Collective redress/class action as a resource for lawsuits was brought into Icelandic law on 20 September 2010 by Act No 117/2010. This Act amended Act No 91/1991 on Civil Procedure (the “CPA”) by adding a new Article 19a, which contains all the provisions of the CPA regarding collective redress. Before Act No 117/2010 came into force, there was (and still is) a provision in the CPA (Article 25(3)) prescribing the possibility of forming associations to pursue cases in their own name for recognition of certain rights of their members. Although associations could be established strictly for the purpose of bringing a lawsuit, the provision lacked many important elements found in collective redress regimes and was almost never used for such purposes.
The explanatory documents with Act No 117/2010 state that upon the enactment of the CPA in 1992, consideration had been given to enacting rules on collective redress/class actions. However, the idea was abandoned as there were no such rules in the other Nordic countries to rely on. As rules on class actions have since been enacted in other Nordic countries, it was thought timely for Iceland to follow this trend.
In 2001, directive 98/27/EC on injunctions for the protection of consumers’ interests was implemented with Act No 141/2001 on injunction and litigation, to protect overall consumers’ interests (see 1.3 Implementation of the EU Collective Redress Regime).
It can be deduced from the explanatory documents with Act No 117/2010 that the collective redress regime in Article 19a of the CPA was, at least in part, modelled on such legislative regimes in the other Nordic countries. As an example, Article 19a contains a condition, like similar provisions in the other Nordic countries, that the claims of class action members must be sufficiently similar. However, Article 19a differs to a certain extent from the other Nordic countries’ class action regimes. For instance, there is no condition in Article 19a that a class action must be deemed the most convenient way to pursue the members' potential claims, as seems to be the case in Denmark, Norway and Sweden. Furthermore, there is no explicit condition that Iceland should be the correct venue for all the members' claims. Article 19a also does not require plaintiffs to bring forth a specific request in court in order to be allowed to file a class action, which seems to be a requirement in Denmark, for example. Instead, assessment of whether the conditions for collective redress are fulfilled is carried out in the traditional way when procedural issues are examined by the court – see 4.4 Class Members, Size and Mechanism (Opt In/Out).
Iceland has implemented Directives 98/27/EC and 2009/22/EC (the “Directives”), on injunctions for the protection of consumers’ interests, with Act No 141/2001 (on injunction and litigation to protect overall consumers’ interests) and Act No 97/2014 (amending Act No 141/2001), respectively. The provisions of Act No 141/2001 (as amended) clearly meet the minimum requirements imposed on member states by the Directives in that they provide access to competent authorities and courts to quickly stop violations of the directives listed in the annexes of the Directives.
Directive 2020/1828 (the “Directive”) has not been implemented in Iceland. The Directive is currently under scrutiny by EFTA as to whether it will be incorporated into the EEA agreement. Thus, the Directive and its expected implementation have not yet been addressed or discussed by the legislature.
The four paragraphs of Article 19a of the CPA contain the entire legislative framework for general class actions in Iceland. In other respects, all the rules of the CPA, which contains more or less all the rules for handling civil court cases in Iceland, apply to the extent that there is no explicit deviation from them.
Article 19a provides the possibility for three or more persons (individuals or legal entities) who have claims against the same party or parties, and could have pursued a case in court on their own or jointly with others pursuant to Article 19(1) of the CPA (discussed further in 4.1 Mechanisms for Bringing Collective Redress/Class Actions), to form and entrust an association with filing a single lawsuit in its own name with regards to all their claims, and, as the case may be, to enforce and settle the claims (paragraph 1 of Article 19a).
The collective redress regime in Article 19a is intended for civil cases that are conducted in accordance with the CPA. The remedy is not limited or conditioned to specific types of civil cases.
In essence, a collective redress/class action suit in Icelandic law is where three or more persons, who have claims against the same party or parties that originate from the same incident, circumstance or legal instrument, within the meaning of Article 19(1) of the CPA, form an association to file a single lawsuit regarding all their claims in accordance with Article 19a of the CPA.
The mechanism for bringing a collective redress/class action suit in Iceland is for three or more persons who have claims against the same party that originate from the same incident, circumstance, or legal instrument, to establish an association which has the sole purpose of pursuing their specific case in court.
