Denmark introduced legislation on the subject of collective redress in 2008 and this legislation has not been changed since it was introduced.
While Danish legislators looked at the experience with collective redress suits in many other jurisdictions, they found that the regimes could not be copied due to differences in legal systems. They found that while the USA had the most collective redress suits, the differences between the American and Danish legal systems could not be reconciled. Some inspiration was drawn from Swedish regulation, especially the strict legislation about group representatives that ensures that no unnecessary collective redress suits (so-called "nuisance suits") are brought before the courts.
The directive has not yet been implemented in Danish law, but when it is, it will not impact significantly on Danish legislation as Danish law already shares many similarities with the new EU system. For example, Denmark has already appointed an entity that can represent consumers in collective redress suits, namely, the Consumer Ombudsman. Furthermore, the government can appoint other public entities to represent consumers, see Section 254 c, Section 1, No 3 of the Danish Administration of Justice Act (the "Justice Act"). There is also nothing to prevent organisations from EU countries representing consumers in Denmark as long as the legal venue of the suit’s claims is Denmark.
Collective redress suits in Denmark are regulated under Chapter 23 of the Justice Act. This act contains almost all the legislation regulating court cases in Denmark. Chapter 23 a comprises Sections 254 a–k.
All types of civil cases can be brought as a collective action, although criminal cases cannot. However certain conditions, see Section 254 b, subsection 1 of the Justice Act, must be met in order for a collective redress suit to be allowed by the court:
If the group cannot comply with these criteria, the courts will not allow the collective redress suit to go forward and the participants must bring their claims individually.
In Danish law, collective redress suits are a separate form of legal procedure and, as such, a collective redress suit is a lawsuit that can be processed using the rules set forth in Chapter 23 of the Justice Act. In other words, a collective redress suit is a lawsuit which meets the criteria set out in 3.1 Scope of Areas of Law to Which the Legislation Applies.
The mechanisms for bringing a collective redress suit to court are the same as in every other court case, the difference being that the plaintiff, in their Statement of Claim, requests that the court will process the claim in accordance with the rules of collective redress.
A collective redress suit can be brought in every city court, which is the same for all court cases. Certain collective redress suits can be brought before the Maritime and Commercial Court, namely cases concerning transportation, marketing, intellectual property and competition law.
A collective redress suit begins like any other court case, with the handing in of a Statement of Claim. This must contain the request for the case to become a collective redress suit and can be handed in by anyone with the standing to be group representative. Besides the request, the Statement of Claim must, according to Section 254 d, subsection 1 of the Justice Act, contain:
When the group is identified, a collective redress suit proceeds in the same way as a “normal” civil case. Procedurally – once the group has been identified – there is no difference between bringing forth a normal court case and bringing forth a collective redress suit.
The group representative is the one with standing to bring forth the claim and act as the party in the suit. Section 254 c, subsection 1 of the Justice Act, sets forth that a group representative must be:
So far, the Consumer Ombudsman is the only public institution which is authorised to act as a representative in a collective redress suit.
Danish legislation allows both opt-in and opt-out collective redress suits.
If the suit is an opt-in suit, the court will determine a deadline for group members to opt in to the suit, see Section 254 c, subsection 6 of the Justice Act, although the court in special circumstances can allow someone to opt in after the deadline. Opting in to a collective redress suit is binding for the group member, which is why any potential group member must be informed of the legal effects of opting in.
The court can decide that opt-in is not the best mechanism for any particular collective redress suit. In such cases, the court can decide that the suit should be opt-out and will set a deadline for when potential group members must opt out of the group, see Section 254 e, subsection 8 of the Justice Act. However, in special circumstances, the court can allow someone to opt out after the deadline has expired. The group representative must be a public authority if the suit is to be conducted as an opt-out suit, however.
See 4.4 Class Members, Size and Mechanism (Opt In/Out).
The court decides whether the suit is appropriate to become a collective redress suit and whether it should be an opt-in or opt-out suit. Furthermore, the court appoints the group representative and manages the deadlines for opting in and opting out.
In opt-in suits the court can also decide that opting-in is conditional on the group member providing security – an amount decided by the court – for the legal costs of the case, in case the court gives judgment in favour of the defendant, see Section 254 e, subsection 7 of the Justice Act.
