NCPA - National Center for Policy Analysis


May 25, 2007

The latest export from the United States to Europe could do irreparable damage, says Malcolm Carlisle, chairman of the European Justice Forum.

Over the last decade there have been increasing and troubling signs of the U.S. litigation culture taking root at the national level in Europe:

  • Some nine class-action bills have been making their way through the parliamentary procedures in Italy.
  • The German Supreme Court has issued a judgment that makes it unconstitutional to ban contingency fees for lawyers under any circumstances.
  • Denmark, Finland and Norway all have new laws that make it easier to act collectively in judicial matters.
  • France, Poland, Ireland and the United Kingdom are considering introducing legislation that allows class-action suits.

So how concerned should Europe be?  One only needs to look at U.S. system to gain a sense of where this road could lead, says Carlisle:

  • Tort costs in 2004 alone reached $260 billion, equal to a "litigation tax" of $886 on every American citizen, or just over 2 percent of the U.S. gross domestic product (GDP).
  • The real winners have been trial lawyers; meanwhile, plaintiffs are promised millions and receive only a small fraction of the payouts.
  • One notable case is the Bank of Boston class-action settlement in Alabama; the lawyers reaped $8.5 million, leaving each plaintiff with $8.76 each.

Without a doubt, Europe needs a balanced legal system that protects consumers and businesses alike, says Carlisle.  But in order to accomplish this, civil justice systems must differentiate between meritorious claims and frivolous ones that stand only to clog up an already overburdened legal system.  Redress mechanisms must be designed in a fashion that ensures that those with a genuine cause for complaint are compensated, not the trial lawyers.

Source: Malcolm Carlisle, "An Unwanted Import," Wall Street Journal, May 24, 2007.

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