New European collective actions legislation approved

24 November 2020 marks the final approval of the new European collective actions legislation, the Directive of the European Parliament and of the Council on representative actions for the protection of the collective interests of consumers, and repealing Directive 2009/22/EC (the "Directive"). This note summarises the main provisions entering into force and a short review from EU Member State perspectives.

The Member States have latitude when implementing certain features of the Directive. The next 24 months will therefore be decisive for the shape of the collective proceedings in the Member States and some jurisdictions may emerge as enabling these representative actions with fewer options than others. Given the possibility of cross-border representative actions, we may see some venues becoming (even) more popular for collective redress. While the Directive promises safeguards against abusive lawsuits it will be crucial that defendants’ rights and fairness of procedure are going to be maintained in practice.

Main provisions of the new Directive

The Directive regulates collective actions for EU law infringements by traders, establishing who may bring the actions and where in terms of venues, how actions are brought seeking injunctive relief and/or redress measures (including financial compensation), and for what kinds of infringements. In a nutshell:

WHO – Actions can be brought only by ‘qualified entities’.  A ‘qualified entity’ is any organisation or public body representing consumers' interests which has been designated by an EU Member State as qualified, in accordance with the Directive, to bring representative actions (cf. article 3).

Criteria for the designation of a ‘qualified entity’ vary depending on if the designation is made (i) for the purpose of bringing domestic representative actions or (ii) in cross-border representative actions.  In the first case, the ‘qualified entity’ must be compliant with criteria set out by national law of the EU Member State of its designation.  In the second case, it must comply with the criteria established by the Directive, notably: (a) it must be a legal person properly constituted according to the law of the EU Member State of its designation, (b) it must demonstrate 12 months of public activity in the protection of consumer interests prior to its designation request, (c) it must have “a non-profit-making character” (cf. article 4.3), and (d) it must not be subject to insolvency, and finally (e) it must be an independent entity.

WHERE – Domestic representative actions are brought by local entities before courts or authorities of a single EU Member State. If designated for cross-border representative actions, a ‘qualified entity’ is allowed to bring actions in any EU Member State (cf. article 6).

Several ‘qualified entities’ from different EU Member States are allowed to jointly bring a single representative action in one EU Member State where the alleged infringement affects or is likely to affect consumers from different EU Member States.

WHAT  The Directive applies to infringements, by ‘traders’, of specific directives/regulations listed in Annex 1 that harm or may harm “the interests of a group of consumers” (cf. article 2).  The Directive defines a ‘trader’ as “any natural person or any legal person, irrespective of whether privately or publicly owned, who is acting, including through any other person acting in that person's name or on that person's behalf, for purposes relating to that person's trade, business, craft or profession” (cf. article 3).

The list in Annex 1 includes a variety of EU directives and regulations, including the European chemicals regulations, the GDPR, the General Product Safety Directive, the General Food Law Regulation and the Cosmetics Regulation. It also includes directives and regulations about misleading advertising, the EU Ecolabel, food information, energy labelling, medicinal products, internal market in natural gas and in electricity, eco-design, energy efficiency as well as the classification, labelling and packaging of substances/mixtures.

HOW – For the above infringement(s), ‘qualified entities’ may choose to apply for an injunction or to seek compensation (“redress measures”) before national courts of EU Member States on behalf of the consumers concerned by the infringement(s). With the injunction’ a ‘qualified entity’ can try to stop infringing activities by a ‘trader’.  It must provide “sufficient information about the consumers concerned” (cf. article 8) but individual consumers do not need to consent to the action, nor must the ‘qualified entity’ prove loss/damage of individual consumers or intention/negligence on the side of the ‘trader’.

‘Redress actions’ (cf. article 9) are aimed at providing compensation, repair, replacement, price reduction, contract termination or reimbursement of the price paid to affected consumers.  EU Member States can decide whether to establish an “opt-in” system (where consumers need to agree to be represented) or an “opt-out” system (where all consumers are included unless they declare that they do not wish to be represented by the ‘qualified entity’).  An “opt-in” system is required for any consumer living outside the relevant EU Member State to join the action.

WHEN  The Directive will apply 30 months from its entry into force on the 20th day following its publication in the Official Journal of the European Union (cf. article 24), so it will likely take until 2023 for the new procedures to be actually implemented.

The Directive has received mixed reactions. Already during the legislative process some Member States raised concerns regarding the Directive.  It is important to note that the Directive does not require Member States to scrap their existing mechanisms, they just have to establish the mechanism required by the Directive as well.

Read about local implications by clicking the countries below. 

Outlook

Signature by the President of the European Parliament and by the President of the Council is scheduled for 25 November 2020. The legislation will subsequently enter into the next important phase with Member States having to adopt the laws, regulations and administrative provisions necessary to comply with the Directive.

We may see the first actions under the new mechanism in 2023, a full ten years after the Commission Recommendation of 11 June 2013 on common principles for injunctive and compensatory collective redress mechanisms in the Member States concerning violations of rights granted under Union Law. With the introduction of the Directive, the Commission has finally seen some EU-wide progress on one of its long-held aims.

 

 

Authored by Dr. Matthias M. Schweiger, Filippo Andrea Chiaves, Manon Cordewener, Matthew Felwick, Valerie Kenyon, Christine Gateau, Christelle Coslin, and Dr. Wojciech Marchwicki.

 

Contacts
Matthias Schweiger
Partner
Munich
Filippo Chiaves
Senior Counsel
Milan
Manon Cordewener
Partner
Amsterdam
Matthew Felwick
Partner
London
Valerie Kenyon
Partner
London
Christine Gateau
Partner
Paris
Christelle Coslin
Partner
Paris
Wojciech Marchwicki
Partner
Warsaw

 

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