The length of the proceedings will depend on several factors, such as, how many group members there are and how complicated the case is, but it is not unusual for the proceedings to take more than one year.
There are no such rules in Denmark.
There are several methods of funding a collective redress suit. A number of these are open to individuals.
Legal expenses insurance
An individual can be covered by a legal expenses insurance.
In certain cases, the government provides free legal aid and thereby accepts to cover a person’s costs in connection with the case, if either the person or the case qualifies. A person can qualify for legal aid if their income is below the appointed minimum, which can be found in Sections 325 and 326 in the Justice Act. Such a person may not be covered by a legal expenses insurance and the case needs to either fall with the types of cases listed in Section 327 of the Justice Act or be of such a nature that it is essential for the applicant to take it to the courts, see Section 328 of the Justice Act. Free legal aid can also be provided if the case is of benefit to society or will have such an effect on the applicant that it is necessary that legal aid is provided, see Section 329 of the Justice Act, or if legal action is taken by a consumer who has been successful in an action before the Consumers Complaints Board or in certain taxation cases.
On a group level, third-party litigation has been permitted by the Danish Supreme Court. Third-party funding is however not regulated by law, which means that there is in principle complete freedom of contract regarding third-party funding, as long as the governing contract for the third-party funding lives up to the general requirements for contracts in Danish law. Furthermore, the majority in the business and legal communities are sceptical of third-party funding and believe that increased use of it will lead to increased commercialisation of lawsuits and result in far more speculative suits.
With regards to who should pay the legal costs of the case, this is decided by the presiding court in accordance with the usual legislation concerning legal costs, see Sections 311–322 of the Justice Act. If the court finds in favour of the defendant, the group representative and the members of the group are jointly and severally liable.
In opt-in suits, the court can decide that opting in is conditional on the group member providing security – an amount decided by the court – for the legal costs of the case, in case the court passes judgment in favour of the defendant, see Section 254 e, subsection 7 of the Justice Act. If the group loses the case, the liability of the group members is limited to this amount, see Section 254 f, subsection 3 of the Justice Act.
The same rules of disclosure apply in collective redress suits as in any other court case. These can be found in Sections 298–301 of the Justice Act.
As in any other court case, remedies can be the payment of damages, restitution or declaratory remedies.
There are a number of out-of-court resolution methods available in Denmark.
There are a great number of ADR mechanisms available before litigation. These mechanisms seek to settle a high number of small individual claims before they progress to the courts. If the defendant does not comply with these ADR rulings, the Consumer Ombudsman may take the question to court on behalf of the consumer or group of consumers. These court proceedings may be commenced over the same issues while ADR proceedings are taking place. The ADR proceeding would normally be stayed during litigation. There are no collective ADR mechanisms available. The ADR mechanisms available have worked very well in the past and there appears to be no reason to change them in the near future.
Once the Statement of Claim has been handed in, the parties can choose to settle the claim between them before the court reaches a decision. This is done as in any “normal” court case.
A judgment in a collective redress suit is binding for the members of the group, see Section 254 f, subsection 1 of the Justice Act.
Usually, the parties comply with the judgment and there is no need for the courts to enforce it. If the losing party does not comply with the verdict, the Enforcement Court can enforce any verdict that prescribes the payment of money. If the verdict is declaratory in nature, another suit must be brought before the court to determine if this declaration should lead to damages.
No policy developments have been proposed.
No legislative changes have been proposed.
Brexit has had no impact on collective redress suits in Denmark.
COVID-19 has had no impact on collective redress suits in Denmark, except that the processing of these suits may have been delayed due to the lockdowns in 2020 and 2021, during which the courts did not operate.
The Use of Class Actions in Denmark – 2021
Denmark introduced legislation on collective redress as early as 2008, but since that time the Danish courts have only adjudicated a fairly small number of collective redress suits.
While Denmark’s legislative regime for collective redress is well developed, it appears that a range of policy matters, from “floodgate” arguments concerned about the ease of bringing large claims against potentially innocent companies, to general opposition to third-party funding, have meant that collective redress cases have historically remained small in number in Denmark.
