Deliberations on the collective pursuit of claims mechanisms (collective redress), particularly in cross border cases and in cases of the violation of rights granted by virtue of EU law, especially in the area of competition and consumers protection at the European level, have been conducted for almost 20 years. The year 2018 was especially crucial for the development of this field and the New Deal for Consumers was also announced.
In the scope of competition law, in 2005 the European Commission adopted the Green Paper entitled Damages actions for breach of the EC antitrust rules while in 2008 it adopted the White Paper on damages actions for breach of the EC antitrust rules that proposed a set of concrete solutions for implementing the collective pursuit of claims as another instrument for the enforcement of EU regulations on competition. Solutions proposed in the White Paper included two complementary mechanisms for the collective pursuit of claims, and namely: opt-in collective actions with the possibility of joining the group (the opt-in model, in which individual injured parties expressly decide to combine their individual claims arising from the damage that they suffered into one single action) and representative actions brought by qualified entities on behalf of groups of identified (and in certain rare cases identifiable) injured parties. What’s important, according to the Commission’s concept, the proposed solutions would not deprive the injured party of the right to bring an individual action for damages. The White Paper also included a proposal on establishing common evidentiary standards to be complied with in a civil action in order to demonstrate an infringement of the antitrust law and the damage suffered.
Consumer law constitutes another area of law where the implementation of mechanisms of the collective pursuit of claims has been debated. The strategy of consumer policy for the years 2007-2013 assumed the introduction of the possibility for the collective pursuit of claims. It was therefore emphasized that the lack of regulations in this area results in consumers’ mistrust of cross-border purchases. In relation therewith, the Commission published the Green Paper on Consumer Collective Redress of 27th November 2008. The paper addresses the manner of facilitating effective redress in situations where large numbers of consumers have suffered damages in connection with the practices of one and the same entrepreneur infringing on consumer law. The Green Paper submitted several solutions of further conduct regarding the discussed issue for consideration which subsequently found their reflection in the extent of social consultations led by the Commission.
In the years 2010-2012, the European Commission continued further works and in-depth research to provide an answer to, among others, the question how the European mechanism of collective redress can be reconciled with the requirement of Article 67.1 TFEU under which the EU shall constitute an area of freedom, security and justice with respect to the different legal systems and traditions of the Member States, in particular in the areas well established on the national level (such as procedural law), but constituting a novelty on the EU level.
In the course of the Commission’s activities aimed at strengthening cross-border collective redress mechanisms, the Member States raised the issue of inconsistencies between the Commission’s various initiatives on the collective pursuit of claims (limited to competition and consumers protection) and initiatives on the other areas of law which may create rights eligible to be protected pursuant to the collective redress. Group proceedings are, in substance, a procedural instrument of potential significance for European policies in areas other than competition or consumer protection (such as financial services, environmental protection, personal data protection or non-discrimination).
As a retort to those remarks, the European Commission recognized that in creating future legal solutions (in a form of a directive) in terms of collective redress, after the social consultations, a horizontal approach (i.e. universal, cross-sectional to a scope of the prospective measure) should be adopted.
In 2011, the Commission conducted social consultations “Towards a Coherent European Approach to Collective Redress”. They aimed, among others, at identifying common legal principles regarding collective redress and researching in what way such common principles may be, on one hand, introduced within the EU legal system while, on the other, within the legal order of each EU Member State. The consultations also extended to the identification of those legal areas in which mechanisms of the collective pursuit of claims could support the better enforcement of EU legislation or the protection of the rights of citizens and economic entities in the European Union.
The results of conducted social consultations were summarised by the Commission in the Communication to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions “Towards a European Horizontal Framework for Collective Redress” of 11th June 2013. In the conclusions of this document the Commission noted the advantages of the adoption of, in the scope of the prospective regulation, a cross-sectional (horizontal) approach, in order to avoid the risk of mutual non-adjustment of the rules on group proceedings in a separate areas of law and in order for the undisturbed operation of this mechanism be assured in parallel to the Member States’ procedural provisions.
In the meantime, the European Parliament resolved to join the debate on the collective redress mechanisms and adopted – based on a complex report on collective redress – Resolution of 2nd February 2012 “Towards a Coherent European Approach to Collective Redress”.
The European Parliament confirmed that the rules governing collective redress should be of a cross-sectional nature (see point 15 of the Resolution). The European Parliament also drew attention to several issues connected with the specific characteristics of collective redress – it endorsed the opt-in principle and indicated that only those representative organisations which were verified by means of a qualification procedure should be entitled to bring forth an action.
