Several group actions have recently been brought separately by consumers and consumer associations across different EU Member States for similar wrongful acts caused by the same professionals (of the Dieselgate type). This scattering of legal proceedings on the basis of similar facts, made clear both the necessity and the urgency of simplifying the legal procedures for compensation of consumers.
In this context, on 24 November 2020, the European Parliament approved Directive (EU) 2020/1828 on representative actions to protect the collective interests of consumers.
The directive aims to ensure that a mechanism for representative actions to protect the collective interests of consumers is available in each Member State, constituting a minimum basis for harmonising collective legal actions, brought by individuals who have suffered identical losses, against the same defendant.
Member States are required to transpose these rules into their domestic law by 25 December 2022, to enable individuals to collectively, through a qualified entity (association, foundation, etc.), seek the cessation of wrongdoing, and redress for the damage they have suffered as the result of an act committed by a professional such as a commercial company.
Member States shall implement these transposed rules from 25 June 2023.
Actions covered by the Directive
The Directive covers two types of action:
- Domestic representative actions, which are “brought by a qualified entity in the Member State in which the qualified entity was designated“; and
- Cross-border representative actions, which are “brought by a qualified entity in a Member State other than that in which the qualified entity was designated“.
In order to promote cross-border actions, the Directive provides that qualified entities from different Member States may “join forces” within a single representative action, even if the action is brought before a court in another Member State (Recital 31).
Scope of Directive (EU) 2020/1828
The Directive applies to domestic or cross-border representative actions for injunctions and damages brought in respect of infringements by traders of the provisions of EU law referred to in Article 2(1) and Annex I of Directive 2020/1828 in the fields of:
- Consumer affairs
- Data protection
- Financial services
- Air and rail transport
- Environmental services
- Health, etc.
The Directive provides for designation of one or more “qualified entities” (consumer organisations, public bodies, associations) by each Member State (Article 4).
The criteria for selection of these qualified entities are defined by the Directive, requiring that they (Article 4 § 3):
- Demonstrate 12 months of actual public activity in the protection of consumer interests
- Be non-profit-making
- Be independent and not be “influenced by persons other than consumers”, etc.
They must also be qualified to apply for (Article 7 § 4):
- Injunctive measures; and
- Redress measures.
Each Member State shall communicate a list of these qualified entities to the European Commission, and ensure that the information on these qualified entities is made available to the public (Article 5).
The Directive specifically addresses the issue of third-party funding and requires Member States, in general terms, to ensure that funding does not “divert the representative action away from the protection of the collective interests of consumers” (Article 10).
The domestic courts will thus have to assess whether “the third party would be likely to unduly influence the procedural decisions of the qualified entity in the representative action“.
The Directive furthermore outlines the possibility of representative actions being funded by organisations funded through equal contributions by their members, through donations or through crowdfunding (Recital 52).
The Directive requires Member States to ensure that qualified entities provide information on their websites about actions brought, the progress and the outcome of these actions (Article 13).
This information may also be contained in a national database (Article 14).
Opt-in / opt-out
Consumers are traditionally offered two means of participating in a group action:
- The opt-in system, which obliges consumers to join the group action in order to receive compensation; and
- The opt-out system, which automatically includes all victims of the subject-matter of the action, other than those who wish to be excluded from the group. The Directive leaves the choice between an opt-in or opt-out mechanism to the Member States.
However, it excludes the opt-in system where injunctions are concerned (Art. 8) and allows opt-out mechanisms only for consumers who are habitually resident in the Member State of the court before which the representative action is brought. (Recital 45, Art. 9).
For example, the Netherlands has so far chosen the opt-out mechanism. Thus, in the case of a group action brought by a qualified entity before the Dutch courts, only individuals having their habitual residence in the Netherlands and meeting the criteria set out in the judgment upholding the claims of the qualified entity are able to benefit from this decision, without having to be party to the proceedings or members of the qualified entity.
In contrast, the group action mechanism under French law, as defined by Law No 2014-344 of 17 March 2014, favours the opt-in system: concerned consumers are called upon to come forward once the judge has ruled on admissibility and set the amount of compensation.
Loser pays principle
Finally, the Directive establishes the principle that the losing party must pay the costs of the proceedings borne by the winning party, with the exception of any costs incurred by an individual consumer as a result of intentional or negligent conduct (see recitals 36 and 38; Article 12).
In France, Articles 699 and 700 of the Code of Civil Procedure enable the court to order the losing party to pay the other party a limited lump sum, so that the legal costs actually incurred by the winning party are not, so far, fully compensated.
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Le TUTOUR Avocats has developed significant expertise of cross-border mass claims litigation. It represents French and foreign victims in mass claims in France, notably in relation to defective medical devices, PIP breast implant litigation and, as such, closely monitors the transposition of this Directive into French national law.