As we see it > Qualified Entity in the New Draft Bill Implementing the Representative Actions Directive

Qualified Entity in the New Draft Bill Implementing the Representative Actions Directive

  • Agnieszka Trzaska-Śmieszek
  • Magdalena Osmęda
24 August 2023

As announced in our post Poland’s Implementation of the Representative Actions Directive Getting Closer – New Draft Bill, we are launching a series of posts providing a more detailed discussion of the proposed changes aimed at implementing into the Polish legal system Directive (EU) 2020/1828 of the European Parliament and of the Council of 25th November 2020 on representative actions for the protection of the collective interests of consumers and repealing Directive 2009/22/EC (hereinafter: “Directive 2020/1828”).

First, we take a closer look at a new category of participants in class proceedings – the qualified entity. Class actions in cases concerning the cessation of practices infringing the general interests of consumers and in cases concerning claims arising from such practices will be brought by a “qualified entity”. More than one qualified entity may bring such an action.

What will be the role and position of the qualified entity in the proceedings?

According to the draft bill of 5th July 2023 (hereinafter: “Draft of 05.07.2023”), the qualified entity constitutes a separate procedural category from the group representative. This clear distinction between the qualified entity and the group representative is provided for in the proposed Article 4 Section 1 of the Class Action Act.1

The proposed provisions separately regulate the position, rights, and competences of the qualified entity, and the Draft of 05.07.2023 does not include any reference implying that provisions on the group representative should apply accordingly to the qualified entity. Thus, provisions applicable only to the group representative will not apply to the qualified entity (not even by analogy).

However, in many respects, the position and role of the qualified entity are analogous to that of the group representative. As in the case of the group representative, the proposed Article 2b of the Class Action Act provides that the qualified entity conducts the proceedings in its name, on behalf of all group members.

An example of the different treatment of the group representative and the qualified entity is the proposed Article 18a of the Class Action Act, which excludes the application to the qualified entity of Article 18 of the Class Action Act, which allows the court to replace the group representative upon request by more than half of the group members. As explained in the justification to the Draft of 05.07.2023: “This provision excludes the application of Article 18, which regulates the issue of changing the group representative. In the current class actions, the group appoints its representative (see Article 4 Section 2), which is why the act gives the group the right to change that representative. In contrast, in representative actions under Directive 2020/1828, the qualified entity brings the action and enables the formation of a group, acting as the host of such proceedings. Therefore, Directive 2020/1828 grants consumers the right to opt out of the group.”

This means that, compared to the group representative, the position of the qualified entity is stronger and independent of the group members’ decisions.

Who can become a qualified entity?

The Draft of 05.07.2023 provides that the rules for obtaining the status of a qualified entity will be included in Chapter 2a of the Act on Competition and Consumer Protection (hereinafter: “Consumer Protection Act”)2, titled “Qualified Entity”.

An entity may become the qualified entity if designated by the President of the Office of Competition and Consumer Protection (UOKiK; hereinafter: “President of UOKiK”) and entered into the relevant register of qualified entities. The President of UOKiK will maintain a register of qualified entities for domestic and cross-border group proceedings (a proceeding is considered cross-border if it is conducted before a court or administrative authority of an EU Member State other than the one in which the qualified entity was designated).

Thus, an action may be brought by an entity entered in the register maintained by the President of UOKiK or, in the case of cross-border actions, by an entity listed in the register of qualified entities maintained by the European Commission.

To become a qualified entity and be entered in the register, the applicant must meet the conditions listed in Article 46h of the Consumer Protection Act (as stated in the justification to the Draft of 05.07.2023, the goal is to ensure the professionalism and independence of qualified entities):

  1. it is a legal person;
  2. its statutory purpose is to protect consumer interests;
  3. it has conducted non-profit activities for the protection of consumer interests for at least 12 months before applying for registration;
  4. it is not subject to bankruptcy proceedings and has not been declared insolvent within the meaning of Article 11 of the Bankruptcy Law of 28th February 2003 (Journal of Laws 2022, item 1520, and 2023, item 825);
  5. it is independent and not subject to the influence of entities, particularly entrepreneurs, that could gain an economic benefit from the initiation of a domestic or cross-border group proceeding, including when funded by third parties, and it has procedures in place to manage conflicts of interest involving itself, its funders, and consumers;
  6. it publicly provides, in plain and understandable language, by all appropriate means – especially via its website – information indicating that it meets the conditions listed in points 1–5, as well as information on its sources of funding, organizational, management, and membership structure, statutory purpose, and activities.

The entry into the register will be made upon the application of an entity that meets the above requirements.

Will the Financial Ombudsman be able to act as a qualified entity?

The Financial Ombudsman will be entered into the register of qualified entities ex officio and will be entitled to bring class actions (both domestic and cross-border) on behalf of clients of financial market entities as defined in Article 2 Section 1 of the Act of 5th August 2015 on Handling of Complaints by Financial Market Entities, the Financial Ombudsman, and the Financial Education Fund, and in matters arising from service agreements or actions performed by a financial institution for a natural person as defined in Article 4 Point 4 of the Act of 5th August 2015 on Macroprudential Supervision of the Financial System and Crisis Management in the Financial System.

The Draft of 05.07.2023 in Article 4 provides that the President of UOKiK shall enter the Financial Ombudsman into the register of qualified entities within 3 months of the law’s entry into force and shall immediately notify the Ombudsman of the entry.

Not all provisions of the Consumer Protection Act regarding qualified entities will apply to the Financial Ombudsman. In particular, the requirement to disclose sources of funding will not apply.

It is worth noting that since 16th March 2023, the Financial Ombudsman may also serve as a group representative in “ordinary” class actions involving claims listed in Article 4 Section 2a of the Class Action Act.

Examination of the standing of the qualified entity

Due to the special requirements that a qualified entity must meet, the Class Action Act provides additional regulations concerning the examination of that entity’s legal standing to bring an action. In cases concerning the cessation of practices infringing the general interests of consumers and in cases involving claims arising from such practices, the court will be obliged to determine whether the action falls within the statutory activities of the qualified entity and whether it pertains to the sector covered by the entity’s mandate (see proposed Article 10 Section 4 of the Class Action Act). If these requirements are not met, the court will reject the claim (see proposed Article 10 Section 5 of the Class Action Act). For example, the court will reject a claim if an entity protecting consumers in the aviation sector brings an action concerning breaches of consumer credit regulations.

The provisions therefore establish a two-step verification of qualified entities – at the stage of entry in the register (by the President of UOKiK) and later at the stage of examining a specific claim (by the court). The first verification concerns compliance with the registration criteria, while the second aims to determine whether the registered entity can bring an action concerning a specific infringement.

1 That is, the Act of 17th December 2009 on Pursuing Claims in Group Proceedings (Journal of Laws of 2020, item 446; hereinafter: “Class Action Act”)

2 That is, the Act of 16th February 2007 on Competition and Consumer Protection (Journal of Laws of 2021, item 275; hereinafter: “Consumer Protection Act”)