According to the discussed European Parliament Resolution, one of the ways of counteracting abuse of collective redress mechanisms should consist in the exclusion of certain solutions, in particular such as punitive damages, third party financing of collective redress and payment of the attorney’s fee dependent only on the outcome of the case. It was also indicated in the Resolution that in the cases covering collective redress “the loser pays” rule should apply, as a rule taking priority in civil disputes as one of the main means of protection against abuse of recourse to court.
Moreover, the Parliament acknowledged that applying rules that prevent the choice of a domestic court venue due to the possibility of obtaining a more advantageous resolution of the case (forum shopping) on the EU level, is necessary.
On 11th June 2013, the European Commission issued a Recommendation on common principles for collective redress in the case of claims for ceasing and desisting from tortious practices and for compensatory claims in the Member States regarding the infringement of the rights granted by virtue of the EU law (OJ of EU L 201/60). The recommendation called upon the Member States to introduce national mechanisms for the collective pursuit of claims and presented common European principles that should be taken into consideration in such mechanisms. According to the Commission’s Recommendation:
The Commission called upon the Member States to implement adequate, according to the Recommendation, legal measures within two years at the latest from the date of the publication of the Recommendation in the Office Journal of the European Union, i.e. till 26th July 2015. The Commission announced that within three years at the latest from the date of this publication, i.e. till 16th July 2018, an evaluation of the factual status (on the basis of annual reports submitted by the Member States) should be conducted in order to check whether further measures aimed to facilitate the strengthening of the collective redress mechanisms are necessary.
On 24th October 2017 the European Commission announced a programme of the Commission’s works for 2018 within which it was prospected that an initiative of creating “a new deal for consumers” concerning, among others, collective redress matters, would be developed.
On 25th January 2018 the European Commission published a Report on the implementation of the Recommendation in the EU Member States. The Report included an assessment of the amendments in the Member States’ regulations associated with the Recommendation of 2013 and an analysis whether those possible legal developments allowed the use of the rules prescribed in the Recommendation to become more common and more coherent. The results of the Report were mainly based on: 1) the information delivered to the Commission by the Member States, 2) a study supporting the assessment of the implementation of the Recommendation covering all Member States, 3) a call for remarks (to which the Commission received 61 replies) and 4) a study supporting the Fitness Check of the EU consumer and marketing law.
On the grounds of the specific analysis made within the framework of the Report, the European Commission made several important conclusions. Firstly, according to the European Commission, legislative activities affected by the Recommendation remained somewhat limited in the Member States. The Commission noted that access to collective redress mechanisms and the implementation of restraints from the potential abuse of such mechanisms is still patchy on the EU territory. A significant impact of the Recommendation is visible in two Member States (in Belgium and Lithuania) where new provisions were introduced shortly after the Recommendation had been adopted and in Slovenia where, on the other hand, the new regulations of law had been waiting to enter into force. The impact of the Recommendation may be seen in those Member States which amended their legislation after 2013 (in France and Great Britain).
It was emphasized in the Report that nine Member States currently still have no compensatory collective redress mechanisms in place. Moreover, in some Member States which formally provide for collective redress mechanisms, in practice, the injured parties are not able to make use of them because of the strict conditions prescribed in the national legislation, the excessive length of the procedures and the relatively low prospective financial advantages compared to the exaggerated costs of such claims.
On 11th April 2018 the Commission presented the “New Deal for Customers” (“New Deal”), the aim of which is to guarantee that all European consumers are able to fully exercise their rights granted them by virtue of the European legislation.
One of the elements of the Deal is the European Commission’s legislative initiative – the Proposal for a 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 COM/2018/0184 final – 2018/089 (COD) (hereinafter: “Proposal for a Directive” or “Directive on representative actions”; text of the Proposal for a Directive is available here. The aim of the Directive is to enable authorized parties to pursue their claims by means of representative actions, so that the protection of collective interests of consumers is guaranteed whilst the possibility of abuse of recourse to court can be excluded at the same time.
Legislative procedure no. 2018/0089 (COD) on the Proposal for a Directive on representative actions remains pending (see here for the current status). The European Parliament, after many amendments were implemented, adopted the text in the first reading. The project of the Directive on representative actions is awaiting the EU Council’s stance.
The Proposal for a Directive provides for a procedural mechanism, which does not affect the rules establishing the substantive rights of consumers to contractual and non-contractual remedies in case their interests have been harmed by an infringement, such as the right to compensation for damages, contract termination, reimbursement, replacement, removal, repair or price reduction. A representative action seeking redress under this Directive can only be brought where EU or national law provides for such substantive rights.
