[Class Action Introduction?]②Japan, UK, and Germany Impose Scope and Procedural Limits...US Model Is the Most Powerful

US: Comprehensive Class Action Compensation Without Limits
UK: American-Style System Only for Competition Law Cases Like Cartels
Japan and Germany: Liability Determined Through Group Litigation,
Then Individual Claims by Victims
Korea's Securi

The Volkswagen Dieselgate (emissions manipulation) scandal that broke out in 2015 is often cited as a clear example of the power of class action lawsuits. At the time, American consumers received compensation totaling between $14.7 billion and $20 billion through class actions. It is reported that each vehicle owner received up to $10,000 (approximately 12 million won at the time) in cash compensation. American investors also filed a class action against Volkswagen and received $48 million (about 6.5 billion won) in compensation. This was partly recognized on the grounds that investors suffered losses when the price of American Depositary Receipts (ADRs) listed on the US stock market plummeted after the emissions manipulation was revealed.

The Dieselgate scandal erupted when Volkswagen admitted in September 2015 that it had manipulated emissions-related software in 10.7 million diesel vehicles worldwide. The emissions reduction device was designed to operate properly only when the vehicle detected it was undergoing a test, and not during normal driving. As a result, harmful substances such as nitrogen oxides were emitted in excess of regulatory limits during actual driving conditions.

Following the scandal, Volkswagen faced class action lawsuits in major countries and was forced to pay massive compensation. In Germany, about 260,000 people participated in the lawsuit, resulting in a settlement of 830 million euros (about 1.1 trillion won). In contrast, in Korea, where there is no class action system, only some affected car owners were able to respond through individual lawsuits. Volkswagen sold 120,000 related vehicles in Korea, but only about 2,000 victims filed lawsuits. Even now, more than a decade later, legal battles are ongoing and the compensation process is reportedly progressing slowly.

The Most Powerful System: The U.S.-Style Class Action...Liability to Compensate All Victims

According to the legal community on December 24, compared to major advanced economies such as the United States, Europe, and Japan, compensation for domestic consumers in the Korean market has not been properly carried out. Even in cases of major consumer harm involving life and health, such as the humidifier disinfectant disaster in Korea in 2011, recovery for victims has been delayed. According to the 2020 report from the Special Investigation Committee on Social Disasters, 6,817 people reported damage to the Ministry of Environment, of which 1,553 died. The number of unreported deaths is estimated at 14,000, and it is known that 670,000 people have experienced health damage.

The United States is the country where the most powerful form of class action operates actively. There is no restriction on the field; if a case involves common interests, a class action is allowed. Unless individuals file a separate opt-out, the judgment in a class action applies to all members of the group. When plaintiffs win, it is customary for a relief fund to be created with money contributed by the defendant company, and the fund is distributed to all members. Companies facing class actions sometimes file for bankruptcy in court and undergo restructuring to reorganize their business.

Johns-Manville, a U.S. asbestos product manufacturer, is a representative example of a company that went bankrupt due to class action lawsuits. Johns-Manville, which produced construction materials, continued selling asbestos products even after its carcinogenicity became known, and was sued in a class action. As annual compensation owed to victims reached hundreds of millions of dollars, the company filed for bankruptcy in 1982. It established a $2.5 billion trust fund dedicated to asbestos victims, provided compensation separately, and restructured the company to discontinue the asbestos business.

Various Class Action Systems in Europe, Japan, and Beyond

In addition to the United States, major countries have opened the door to various forms of collective litigation for consumers. However, unlike the U.S. model, which applies to all victims unless they opt out and does not restrict the field, these countries tend to allow monetary claims through class actions in a somewhat less powerful form.

The United Kingdom generally limits the effect of a judgment to victims who explicitly declare their intention to participate in the lawsuit. However, through the Consumer Rights Act of 2015, the UK introduced the U.S.-style class action system specifically in the field of competition law (antitrust law). In cases of collusion or abuse of market dominance, as in the U.S., unless victims individually opt out, the court's decision applies to all victims. The UK is currently considering expanding the scope of this opt-out class action system through public consultation.

Germany recognizes collective relief for victims through a "model declaratory action" system instead of the U.S.-style class action. In this system, consumer organizations first address only the existence of illegal acts and liability by companies, and individual victims do not need to participate directly but only need to register. If the court recognizes the company's liability, victims can then choose to file individual damage claims. This system reduces the burden on consumers to prove illegality and causality against companies, and limits compensation to those victims who choose to participate, thereby reducing the burden on companies as well.

Japan operates a class action system similar to Germany's. Japan introduced a class action system for collective relief of consumer damages in 2013, and it has been in effect since 2016. In the first stage, a consumer organization confirms the existence of liability for compensation against a business operator, and in the second stage, victims participate to determine the amount of individual claims.

Korea Fights Alone...Humidifier Disinfectant Victims Still Uncompensated

Among the 38 member countries of the Organisation for Economic Co-operation and Development (OECD), only Korea, Switzerland, and T?rkiye lack a collective monetary damages claim system for consumers against corporations. However, Switzerland has a special system that effectively produces results similar to class actions.

While Switzerland does not allow traditional class actions, it recognizes the free transfer of damage claims, allowing consumers to collectively receive compensation. During the Volkswagen Dieselgate, Swiss consumers transferred their compensation claims to investment funds, which then aggregated the claims and negotiated a large-scale settlement.

In contrast, Korea does not have such a collective compensation system. Even when large-scale consumer harm occurs, each victim must file an individual lawsuit to receive compensation, resulting in a structure where only Korean consumers are excluded from compensation for the illegal acts of global companies.

The delay in compensation for the 2011 humidifier disinfectant disaster is a representative example. Although a special law was enacted in 2017 to provide some support for hospital and funeral expenses, corporate liability for damages has still not been determined 17 years later. The Mediation Committee for Humidifier Disinfectant Victim Relief proposed a final mediation plan in 2022 (with a maximum compensation amount of 924 billion won for 7,027 victims), but Oxy and Aekyung, the companies responsible for the largest share of compensation, did not agree.

As a result, victims are proceeding with individual civil lawsuits, making it difficult to even determine the exact scale of the damage. Because victims are pursuing lawsuits individually, even if a court recognizes a company's liability in a particular case, it only applies to the plaintiffs in that case. Critics argue that if Korea had a class action system, the responsibility for tens of thousands of victims could have been determined quickly in a single lawsuit. The longer individual lawsuits drag on, the more difficult it becomes to scientifically prove causality, and companies gain an advantage by responding to dispersed lawsuits and playing a game of attrition.

Yonhap News Agency