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Tuesday, June 15, 2021

Lessons learned from Vedan: A call for class action suits in Vietnam

Updated: 14:37’ - 01/09/2010

Alex Thomas Larkin & Tran Si Vy
LEADCO LEGAL COUNSEL

It is no exaggeration to say that Vedan[1] has killed the Thi Vai River. For years, this Company “stealthily discharged” enormous volumes of untreated wastewater from its monosodium glutamate plant into the river, seriously contaminating the waterway and damaging the livelihood of those who depend on it. Facing the threat of lawsuits by thousands of farmers, Vedan recently agreed to settle the matter by providing full compensation, covering 100% of the damages incurred by farmers living in Ho Chi Minh City, Ba Ria-Vung Tau and Dong Nai.

The Vedan matter very nearly became Vietnam’s test case for class action lawsuits. If Vedan and the multitude of farmers and other residents had not reached a settlement, this matter would have challenged the legal community, both in terms of the Courts and legal counsel’s ability to handle the number of plaintiffs. It should be noted that the 6.000 plus farmers and other residents asserting claims against Vedan exceeds the total number of lawyers currently practicing in Vietnam.[2] The law, as currently constituted, simply does not adequately address a situation like this, where thousands of plaintiffs who have been similarly-harmed, seek remedies in the Courts of Vietnam. Simply put, the Courts would be overwhelmed and the law fails to provide sufficient guidance for the Courts or for legal counsel to handle such a case. 

Legal community reacts

In recent months, the legal community of Vietnam has been observing and debating the Vedan matter with great anticipation. There are those who believe that the Civil Procedure Code already provides a mechanism for handling this type of case, as it allows the Courts to combine similar cases into one. Many more lawyers and legal scholars disagree, however, arguing that one small provision of the Civil Procedure Code is simply insufficient to guide the Courts and legal counsel, and to ensure that the Courts have the capacity to handle such a case.

Questions abound regarding the Vietnamese legal community’s ability to cope with this type of situation. What does the current law allow? How should the courts, and legal counsel, handle thousands of plaintiffs asserting similar claims? Are changes in the Civil Procedure Code justified?

The last decade has witnessed Vietnam transitioning rapidly from a third-world nation attracting opportunists looking for a place to operate polluting factories to an emerging economy willing and able to protect its people and environment from such irresponsible acts.  As this transition continues to develop, many more “Vedans” will surely emerge. How many farms, waterways, and other areas have been adversely affected by polluters? And how will the Courts and the legal community respond? This article explores the “class action lawsuit” as a potential mechanism for answering these questions.

Argument in favor of class actions

6.973 households in total were negatively affected by the untreated pollutants illegally discharged by Vedan.[3] Under current law, each person who has been harmed has the right to file a lawsuit against the person or company who caused the harm. The person initiating the lawsuit, in a civil case, is the plaintiff.[4] Technically, the law does not provide a mechanism under which a single person or small group of co-parties can represent a larger group or a class to protect the common interests of all similarly harmed parties.

If each farmer who has incurred loss or damages filed a lawsuit himself against Vedan, there would be thousands of individual petitions submitted to the Court.  Consequently, the Court would be overwhelmed and unable to receive and adequately process all petitions.  Furthermore, the collection and presentation of evidence, verifying the legality of documents, and convening of witnesses, would require significant time and resources, with every plaintiff largely duplicating the efforts of one another. It is widely agreed that no court in Vietnam is equipped to handle such a scenario, receiving thousands of separate cases, especially in light of Article 179 of the Civil Procedure Code, which requires civil cases to be heard by the Court in a timely manner.[5] Lawyers involved in the Vedan case estimated that it would take years for the courts to prepare themselves for the case, therefore failing to comply with Article 179.

The above discussion presents a strong argument in favor of amending legislation to provide a mechanism for class action lawsuits.  If the settlement of the Vedan matter had not occurred, a class action against Vedan would offer many advantages for both the plaintiff-farmers and the Courts to deal with the case, as it would aggregate a larger number of individualized claims into one representative lawsuit.