The Proposal for a Directive is based on a principle of minimum harmonization and does not replace existing national collective redress mechanisms. Taking their legal traditions into account, it leaves it to the discretion of the Member States whether to design the representative action set out by this Directive as a part of an existing or future collective redress mechanism or as an alternative to these mechanisms, insofar as the national mechanism complies with the modalities set by this Directive. This neither affects the Member States’ possibility of remaining the existing frameworks nor obliges Member States to amend them. Member States will have an opportunity to implement the regulations prescribed in this Directive to their own collective redress systems or to implement them as a separate procedure.
General assumptions of the regulations set by the Proposal for a Directive, counting amendments introduced by the Parliament, are presented below:
The abovementioned Proposal for a Directive was then triple of the opinion: the European Economic and Social Committee (twice) and the European Committee by the Regions (once).
In the first opinion of the European Economic and Social Committee of 19th September 2018, the EESC criticized the content of the Proposal for a Directive. Firstly, according to the EESC, actions presented in the Directive should be of a universal nature and not limited to consumers. Additionally, the EESC considered that the Commission should further elaborate on the role of the judge; the burden of proof, production of evidence, place of jurisdiction and the applicable law. In terms of compensation, the EESC noted that the proposed legislation did not fully address the need to provide actual compensation to consumers for the damage suffered since there was no clear provision that referred to the compensation of the total amount lost by consumers, regardless of the damage suffered. Moreover, the EESC postulates 1) the introduction of mechanisms confirming the guarantee of confidentiality of information provided, not only at the stage of the proceedings, but also in final decisions in order to protect the rights of entrepreneurs, including the safeguarding of company secrets and 2) incorporation a recommendation for Member States to use technological innovations, in particular with regard to the gathering of participants for a collective action into the Directive. The Committee believes that consumers should be free to decide whether they wish to opt in or opt out from the collective action. In particular, the EESC believes that an opt-in model would be appropriate for cases involving a limited number of victims who have suffered significant damage, while an opt-out model would be more appropriate for cases involving a large number of victims who have suffered little damage.
The European Economic and Social Committee criticized the Proposal for a Directive in the next opinion of 12th December 2018 as well using then these terse words: “the Commission’s proposal on representative actions, included in the proposal for a New Deal for Consumers, is disappointing”.
On the other hand, in the opinion of 10th October 2018, the European Committee of the Regions proposed introducing three following amendments to the Directive: 1) amendment of the Article 5.3 so as to the mandate of the individual consumers should only be required where a redress order is requested by the qualified entity, 2) deleting Article 18.2 and, in the scope of the Annex I, adding point 60 which would widen the scope of the Directive on environmental damages.
On 3rd October 2018, the Board of Citizens Rights and Constitutional matters published the research on collective redress in the EU Member States. The aim of the research was to analyse the trends in the Members States’ legislations and a prospective role of the European Union as it comes to regulations regarding collective actions. The research consists of reports from 12 countries: Austria, Belgium, Estonia, France, Spain, Holland, Luxembourg, Germany, Poland, Romania, Great Britain and Italy and an assessment of the projected Directive together with the alternative to the Directive proposition.
Conclusions of the research are as follows: the pan-European mechanism of collective redress is, on the one hand, welcome and, on the other hand, impossible to accomplish because of the existing differences between the EU Member States’ systems of collective redress. Introducing one European system would therefore coincide with the rules of proportionality and subsidiarity. The proposal of the European Commission of April 2017 is a reply for some of problems regarding collective redress – but still not for all of them. Perhaps it will be necessary to introduce some changes into private international law because of the rising role of the internal market and the necessity of supporting the possibility of acting by consumers organisations outside the native country.
Despite the critical opinions on the proposed Directive, the project went to the floor of the European Parliament. The first reading of the motion took place on 26th March 2019 and then the rapporteur Geoffroy Didier presented the report on this in the name of the Legal Commission. The report consisted of 108 amendments. A further 31 amendments were presented by the ENF (Europe of Nations and Freedom) political group. During the voting in the plenary, all amendments proposed in the report (108 amendments) were adopted which means that the text of the Directive contained in the motion significantly differs from the one originally presented by the Commission. The motion incorporating the European Parliament’s amendments is equivalent to the stance of this body.
In EN: On June 30, 2020, the European Commission published the agreed text of the Directive on representative actions to protect the collective interests of consumers and repealing Directive 2009/22, the text is available here.