The association can be simple in format but must meet the requirements necessary for it to have legal standing. Thus, the association must demonstrate that it has in fact been established (ie, by producing a written memorandum of association or the minutes of the founding meeting) and keep a register of its members. Furthermore, the association must be given a name and have articles of association or by-laws with rules by which the association operates. However, for the sake of simplicity, it is provided in Article 19a, paragraph 1, that where no special articles of association are set out, general articles of association for litigation associations issued by the Minister of Justice by a regulation shall apply. It should be noted that it is not mandatory, although it is possible, to formally register litigation associations with the relevant authorities.
In the summons submitted to the court, a claim must be made in one piece in the name of the association. Furthermore, details of the members must be stated in the summons and, if the claim is for a sum of money, what share each of them has in the claim. Although it is not a requirement per se, it would be considered good practice to specify in the summons how the members' claims originate from the same incident, circumstance, or legal instrument, if it is not obvious. Apart from the above, the general rules of the CPA on the content of the summons apply. A class action suit can be brought in the same courts as other civil cases, ie, one of the eight district courts that has jurisdiction over the matter. In this regard, it would generally be sufficient if the relevant court had jurisdiction over just one of the members' claims.
The procedure for bringing a collective redress/class action suit is the same as for bringing other civil cases. The litigation association must serve the summons on the defendant(s) by the means provided for in the CPA on lawful service of summons. In the summons, the defendant(s) is/are summoned to a court session in the district court where the association submits the claim together with other court documents. Thereby, proceedings are started before the court.
Article 19a stipulates that although the litigation association is the party to a case, its members will each have the interests that the case concerns and enjoy status as parties, except as follows from other provisions of Article 19a. However, the association has full authority to take all types of decisions regarding the case, including to cancel it or end it through a court settlement. The Article does not require a person to be selected or specified to represent and act on behalf of the association. It could, however, be practical to do so. In this regard, it should be noted that ministerial articles of association mentioned in 4.1 Mechanisms for Bringing Collective Redress/Class Actions entail that a board or chairman is elected to make decisions for the company and act on its behalf. Such a board or chairman would presumably be considered to represent the association in a case.
Member Eligibility and Size
As stated in 4.1 Mechanisms for Bringing Collective Redress/Class Actions, three or more persons who have claims against the same party or parties that originate from the same incident, circumstance or legal instrument can bring a class action suit. There is no statutory maximum number of class action members.
No special request must be made to the court for authorisation to file a class action lawsuit, as in some legal systems. Rather, the court will examine this in the same way as it generally examines whether there are formal/procedural defects in a lawsuit. Regardless of whether a demand is made in this respect by the defendant, the court would most likely examine whether most if not all the conditions for a class action are met. Thus, a court would presumably examine whether the formal requirements for the establishment of a litigation association are met, whether the claims of the members are against the same party or parties, and whether the members’ claims originate from the same incident, circumstance or legal instrument.
Mechanism for Joining a Class Action (Opt In)
Article 19a only prescribes an opt-in option in the sense that all members of a class action must specifically agree to participate in the class action. A member can at any time – or at least up until the main proceedings – withdraw from a class action. If a member withdraws from a class action after the case has been filed, the member might still be ordered to pay a share of the legal costs awarded to the defendant, if applicable.
A party may at any time before the main proceedings in a case become a member of a litigation association and join a class action. If a new member joins a class action after a lawsuit has been filed, the association can increase its claims in favour of the new member. Such a change or increase in the claims shall, as necessary, be made by serving a supplementary summons on the defendant as per 4.2 Overview of Procedure.
There are no special rules on case management powers for the courts in respect of class action suits, but general rules on procedure apply. As mentioned in 4.4 Class Members, Size and Mechanism (Opt In/Out), the court will at early stages in the proceedings examine whether most, if not all, the conditions for a class action are met. In other respects, the court will presumably not actively interfere with the proceedings.
The duration of proceedings in a traditional civil case before the district courts is on average approximately one year, but may take less or more time depending on the scope of the case. The little experience of class actions in Iceland suggests that such cases can take longer than average, as they can be larger in format. However, it should be noted that few such cases have been brought and the sample is therefore not large.