First, with a class action lawsuit, the Court’s workload would be greatly reduced, as the huge volume of cases would be reduced to just one.  Rather than facilitating thousands of plaintiffs individually with thousands of notices and procedural documents to each involved party, the court would only have to deal with one, or a few, representatives of the plaintiffs.

Second, a class action lawsuit benefits the defendants as well as the plaintiffs, by essentially requiring the defendants to present their defense only once, rather than defending against each plaintiff’s case individually. In the Vedan example, thousands of farmers would not have to be present at the Court for each appearance or hearing. Rather, the plaintiffs’ representative(s) would handle all matters related to the case on behalf of all plaintiffs.  Similarly, Vedan would not have to deal with every single civil proceeding for each separate lawsuit.  Not only would a class action reduce the number of court appearances for the parties, it would also dramatically reduce the total fees paid to legal counsel. A single lawyer, or a small team of lawyers, would represent the entire plaintiff class, rather than each plaintiff retaining and paying for separate counsel.

Finally, a class action lawsuit would enable and incentivise farmers to assert their claims even where the amount to be recovered by each farmer may otherwise be too small to justify their own lawsuit.

A look at class actions abroad

Class action lawsuits are common in the Federal and State Courts of the United States.  Under U.S. law, the class action is a procedure whereby a single person or small group of co-parties may represent a larger group, or “class,” of persons sharing a common interest. It may be used where joinder of all the potential co-parties is not feasible, either because the class is simply too large (numbering possibly in the millions) or because of insuperable difficulties of personal jurisdiction, venue, or diversity”[6]

In the U.S. Federal Courts, class actions are governed by Federal Rule of Civil Procedure 23 and 28 U.S.C. 1711-1715. The present Rule 23(a) states four prerequisites which must be met before there may be a class action: (1) the class must be so large that joinder of all the members in an ordinary lawsuit is not feasible; (2) there must be common “questions of law or fact to the class”; (3) the claims or defenses of the representatives must be “typical” of those of the class; and (4) the representatives must “fairly and adequately protect the interests of the class.”

In 2000, the U.S. Courts were faced with Dukes vs. Wal-Mart Store, Inc. - one of the largest civil rights class action lawsuits in U.S. history. The case was initiated when a 54 year-old Wal-Mart employee in California, named Betty Dukes, filed a sex discrimination claim against Wal-Mart. Dukes claimed that, despite six years of hard work and excellent performance reviews, she was denied the training she needed to advance to a higher, salaried position. Wal-Mart’s position was that Dukes clashed with a female Wal-Mart supervisor and was disciplined for admittedly returning late from lunch breaks.[7] The plaintiffs sought to represent 1.6 million women, including all those who worked in a Wal-Mart store at any time since December 26, 1998.[8]  In June 2004, Federal District Judge Martin Jenkins ruled in favor of class certification under Rule 23(b)(3).

The Austrian Code of Civil Procedure (Zivilprozessordnung - ZPO) does not provide for a special proceeding for complex class action litigation. However, Austrian consumer organizations (Verein für Konsumenteninformation/VKI and the Federal Chamber of Labour/Bundesarbeitskammer) have, in recent years, brought claims on behalf of hundreds or even thousands of consumers.[9] This technique, recently labeled as “class action Austrian style”, allows for a significant reduction of overall litigation costs. The Austrian Supreme Court, in a recent judgment, has confirmed the legal admissibility of these lawsuits under the condition that all claims are essentially based on the same grounds.[10]

In some developed countries in Europe, jurisdictional systems, despite lacking specific regulations on class actions, have developed flexible approaches to deal with mass claims involving numerous plaintiffs seeking compensation. For example, on November 1, 2005, Germany enacted the “Act on Model Case Proceedings in Disputes under Capital Markets Law”, allowing proceedings to be brought before the courts in litigation arising from mass capital markets transactions and does not apply to any other civil law proceedings.[11] It differs from class actions in the U.S. in that it only applies to parties who have already filed suit and does not allow a claim to be brought in the name of an unknown group of claimants.

Article 38 is not enough

Some argue that Vietnamese law already provides a mechanism for large numbers of plaintiffs to bring a case, such as the Vedan case, to court. They rely on Article 38 of the Civil Procedure Code, which provides that a court may merge two or more cases which it has separately accepted into a single case for resolution if merger or resolution in the same case ensures compliance with law.

