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Backhaus, Jürgen G. --- "Class Action as a Remedy for Market Failure" [2012] ELECD 304; in Backhaus, G. Jürgen; Cassone, Alberto; Ramello, B. Giovanni (eds), "The Law and Economics of Class Actions in Europe" (Edward Elgar Publishing, 2012)

Book Title: The Law and Economics of Class Actions in Europe

Editor(s): Backhaus, G. Jürgen; Cassone, Alberto; Ramello, B. Giovanni

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781847208033

Section: Chapter 5

Section Title: Class Action as a Remedy for Market Failure

Author(s): Backhaus, Jürgen G.

Number of pages: 6

Extract:

5. Class action as a remedy for market
failure
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 principal­agency 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 ...