There are no special rules regarding delays or acceleration of proceedings in respect of class actions. The general principle is to expedite proceedings as quickly as possible, but if there are special reasons to delay a case, such a request can be submitted to a judge who will decide on it. It is possible to apply for acceleration of proceedings in certain types of cases, ie, cases relating to a decision or act of an administrative authority, or a strike, lockout or other action in relation to labour disputes. It is a condition for expedited proceedings that there is a need for a quick resolution and that it is of general significance or relates to important interests of the plaintiff(s).
According to Article 130(1) of the CPA, a party that loses a case in all substantive aspects will normally be ordered to pay the counterparty’s legal costs. The same applies to class action suits. If a litigation association loses a case and is ordered to pay the defence party's legal costs, the obligation to pay rests with the association as well as all its members, jointly and severally, as it is prohibited to limit the liability of members vis-à-vis the association’s obligations.
Arguably, the most common way to fund a class action suit is through membership fees or guarantees. In this regard, it should be noted that in the articles of association issued by the Minister of Justice, discussed in 4.1 Mechanisms for Bringing Collective Redress/Class Actions, it is stated that membership fees can be levied to cover the cost of the association’s operation. Membership fees will be determined at the founding meeting or at a general meeting of the association.
Third-party funding is also an option, as nothing in the law prohibits such funding of a class action. With regards to legal aid granted by the government under certain conditions, it is uncertain whether such funding remedy can be used in class actions. One of the ideas behind the class action remedy is to collect a number of claims which individually are so low that they would not justify bringing a lawsuit due to cost. If a member of a class action suit is eligible for legal aid to pursue their claim, it is unclear whether they could use the legal aid for the benefit of a class action. Possibly, in such a case, legal aid might be granted to a member to cover their cost of participation, but there are no precedents that confirm this. In a related matter, it is also uncertain whether funding through individual member’s legal expenses insurance is a possibility.
Even though a party has not raised a claim in connection with an incident in court, it may seek proof of an incident in court by requesting oral testimony or submission of documents or other visible evidence, if one of these two conditions is met:
Unless an intended counterparty in a suit agrees, the above method cannot be used to obtain evidence in the counterparty's possession, and the counterparty will not be compelled to give oral testimony. If it is shown that the intended counterparty is in possession of requested evidence, the requesting party cannot obtain that evidence from a third party either, but must challenge the intended counterparty to submit it during the proceedings of the court case after it has been brought (see below under “Trial Disclosure”).
In addition to the above, a party may request the court to appoint an assessor to assess matters that require expertise if this is done to verify a claim or to prove events or circumstances on which it could be based.
During the proceedings of a court case, the above methods and conditions for obtaining evidence pre-trial also apply during the trial, except (naturally) the two conditions mentioned in the first paragraph. A third party can be compelled by the court to give oral testimony or submit documents, but a counterparty cannot. If a party in legal proceedings does not respond to a counterparty’s request for documents, then the judge may find that the former party has accepted the latter party’s assertions regarding the substance of the documents, provided that the substance is relevant in the proceedings.
Rules of Privilege
The following persons may refuse to give testimony and/or submit documents, either totally or to some extent:
The judge may release other persons who are, or who have been, very close to a party, from the obligation to give evidence if the judge considers the relationship between them to be very close.
Witnesses are entitled to refuse to answer questions or submit documents if there is reason to believe that an answer or submission could constitute an admission, or an indication, that they have committed a punishable offence or an act which could bring them into moral disrepute or cause them substantial financial loss. Furthermore, the judge may exempt witnesses from revealing secrets regarding their commercial dealings, discoveries or inventions or other such activities if the judge considers the witness’s interest in maintaining secrecy to substantially outweigh the interest of a party in obtaining the evidence.
Furthermore, witnesses may not, without the permission of the person concerned, answer questions or submit documents concerning:
The same remedies are available through class actions as for traditional court cases, in particular, claims for sums of money based on a contract or for damages, declaratory claims for the recognition of the rights of the plaintiff(s) or obligation of the defendant(s), etc.
