive in the world, at a cost of $255 billion per year. But, according to research by Towers Perrin, the U.S. tort system returns less than 50 cents on the dollar to the consumers it is designed to help, and only 22 cents go to compensate actual economic losses.

...While some may be pacified by the thought that the British might not abuse collective actions like Americans have, my bet is that British lawyers will not be the only ones filing suits. The U.S. trial bar has already set foot in Europe. In the words of Brian Murray, a partner at an American law firm, "all the fields have been plowed in the United States. If you want to enter new markets, you have to go outside the United States." In that vein, U.S. law firms are opening new offices in London, and some are even overtly advocating for collective actions across the EU.

U.S. claimants' lawyers are looking to expand their business model across the Atlantic largely because class actions are so profitable for them. Lawyers extract enormous settlements, reaping millions of dollars in fees for themselves. But the problem is that the consumers they represent often get very little or nothing at all...Furthermore, in the U.S., any citizen may be a claimant in one of these lawsuits without even knowing it. Without the consumers' permission, lawyers can file on behalf of everyone who bought a certain product in a given period of time or held a certain stock as long as they have one claimant to name in the case. One environmental group placed an advertisement stating that "if you breathe air," you are a claimant.

...British politicians can be commended for working to expand consumers' access to justice. And, in an election year, it may be tempting to rush legislation that seems to serve that purpose. But, based on 40 years of American experience, billions of dollars squandered, and widespread consumer dissatisfaction with the American system, adopting loosely written legislation to create collective actions, without safeguards that will prevent the most egregious abuses, is the wrong way to go.

More here.