However, there are some discernible features and trends emerging in respect of such cases in Denmark. For a start, there are some Denmark-specific form and procedural requirements which may historically have meant that cases are harder to bring in Denmark and that the cases there have been have generally involved securities litigation matters. However, this is now broadening in scope, with numerous cases being brought in a range of different areas.
Mandatory criteria to bring a claim as a collective action
One of the reasons there have only been a few collective redress suits in Denmark could be the numerous inclusion criteria that need to be met in order to bring a collective action suit. First, as with any other claim before the courts, the claim must be legitimate and be suitable for trial, it must be current and the plaintiff must have a specific interest in pursuing the case. Specific to collective actions, the claims aggregated in the action must meet additional requirements:
It is thought that the requirement that a collective redress suit needs to be the most suitable way to address the claims is likely the most difficult requirement to fulfil and one with which many potential claims struggle. The court will assess this and will only issue a group certificate if no other option for addressing the claim is better suited.
One example of this is the High Court case UfR.2016.104Ø, in which an association of loss-making former employees of Roskilde Bank could not bring a class action for damages. The case was found not to meet the conditions required by the Danish Administration of Justice Act (the "Justice Act") because the claims were not sufficiently uniform for a class action to be the appropriate process. It was emphasised that determination of the claims, based on the allegations and pleas stated in the application, would involve individual assessment of each claimant's circumstances. Consequently, the case was dismissed as not appropriate for collective redress.
As a starting point, all collective redress suits are “opt in”, which means that those who wish to take part in the group action must opt in before a certain deadline decided by the court. The court can make it a condition for opting in that the group members provide security for legal costs.
This requirement for security for legal costs from parties to a collective redress action may, arguably, be another reason for historically low numbers of claims in Denmark. The Danish Supreme Court lowered the security for legal costs in its decision in UfR.2012.2938H and mentioned that this amount must be determined at the court’s discretion, taking into account the value of the case, as well as the scope and nature of the case, and the work associated with it.
Danish legislation (Section 254 c, Section 1, No 3 of the Justice Act) also allows "opt-out" collective redress suits, but only if a public authority appointed by law acts as the group representative. Currently, only the Consumer Ombudsman has been appointed under legislation to act as a public group representative in opt-out suits.
Usually, group representatives are ad hoc legal entities with the sole purpose of pursuing a particular collective claim.
The above mechanism may also therefore be considered a procedural hurdle for some of those bringing claims. This can be seen in the High Court decision UfR2018.3361Ø in which the association “Class Action against AP Livsforsikringsselskab” filed a class action against the insurer AP Livsforsikringsselskab. The High Court dismissed the class action and emphasised that because the group included both active members and pensioners, it was not sufficiently uniform and the same factual circumstances did not exist for the individual members.
Securities Cases Increasing
Collective redress claims have increased recently, in particular, with respect to securities claims. In fact, two of the largest securities claims in the last ten years have been collective redress claims.
The well-known case of Danske Bank is one such example of this phenomenon. There were several collective redress suits in this case, among them, one where 300 investors sued the bank because their shares lost value. Such loss of value was due to the bank’s money-laundering practices.
In the OW Bunker case from the Danish High Court, UfR2019.962Ø, a number of small investors formed an association in order to sue the former executive board for misrepresentation and non-disclosure in a prospectus published prior to the listing of OW Bunker. The class action was accepted, as the High Court deemed it was the best way to deal with the claims. The company went into bankruptcy less than a year after the listing.
Broadening of Scope of Collective Actions
Although historically many collective redress suits in Denmark have been limited to securities cases, such as the one above, it now seems that collective redress rules are beginning to have a wider use.
In the Danish town court of Hillerød, in spring 2021, a group of Tesla car owners brought a suit against Tesla alleging that an update of the software in the cars meant that the car batteries took longer to charge and this generally decreased the functionality of the cars.
A third collective redress suit in progress concerns an energy company that spent DKK165 million on developing the production of geothermal heat, despite being warned that there was only 10% chance of success and despite spending more on the project than the company was authorised to. The company’s customers ended up paying the difference and therefore sued the company.
The Impact of the EU-Wide Collective Redress Rules
The new EU Directive 2020/1828 (the "Directive") on representative actions for the protection of the collective interests of consumers, which will regulate collective redress uniformly across all the EU member states, is to be implemented into Danish law by December 2022.