The same settlement/ADR mechanisms exist for collective redress/class action disputes in Iceland as for other disputes. These mainly involve referring a dispute to arbitration or a conciliator pursuant to a contract. If a dispute is brought before the conventional courts, the presiding judge will hold one session in the case with a view to seeking a settlement. Furthermore, the judge may comply with a party’s request to refer the case to the district commissioner for mediation if the judge considers this is likely to produce results and will not lead to unnecessary delay. The parties may also agree on referring their case to the district commissioner without the assistance of the judge. It should be noted that this remedy is rarely used.
A judgment in a case brought by class action is binding on its members in accordance with the principle of the res judicata effect of judgments. This means that, by joining a litigation association, a member must accept how the association has chosen to handle the litigation since, after the judgment has been passed, a member cannot file a lawsuit again in their own name on the same subject matter.
Enforcement of Judgments
Following the conclusion of a case, an association can seek satisfaction of the members’ rights in its own name. Thus, if an enforceable judgment is obtained through a class action, the association is authorised to enforce it pursuant to conventional enforcement measures, and ultimately settle all the members' claims through distribution.
No policy developments or initiatives exist or have been proposed.
There are no legislative reforms in progress or planned.
Brexit has not had any impact on the collective redress/class action regime or lawsuits in Iceland.
COVID-19 has not had any impact on collective redress/class action suits in Iceland.
Since the collective redress/class action remedy was introduced into Icelandic law in September 2010 (see 1.1 History and Policy Drivers of the Legislative Regime of the Law & Practice section on Iceland), only a few judgments have been handed down by the Supreme Court of Iceland, pertaining to a total of two class actions, where it was considered whether the conditions of Article 19a of Act No 91/1991 on Civil Procedure (the “CPA”) for bringing a class action were met. Below, these two class actions are described, along with judgments concerning them rendered by the Supreme Court. Brief conclusions are then drawn from these judgments.
Case of Former Shareholders of Landsbanki
In 2015, a class of former shareholders (the “Plaintiff”) of Landsbanki Íslands hf. (“Landsbanki”) brought a class action against the chairman (the “Defendant”) of the bank’s former largest shareholder (“Samson”). In the action, the Plaintiff called for the declaration of liability of the Defendant for the losses the members of the Plaintiff suffered when their shares in Landsbanki became worthless following the bank’s collapse in October 2008 during the financial crisis. In essence, the Plaintiff argued, first, that important information on the Landsbanki’s large exposures relating to the Defendant and related parties was unlawfully withheld in the annual financial statements of Landsbanki for the operating year of 2005, published in January 2006, and in subsequent financial statements until the bank’s collapse. Second, that the Defendant neglected from 30 June 2006 to 7 October 2008 to disclose publicly that Samson exercised control over Landsbanki. Third, that the Defendant neglected to ensure that Samson extended a takeover bid to other shareholders of Landsbanki on 30 June 2006, or later.
During the proceedings, the Defendant called for the case to be dismissed, inter alia on the grounds that the basis for the members’ claims was not sufficiently uniform to be amenable to a class action. The district court dismissed that case and the Supreme Court affirmed. In its judgment of 2 May 2016 (case no 235/2016), the Supreme Court held that as Article 19a of the CPA requires that members' claims originate from the same incident, circumstance, or legal instrument, claims for damages must be based on the same grounds for them to be sufficiently uniform. However, the members' claims were based on three different incidents, there were different legal reasons behind them, and they applied to some of the members, but not others. This way of filing a class action therefore conflicted with Article 19a.
The class responded to this judgment by dividing its lawsuit against the Defendant into three separate class actions so that the composition of each class was based on when the members acquired their shares in Landsbanki.
Class No 1 consisted of members who had acquired their shares before 27 January 2006, and they argued that they would have sold their shares if correct information had been published. Class No 2 consisted of members who acquired their shares between 27 January 2006 and 30 June 2006, that is, after the Defendant's alleged violations relating to concealment of information on large exposures began on 27 January 2006, but before the alleged violations relating to the control by Samson began on 30 June 2006. Class No 2 argued that its members would not have cared to own shares in the bank if this information on large exposures or control by Samson had been available. Class No 3 consisted of members who had acquired their shares after 30 June 2006, and they argued that they wouldn’t have bought their shares if the correct information had been published.
