“Third-party funding can be particularly beneficial in lengthy investment treaty cases”

Leaders League: What is the current state of class action in Spain?

José Luis Terron: Class actions in Spain have traditionally been an exception, since mass litigation has been carried out via individual claims. In this regards, the prevalent approach has been to file numerous individual claims related to a similar issue. This has typically involved mechanisms such as multiple parallel proceedings or the joinder of parties to an ongoing lawsuit. These methods have primarily been utilized by consumers and retail investors who have made claims against banks and other financial services firms, often on the grounds that their products were misleadingly promoted, leading to flawed consent.

This type of litigation was meant to change due to EU Directive 2020/1828 (Representative Actions Directive (RAD), which aims to regulate collective actions for the protection of consumer rights. Spain is currently in the process of transposing such directive, however, the legislative process has faced significant hurdles. The proposed bill, which sought to implement this directive, has recently been transferred to the parliament for discussion and approval.

The proposed bill contains several notable provisions.

Primarily, the bill adopts an opt-out system, meaning all affected consumers would be included in the collective action unless they explicitly chose to opt out. This system (only present in Europe in Portugal and the Netherlands) might boost collective litigation in Spain. Other relevant aspects of the bill are that it allows for third-party funding of collective actions, with specific controls to prevent conflicts of interest.

Which sectors are expected to see increased litigation under the future collective action legislation?

The implementation of the RAD in Spain is expected to significantly impact the collective action landscape. We anticipate that the areas of data privacy and greenwashing would be some of the most impacted.

With the increasing prevalence of data breaches and cybersecurity issues, companies handling large volumes of personal data are likely to face heightened scrutiny and potential litigation. The RAD facilitates collective redress mechanisms, which is particularly significant when it comes to data privacy breaches, where the harm is often widespread but individually small, making collective action a more efficient means of seeking redress.

“Companies handling large volumes of personal data are likely to face heightened scrutiny and potential litigation”.

This includes breaches resulting from inadequate cybersecurity measures, unauthorized access and failure to comply with data-protection regulations such as the General Data Protection Regulation (GDPR).

Regarding greenwashing, the enactment of the Green Claims directive (which expressly regulates greenwashing practices) together with the transposition of the RAD might increase ESG-related litigation. Greenwashing refers to the practice of companies making misleading claims about the environmental benefits of their products or practices. As consumer awareness and concern about environmental issues grow, so does scrutiny of corporate environmental claims.

The RAD’s implementation will enable consumer associations and other qualified bodies to bring collective action against companies that engage in greenwashing.

How does A&O Shearman Spain approach third-party litigation funding, and in what types of cases is it most beneficial to your clients?

At A&O Shearman, we proactively inform our clients about the possibility of utilizing third-party litigation funding (TPLF) from the very beginning of their cases. We maintain strong relationships with a diverse array of funders who can offer bespoke financing solutions tailored to the specific needs of our clients. This ensures that our clients have access to the necessary financial resources to pursue their legal claims without having to bear the full financial burden themselves.

One of the primary areas where we have observed significant interest in TPLF is in lengthy investment treaty cases. These cases often involve substantial legal fees that can amount to several million euros. Third-party funding can be particularly beneficial in these scenarios, as it allows clients to manage the high costs associated with prolonged litigation without depleting their own financial resources.

Another critical stage where TPLF can add value is in the monetization of claims. This can occur at various points in the litigation process, either post-award or pre-award.

“The areas of data privacy and greenwashing would be some of the most impacted with the implementation of the EU Directive 2020/1828 in Spain.”

On the one hand, after an award or judgment has been rendered, enforcement can be a complex and time-consuming process, especially when dealing with sovereign entities. Third-party funding can provide the necessary financial support to navigate these challenges, ensuring that clients can effectively enforce their claims over several years if needed.

On the other hand, in cases where a client’s claim has a high likelihood of success but the client requires immediate liquidity, TPLF can offer a viable solution. By securing funding at an earlier stage, clients can continue to pursue their claims vigorously while addressing their immediate financial needs.

What are the challenges in arbitration cases involving contract breaches, and how does A&O Shearman assist in resolving them?

One of the major challenges in arbitration cases involving contract breaches is the management of documents. This is vital for constructing the case and establishing the relevant facts. The sheer volume of documents and the need to efficiently organize, review and analyze them can be overwhelming and time-consuming.

A&O Shearman leverages powerful technological tools such as RelativityOne and Opus 2 to address these challenges effectively. These tools streamline the document review and analysis process, making it more efficient and cost-effective.

RelativityOne is a market-leading eDiscovery platform that A&O Shearman uses to streamline the document review and analysis process. Key features include advanced analytics tools like email threading, clustering, and continuous active learning (CAL), which help in quickly identifying relevant documents and reducing the volume of documents requiring manual review. This not only saves time but also reduces costs.

Opus 2 is another critical tool used by A&O Shearman for case preparation. It integrates document management, collaboration and secure data sharing into a single environment. Key features include centralized document management, flexible bundling workflows, chronology creation and secure information sharing. These features make it easier to manage and access all relevant documents, create and manage electronic bundles, build complete case timelines and securely share content with external users.

By utilizing RelativityOne and Opus 2, A&O Shearman significantly enhances the efficiency and effectiveness of document management in arbitration cases involving contract breaches. These tools help in quickly uncovering important facts, reducing the volume of documents for manual review and ensuring secure and organized data-handling, ultimately leading to better-informed decisions and successful case outcomes.