A new EU Directive signals the start of collective actions on behalf of the EU consumer
Collective or class actions are not new, but they are traditionally thought of as a phenomenon of US and Australian litigation. In the last few years, however, some European countries have started to embrace the concept and revamp their laws and procedures to enable people to club together to seek judicial remedies in certain types of action.
Different countries have gone to different lengths in this respect; jurisdictions such as the Netherlands have been hailed as particular hotspots for collective actions- and laws which arm consumers with greater rights, such as GDPR, have certainly driven on this new trend, albeit in a somewhat piecemeal manner to date. However, this is set to change very soon. The EU has just passed a new Directive which aims to harmonise collective redress mechanisms for consumers across all Member States. This is a watershed moment for European class actions.
Directive (EU) 2020/1828 on representative actions for the protection of the collective interests of consumers and repealing Directive 2009/22/EC will enter into force on 24 December 2020. The Directive will allow collective actions to be brought against businesses if they breach EU law in a broad range of areas such as data protection, travel and tourism, financial services, energy and telecommunication. Rather than incorporating principles of US class action litigation into EU civil procedure, though, the Directive has a different feel, trying to minimise the perceived excesses of American mass claims.
The aims of the Directive are to:
- Better protect consumers against domestic and cross-border “mass harm”;
- Provide safeguards against abusive lawsuits by using the “loser pays principle” and preventing the concept of punitive damages; and
- Only allow designated organisations to bring claims on the consumer’s behalf.
EU member states must put in place at least one effective procedural mechanism that allows qualified entities, such as consumer organisations or public bodies, to bring lawsuits to court for the purpose of either seeking an injunction to cease or prohibit an action or to recover financial compensation for a breach. These entities will be legally and financially supported to bring actions on behalf of groups they represent.
Strict criteria will be imposed to assess whether an entity is “qualified” or not; the Directive specifies these criteria for cross-border actions but leaves each Member State to determine its own criteria for domestic actions. Another interesting aspect of each regime left to the Member States to decide upon is whether or not to implement an “opt out” mechanism for claims; this style of action, where everyone who falls within a particular class of claimants is automatically included in the claim unless they choose not to be, is a key factor in the proliferation of class actions in the US.
Member states will have to transpose the Directive into their national laws by 25 December 2022 and apply those measures from 25 June 2023. As can be seen from above, whilst the Directive aims make collective redress more uniformly available across the EU, there is significant discretion in key areas left to each country. Large consumer-facing businesses will therefore need to familiarise themselves with new class action jurisdictions as and when they emerge and get savvy in tactics available to diffuse a class action before it really gets going.
We will be tracking the progress of Member States as they transpose the Directive into their national laws and comparing this with collective action regimes in non-EU jurisdictions, (including the UK, where other legislative and judicial developments also look likely to lead to a growth in class actions). Please look out for the launch of our Collective Redress tracker in early 2021.
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