However, that single sentence of Article 38 is not sufficient for the District Court to determine how to handle merger of hundreds or thousands of similar cases. If the Court relied on said Article 38 in the context of the Vedan case, a number of serious issues would necessarily arise.  First, the court would have to receive thousands of petitions submitted individually by the farmers, and examine the petitions and related evidence in order to determine whether or not they all have similar facts or nature for the purpose of considering merger. Second, could the Court possibly comply with the time limit for preparing the cases for trial imposed by the Civil Procedure Code? Third, is the Court capable of managing thousands of separate suits, with individual plaintiffs, merged together, given its limited human resources and capacity?

Preparing for the next Vedan

The Vedan experience should not be viewed in isolation.  It is foreseeable, and in fact likely, that there will be hundreds or thousands of Vedan-type cases in the future and that the number of victims could collectively be in the millions. Such legal actions will not be limited to cases involving environmental pollution. Consumer protection, securities fraud, defective pharmaceuticals, and multi-level marketing schemes are typical areas for possible class action lawsuits.

The current state of the law is simply not equipped to discourage and remedy large-scale harm inflicted on large numbers of victims. A single sentence of Article 38 of the Civil Procedure Code is the sole legal tool available to plaintiffs seeking to combine their individual claims into a class action. If the law is not developed to meet the requirements of social protections, conduct like that of Vedan will actually be encouraged, as they know that the likelihood of serious legal action against them is very low. Theoretically, law has many uses, one of which is to discourage undesirable behavior. Vietnam’s Civil Procedure Code should be revised to discourage future “Vedans” from destroying the livelihood of thousands of innocent victims, whether they are farmers, consumers, investors, or otherwise.

The citizens of Vietnam should be able to live their lives with the confidence of knowing that the law is on their side to prevent and remedy harm. With Vedan, we dodged a bullet. If the parties had not settled, the resulting litigation would have overwhelmed the courts. The legal community and lawmakers should learn from the Vedan experience and take the necessary steps to prepare for future cases. Vietnam can draw from the legal systems of other countries where class action lawsuits successfully discourage Vedan-like behavior, and adapt that knowledge to the specific preferences and customs of Vietnam. 

The highly publicized Vedan matter has educated the public about the potential of mass-harm begin inflicted on them, and about the complications of receiving compensation for such harm. The public now expects, and deserves, a clear legal path for pursuing justice against those who recklessly harm the masses.-



[1] Vedan (Vietnam) Enterprise Corp. Ltd. is a wholly foreign invested company established by the Taiwanese Company (Vedan Group – Taiwan).

[2] According to statistics provided by the Department of Judicial Support – the Ministry of Justice, the current number of licensed lawyers in Vietnam is approximately 5,800.

[3] See Hong Tu, “Vedan Case: may it be a class action lawsuit?” Ho Chi Minh City Law Newspaper, May 13, 2010.

[4] See Article 56.2 of the 2004 Civil Procedure Code.

[5] According to Article 179 of the Civil Procedure Code, the time limit for trial preparation of a civil case shall not exceed the maximum of six months from the date of acceptance of the case.

[6] See Steven L. Emanuel, The Emanuel Law Outlines Series, Civil Procedure, Aspen Law & Business - A Division of Aspen Publishers, Inc, New York, 2000, “Ch.8 - Multi-Party and Multi - Claim Litigation,” Section V. Class Actions, p.330

[7] See Malanga, Steven. ”The Tort Plague Hits Wal-Mart”. City Journal, Retrieved 2009-02-23.

[8] See Wal-Mart Stores, Inc. Form 10-Q for the Quarterly Period Ended October 31, 2005, available at http://www.sec.gov/Archives/edgar/data/104169/000010416905000019/wmt10q_q3fy2006.htm

[9] See Alexander Klauser in “Group Litigation in Austria”, speech at “Effective Legal Redress - The Consumer Protection Instruments of Actions for Injunction and Group Damages Action”, Vienna, Austria, February 24, 2006

[10] Supra note 9

[11] See The German “Capital Markets Model Case Act” 2005, available at http://www.bmj.bund.de/kapmug.

VNL_KH1 

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