Stefano Parlatore
Legance, Milan and Rome

Daniele Geronzi
Legance, Milan and Rome

Jacopo Nisticò
Legance, Milan and Rome

Italian class and representative actions combine a traditional 'loser pays' regime with the possibility that the claimant is a thinly capitalised association, creating a structural risk that successful defendants may be unable to recover their litigation costs in practice. This tension is accentuated by the recent implementation of the European Union’s Representative Actions Directive (EU) 2020/1828, which reinforces cost‑shifting, but builds the system around non‑profit consumer organisations.

Italian collective redress and litigation costs

The 2019 reform moved general class actions from the Consumer Code into the Code of Civil Procedure (CCP), introducing Title VIII bis (Articles 840 bis to 840 sexiesdecies of the CCP). The new action is available for the protection of individual homogeneous rights (diritti individuali omogenei) and can be brought either by any class member or by non‑profit organisations and associations whose statutory purpose includes protecting those rights, provided they are listed in a public register kept by the Ministry of Justice. The procedure is structured in three phases, admissibility, merits and a para‑collective distribution phase, but there is no special rule on adverse costs: the general ‘loser pays’ principle of Article 91 CCP applies, subject only to the usual judicial discretion to compensate the costs incurred in limited circumstances.

Alongside this codified type of class action, Legislative Decree 28/2023 has inserted a new Title II.1 into the Consumer Code, creating a representative action (azione rappresentativa) for the collective interests of consumers based on Directive (EU) 2020/1828. Representative actions may be brought only by designated entities (enti legittimati), that is, recognised consumer associations under Article 137 and designated public bodies, seeking injunctive or compensatory measures against professionals for breaches of an annexed list of EU law‑based norms. The Decree again relies on ordinary civil procedure cost rules, but with one important safeguard: where a compensatory representative action fails, individual consumers can be ordered to reimburse the defendant’s costs only in cases of fraud or gross negligence (Article 140 novies, para. 3 of the Consumer Code), implicitly leaving the qualified entity as the primary cost bearer.

Patrimonial liability of recognised and unrecognised associations

Italian civil law distinguishes between recognised associations, which acquire legal personality, and unrecognised associations governed by Articles 36–38 of the Civil Code. Recognised associations enjoy so-called perfect patrimonial autonomy (autonomia patrimoniale perfetta), so only the entity’s assets relate to its obligations and members are not personally liable for adverse cost orders issued against the association. Unrecognised associations, by contrast, have only imperfect patrimonial autonomy: Article 38 of the Civil Code expressly allows creditors to enforce against both the common fund and personally and jointly against those who have acted in the name and on behalf of the association.

Many consumer organisations entitled to bring representative actions are structured as non‑profit associations, meeting the transparency and independence requirements of Article 137 of the Consumer Code, including the minimum membership thresholds and the requirements related to the preparation of annual accounts. These requirements do not, however, translate into any minimum capitalisation or insurance level commensurate with the potential scale of adverse costs in complex collective litigation. In practice, both recognised and unrecognised entities may, therefore, be ‘judgment proof’ relative to the defence costs incurred by large corporate defendants, notwithstanding the formal applicability of Article 91 CCP and, for unrecognised entities, the personal liability of those acting in their name.

The risk of irrecoverable defence costs

From the defendant’s perspective, participation in Italian class or representative actions thus involves asymmetric exposure: if the action succeeds, the defendant bears both the applicable compensation and its own costs (and, in class actions, additional premiums for the claimant’s lawyers and class representative), whereas if it fails, it may recover only a fraction of its costs because the claimant entity lacks sufficient assets. This imbalance is exacerbated by the Directive‑driven policy choice to rely on non‑profit qualified entities as gatekeepers, while simultaneously maintaining a strict loser pays model at EU level. Policy papers from consumer organisations at the EU level openly acknowledge that adverse costs are a key barrier to bringing representative actions and advocate public funds or insurance schemes to backstop those risks, implicitly confirming that many such entities cannot realistically internalise the applicable full defence cost exposure.^[1]

At present, Italian law does not provide any mechanism specific to collective redress that would require an association acting as a class or representative claimant to post security for the resisting party’s legal expenses. Defendants must, therefore, rely on ordinary enforcement against the association’s assets (and, for unrecognised entities, against the natural persons who acted for those entities), which may entail further litigation and reputational sensitivities and may still result in substantial unrecovered costs. This risk can influence settlement dynamics, incentivising defendants to consider pragmatic settlements in borderline or even weak cases simply to cap irrecoverable defence spending, thereby creating scope for the strategic use of collective proceedings by thinly capitalised associations.

Comparative insights on security for costs

In several common law jurisdictions, courts routinely mitigate this risk through ‘security for costs’ orders, compelling impecunious claimants, often corporate vehicles or funded representatives, to provide a financial guarantee as a condition for proceeding. In England and Wales, under the Civil Procedure Rules Part 25, the court may order security where, among other gateways, the claimant company is unlikely to be able to satisfy an adverse costs order or is acting as a nominal claimant on behalf of others, a pattern frequently seen in group or representative litigation; failure to provide security can lead to a stay or strike‑out of the claim. In regard to the competition collective proceedings regime before the UK Competition Appeal Tribunal, security for costs remains available under the Tribunal Rules and has been used to protect defendants in follow‑on damages claims, even where the representative is backed by third‑party funding.^[2]

Australian class action practice illustrates a similar but more funder‑centred approach: although some employment class actions operate in a ‘no‑costs’ statutory environment, commercial representative proceedings funded on a contingency basis ordinarily involve security for costs provided by the funder, reflecting the expectation that defendants should not bear an unhedged risk of unrecoverable costs.

By contrast, the EU Representative Actions Directive confirms that the loser pays but focuses mainly on shielding individual consumers from costs and ensuring that qualified entities have ‘sufficient financial resources’, leaving Member States significant discretion as to whether to introduce dedicated security‑for‑costs regimes. Some Member States have chosen to exempt qualified entities from court fees, while still applying the 'loser pays' approach to legal fees, a combination that mirrors the Italian solution and preserves the very asymmetry that concerns corporate defendants.^[3]

Perspectives on the Italian debate

Against this comparative background, the Italian framework appears incomplete: it exports the full rigour of the 'loser pays' principle to non‑profit associations without either a calibrated security‑for‑costs mechanism or a public or insurance‑based backstop to ensure that adverse costs orders can realistically be satisfied. Any move towards introducing security for legal expenses in class and representative actions would need to reconcile the legitimate expectation of defendants to recover costs with the Directive’s objective of not chilling meritorious public interest litigation by financially fragile entities, suggesting that targeted solutions – such as security orders tailored to manifestly weak claims, mandatory adverse costs insurance for listed entities or public guarantee funds – may be more proportionate than the wholesale transplantation of common law models.