The adoption of the Directive is likely to be of very little consequence for Denmark on the legislative front, however, since the proposed legislation is very similar to the current Danish legislation on collective redress.
Denmark’s response to the Directive
The Danish government has publicly expressed that it is pleased with the following aspects of the Directive, which generally align with the pre-existing Danish position regarding collective actions.
Group representative criteria and selection
Denmark’s existing legislation already allows the Danish Consumer Ombudsman to act as a representative on behalf of a group of consumers in a collective redress suit. The Directive allows that each member state can still decide which private organisations and public authorities can represent the relevant claimants in a class action, and preserves the existing opt-in model.
Member states’ ability to interpret the Directive
In general, the Danish government is also pleased with the wide margin member states have been given to interpret the Directive and prescribe the specified criteria with regards to which organisations can be appointed, what measures the state should provide to ensure consumers’ access to the courts, etc, as this allows the government to maintain as much as possible of the current legislation regarding collective action.
Conversely, the Danish government has commented negatively about the following aspects of the EU system.
Accessibility to collective redress mechanisms
One of the Danish government’s primary concerns is that the Directive will expand consumers’ access to collective redress to such an extent that companies will be in danger of being potentially dragged into a large number of unnecessary and possibly unfair lawsuits, thereby diminishing these companies’ legal rights. This reservation about the new legislation is shared by a number of organisations, most notably, the Confederation of Danish Industry and the Danish Chamber of Commerce. Overall, the Directive has not drawn much attention in legal circles and none at all among the general public in Denmark. However, it is still possible that the adoption of the Directive might increase general public awareness of the existence of collective action mechanisms, thereby increasing the number of such lawsuits in general.
The above concern with the accessibility of the collective redress mechanism mostly relates to the current discussion in Denmark regarding whether third-party funding of collective redress claims should be allowed as it is today. The arguments for and against third-party funding are basically the same; it increases non-professionals’ access to the courts but might, at the same time, expose companies to potentially unnecessary and unfair lawsuits, thereby incurring unjust costs for the companies. With regard to third-party funding, the Supreme Court accepted this in 2017, when OW Bunker’s bankrupt estate entered into an agreement with a third-party funder. The Supreme Court found that third-party funding is not in conflict with Danish legal procedure. Since then, third-party funding has been used in bankruptcy cases and in large damages suits. It has especially been used by shareholders and other investors to bring security claim suits against large companies and executive boards which have experienced a sudden drop in the value of their shares, such as OW Bunker, the Danske Bank, the pharmaceutical company, Novo Nordisk, and lastly, the wind turbine-producer Vestad.
The general perception among legal professionals in Denmark is that third-party funding is on the rise and the Danish legal community cannot agree on whether the introduction of third-party funding is beneficial or not. While many mention the merit of making it easier to bring a case before the courts if one would not normally have the economic means to pursue a claim, most also note the disadvantages, such as the funder’s control of the case and potential conflict-of-interest issues.
Many believe that the increased use of third-party funding will lead to increased commercialisation of lawsuits and speculative lawsuits. The business sector has responded negatively to the notion of third-party funding. The chairman of the board of wind turbine-producer Vestas stated to the press, when the shareholders withdrew the suit against Vestas’ management, that he was of the opinion that the raison d'etre of third-party funding was simply to put undue pressure on the defendants and force a settlement.
The future of collective redress actions in Denmark will be interesting to watch in the coming years, for legal commentators and the public alike.
The current trend of increased use of the pre-existing local mechanism could indicate the potential enthusiastic uptake of the EU-wide mechanism, which may, in turn, increase publicity and therefore the popularity of the general mechanism. However, given the similarity of the new EU and existing Danish mechanisms for collective redress, it is not anticipated that there will be any extreme developments in this regard. The procedural hurdles that exist in bringing such claims in Denmark are likely to remain, and this may therefore act in the future to keep the number of claims relatively low.
The outcome of the ongoing public debates about ease of access to these collective action mechanisms as well as third-party funding will, undoubtedly, have an impact on the future legal landscape and climate in Denmark for bringing this type of claim.
In the meantime, we will continue to watch, with interest, the development of the overall trend for increased claims, both in traditional securities matters, but also further afield.