Class Actions and the Bill to Reform the Civil and Commercial Codes

Motivated by cultural transformations, by the legislative attempts to amend the private law which have taken place since 1987, and by the new constitutional rank given to some rights in the 1994 amendment to the Argentine Constitution, through Decree No. 191/2011 the Executive Power created a Commission ("Comisión de Reformas") to draft a bill to amend, update and unify the Civil and Commercial Codes.

The Commission was composed of the members of the Supreme Court of Justice, Ricardo Luis Lorenzetti and Elena Highton de Nolasco, Professor Aida Kemelmajer de Carlucci and 30 subcommittees where at least 130 lawyers made their contributions. This Commission carried out its task and presented a draft of bill to the Executive Power on February 24, which was also the third anniversary of the decision rendered by the Supreme Court of Justice in re "Halabi" (“Fallos” 332:111), which had outlined the characteristics and admissibility requirements of class actions (see “Class Actions: Landmark Ruling by Supreme Court” published in Marval News # 81).

The members of the Supreme Court of Justice who decided on the Halabi case and who were also appointed to the Commission tried to outline a legal framework for class actions. The recitals of the Decree had granted them the power to harmonize private law with the fundamentals of other legislation within the region, especially Brazilian legislation.

As can be logically inferred, the draft bill followed the guidelines set out in the Supreme Court’s decision in re “Halabi”. Section 14 distinguished three kinds of rights: i) individual rights, ii) individual rights that can be claimed through a collective action, iii) collective rights concerning individual and homogeneous assets. In Book Three, Title V, Chapter 1 Section 5, headed "Damage to collective rights" it established the rights of action for each of such cases. The right of action for damages to collective rights concerning individual and homogeneous assets was obviously much narrower than the rest. Admissibility requirements were established, among them a class certification stage where "... the court must take into account: a) the experience, background and economic solvency of the plaintiff, b) the correspondence between the interests of the members of the group, category or class, and the object of the complaint.” Also it established that concentrating the dispute in a single case should be more efficient than handling individual claims. Lastly, it set forth the scope of final sentences in collective rights concerning individual and homogeneous assets. The decision would have res judicata effect erga omnes if the claim is admitted, although it would not affect individual actions based on the same cause. If the claim is rejected, individual claims may still be brought or maintained.

However, Section 14 was amended and the whole section regarding collective rights was suppressed by the Executive Power from the bill submitted to the Argentine Congress on May 31, 2012. It was officially stated that the amendment of Section 14 sought to maintain the dual rights provided by the Argentine Constitution, i.e. individual and collective rights. It was also considered that class actions are, in essence, procedural matters and their inclusion in the Civil Code could affect our federal system.

An important debate concerning this bill ensued this year in Congress. A Committee was created with members from both houses of Congress to analyze the bill and to render an opinion by November 8, 2012. This Committee could not reach its objective in time. It is expected that its opinion will be presented in 2013. However, it is unlikely that class actions will be reinstated in the bill in the light of the Executive Power’s position against their inclusion.

The bill to reform the Civil and Commercial Codes could be another failed attempt to regulate class actions. Nevertheless, the guidelines to be followed by legislators upon regulating these actions have been very clearly established by the Supreme Court of Justice and they will be hard to avoid in future legislation.