The Law and Economics of Class Actions in Europe
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The Law and Economics of Class Actions in Europe

Lessons from America

Edited by Jürgen G. Backhaus, Alberto Cassone and Giovanni B. Ramello

This well-documented book discusses the power and limitations of class actions with insights and analysis from a panel of distinguished scholars. It pays special attention to the introduction and the applicability of such a legal device in European civil law countries. The book offers a broad legal and economic investigation, drawing insights from US judicial experience and giving a rigorous discussion of both the philosophical and constitutional aspects and the economic mechanisms and incentives set up by class actions.
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Chapter 5: Class Action as a Remedy for Market Failure

Jürgen G. Backhaus


Jürgen G. Backhaus INTRODUCTION Recently and only after the turn of the century, we have been able to witness a remarkable phenomenon in Europe which had long been important to the United States. In fact, class actions in Europe do not even belong to the curriculum of the study of jurisprudence of a typical German Law School. In this chapter, I briefly identify the recent development of class actions in Europe and then try to explain its significance. (I) In doing so, we begin with a definition of class actions. (II) This definition does not include the considerations of forensic symmetry. The need for such a more inclusive analysis becomes particularly urgent when issues of market failure and forensic dynamics are to be considered. (III) While the class action as an institution is significant for overcoming market failure in the context of forensic symmetry, it is marred by principal–agency problems and cannot be relied upon as a perfect remedy. The Rosenfield1 effect indicates the extent to which it fails to overcome market failure and the extent to which it may have to be complemented by other forensic institutes. 1. SECTION I Originally, the class action is a product of English common law, which has no counterpart in either Roman law or the Germanic legal culture. It did, however, also occur in the United States through the federal rule of civil procedure and variously in state law. In the United States the class action had its greatest triumphs, as...

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