The Defendant again called for the three cases to be dismissed for the same reasons as before and the district court again agreed to dismiss the cases. This time, the Supreme Court rejected to dismiss the cases (judgments on 22 August 2017 in cases no 447-449/2017). The court held, in essence, that following the above division of the class into three separate classes, it was clear that the members of each class had claims against the Defendant that originated from the same incident and circumstances within the meaning of Article 19a. Also, that each class’s claims for damages were based on the same grounds and were sufficiently uniform. The merits of the cases are currently being processed before the district court.
Case of the Nature Conservation Class No 2
In 2017, a class that consisted of four river fishing associations (the “Plaintiff”) brought a class action against the Icelandic Food Agency (the “Agency”) and a salmon farming company (“Laxar”) for the annulment of a licence granted to Laxar for the operation of a salmon farm in Reyðarfjörður, Iceland. Three of the fishing associations in the class fished in rivers that were 170 km away from the salmon farm and one association fished in a river 50 km distant from the farm.
The Plaintiff argued inter alia that there was a strong possibility that Laxar’s farming activities in Reyðarfjörður would permanently damage the wild salmon population in the fishing rivers owned by the members of the Plaintiff. Both defendants called for the case to be dismissed. Both defendants argued that the Plaintiff had not demonstrated legally protected interest in obtaining a judgment in the matter. The Agency also argued that the Plaintiff's lawsuit did not satisfy the conditions for a class action and that if one of the members of the class was found to lack legally protected interests, the case must be dismissed in its entirety.
The district court rejected dismissing the case and rendered a judgment on the merits. The case was then appealed to the Court of Appeal which dismissed the case on the basis that the interests related to the use of salmon fishing allowances did not belong to the fishing associations, but to their members individually. For that reason, the fishing associations were not considered to have a legally protected interest in obtaining a court ruling on the matter. The Court of Appeal stated that given this, it did not fall within the court’s purview whether the conditions of Article 19a of the CPA were fulfilled despite the different circumstances of the members of the Plaintiff.
The decision of the Court of Appeal was appealed to the Supreme Court. In its judgment of 31 March 2020 (case no 1/2020), the Supreme Court held that fishing associations could bring claims to the courts related to their members' fishing rights. From this, it also followed that three or more fishing associations were allowed to take advantage of the legal remedy contained in Article 19a of the CPA – if other conditions of the provision were met – and let a litigation association bring an action in its own name regarding the interests of the members of the fishing associations involved in the action. Although the Supreme Court did not clearly state that these other conditions were met in the case, there are indications that the court considered this to be the case. However, the Supreme Court upheld the Appeal Court’s decision on the grounds that the Plaintiff had for other reasons not shown legally protected interest in obtaining a court ruling on the matter. There is some uncertainty, considering this result, as to whether the Supreme Court did not consider it necessary to assess whether the circumstances of the fishing associations were too different for them to be able to bring a class action. An argument can, however, be made that the Supreme Court would have stated in the judgment if it considered the conditions of Article 19a unfulfilled.
Although there have not been many precedents regarding the interpretation and application of Article 19a of the CPA, it can be concluded from the judgments mentioned here that the conditions for a class action are not overly strict. For example, one can say there was a considerable difference between the circumstances of the fishing associations in case no 1/2020, due to the large difference in their distance from the salmon farm. Despite this, the judgment of the Supreme Court indicates that the fishing associations were allowed to bring a class action. In the same way, it can be said that the circumstances regarding the members within the three class actions in cases no 447-449/2017 where somewhat different – and this was argued by the defendant in the case – with regard to the incidents behind each purchase and the stock purchase knowledge and experience of each member. Nevertheless, the Supreme Court found the claims sufficiently uniform to bring class actions. Thus, it is safe to say that the circumstances of members’ claims may differ in certain respects, but still be considered sufficiently uniform. If, on the other hand, the circumstances are too different, this can be dealt with by dividing up the class action in the manner used in cases no 447-449/2017.