Agnieszka Trzaska-Śmieszek
Magdalena OsmędaDate of preparation of the study: October 2022, date of the last update: February 2024.
The Polish legislator still has not passed any legislation amending the existing regulations to implement Directive 2020/1828. Not even a draft implementation law has reached the Sejm, although according to information published on the RCL website, work on the draft has been underway since late 2022. Therefore, below we present the main assumptions of Directive 2020/1828 itself, which should be reflected in Polish legislation.
Directive 2020/1828 is part of a package of directives creating the so-called New Deal for Consumers. The overriding goal of Directive 2020/1828 is to ensure a high level of consumer protection.
Directive 2020/1828 aims to make available to consumers at the EU and national levels in all Member States at least one effective and efficient procedural mechanism in the form of representative actions for injunctive measures to cease harmful practices used by entrepreneurs and for remedies in connection witch such practices. This applies to both domestic and cross-border practices (violations).
Particularly important are the regulations of Directive 2020/1828 on cross-border redress, which are expected to facilitate the possibility of pursuing claims for mass damage, increasing the effectiveness of cross-border actions. Thanks to the institution of cross-border actions, it will be easier to pursue claims for infringements committed by entrepreneurs based abroad (representative actions will be able to be brought in a country other than the seat of that entrepreneur, e.g., in the country where the harmed consumers have their residence).
Directive 2020/1828 does not specify whether its implementation is to be achieved through the establishment of an appropriate civil or administrative procedure, or a combination of both. Member States are free to choose the type of procedure in this regard.
Directive 2020/1828 repeals Directive 2009/22/EC of the European Parliament and of the Council of April 23, 2009, on injunctions for the protection of consumers’ interests.
Member States were required to introduce regulations implementing Directive 2020/1828 by 25th December 2022. These regulations should be applied as of 25th June 2023, for violations that occur on or after 25th June 2023.
The Polish legislator still has not passed any legislation amending the existing regulations to implement Directive 2020/1828. Not even a draft implementation law has reached the Sejm.
Work on the draft law implementing Directive 2020/1828 has been underway at the Government Legislative Center since December 2022. To date, four versions of the bill have been produced: a draft dated 6th December 2022, a draft dated 5th July 2023, a draft dated 17th August 2023 and a draft dated 14th November 2023.
The entity responsible for implementation is the Office of Competition and Consumer Protection.
In most European countries, the implementation process of Directive 2020/1828 was prolonged, and few member states implemented it before 25th December 2022. The implementation of Directive 2020/1828 was quite chaotic.
According to data made available on the official website of the European Union,1 to date, alongside Poland, only 3 other member states have not implemented it: Estonia, Luxembourg, and Austria.
Directive 2020/1828 defines the term consumer as any natural person acting for purposes that are not within the scope of his or her trade, business, craft, or profession.
In the recitals to Directive 2020/1828, it is clarified that infringements causing harm to individuals who are considered entrepreneurs should not fall within the scope of Directive 2020/1828.
Thus, a representative action can only be brought on behalf of individuals who are not entrepreneurs.
A representative action is an action to protect the collective interests of consumers that is brought by a qualified entity as a plaintiff on behalf of consumers for application in order to apply an injunctive measure to cease harmful practices or remedial measure, or both.
Directive 2020/1828 distinguishes between domestic representative actions (brought by domestic qualified entities) and cross-border actions (brought by qualified entities in other Member States). Whether an action is domestic is thus determined by the place of designation of the qualified entity, not by the location of the entrepreneur or the residence or domicile of the consumers represented in the action.
A representative action can only be brought by a qualified entity, designated by the state for this purpose. This means that not every organization working to protect the interests of consumers can bring a representative action, but only an organization that has been formally designated by the state as a qualified entity.
In the case of national actions, Directive 2020/1828 does not indicate the criteria that a qualified entity must mandatorily meet. However, such criteria are provided for entities qualified to bring cross-border actions – an entity qualified to bring cross-border actions can be an entity that:
Member states maintain lists of qualified entities. The list provides evidence of the legitimacy of an qualified entity bringing a cross-border action.
In the case of cross-border actions, Directive 2020/1828 allows them to be brought by several qualified entities from different Member States in order to protect the interests of consumers from those states.
Depending on the legal traditions of the Member State, it is possible that the qualified entity will be a public entity.
The fulfillment of the criteria for designation by qualified entities should be periodically evaluated by Member States (at least once every 5 years). In addition, a Member State may revoke designation when an entity fails to meet the designation criteria.
Ad hoc designation – by the court or administrative body before which the action is brought – of a qualified entity to bring a specific national action is possible. Ad hoc designation of a qualified entity for a cross-border action is not permitted.
Importantly, qualified entities are to be assisted by Member States as needed, e.g., in the form of public funding, including structural support, reduction of court or administrative fees, and access to legal aid – so that the procedural costs of representative actions do not prevent qualified entities from effectively exercising their right to seek application of injunctive measures to cease harmful practices or remedial measures.
Consumers are not a party to proceedings initiated as a result of a representative action.
Only the qualified entity bringing the representative action is supposed to have the procedural rights and obligations of a party to the proceedings. Consumers, on whose behalf the qualified entity is acting, will not formally constitute a party to the proceedings, nor will they have the opportunity to interfere with procedural decisions made by qualified entities, individually submit evidentiary motions in the proceedings, or individually appeal procedural decisions of the court or administrative body before which the representative action in question is brought. In addition, individual consumers should not have procedural obligations in a representative action, nor should they have to bear the costs of the proceedings, unless there are extraordinary circumstances.
The construction assuming that only the entity acting on behalf of the group of persons, who are to be protected by proceedings, is a party is characteristic for a class action (group proceedings) in which only the representative of the group (not each member of the group) is a plaintiff, while the members of the group benefit from the proceedings.
Consumers, therefore, will not be a party to the proceedings initiated as a result of the representative action but are to be beneficiaries of the proceedings.
Despite this, the inclusion of a consumer in a given action creates a kind of state of “lis pendens” – such a consumer cannot simultaneously join another representative action or bring an individual action on the same subject.
A representative action is brought against entrepreneurs for violations of the provisions of Union law referred to in Annex I to Directive 2020/1828, including those transposed into national law, which harm or are likely to harm the collective interests of consumers.
An entrepreneur within the meaning of Directive 2020/1828, on the other hand, is any natural or legal person, whether private or public, who acts, including through another person acting in his name or on his behalf, for purposes relating to his trade, business, craft, or profession.
Representative actions are brought in cases involving violations of the provisions of Union law referred to in Annex I to Directive 2020/1828, including those transposed into national law, which harm or are likely to harm the collective interests of consumers.
A representative action is related to an entrepreneur’s use of harmful practices; Directive 2020/1828 defines “practice” as any act or omission on the part of an entrepreneur.
The fact that the violation ceased before the filing of the representative action or the completion of the proceedings initiated by the representative action does not prevent the case from being heard.
Directive 2020/1828 does not comprehensively regulate all the requirements for admissibility of a representative action, leaving the issue to national regulation.
Instead, Directive 2020/1828 stipulates that the representative action must provide sufficient information about the consumers affected by the representative action.
Member States may introduce or maintain provisions in their national law under which a qualified entity may seek application of injunctive measures to cease harmful practices only after consulting with the entrepreneur concerned in order to lead the entrepreneur to cessation of infringement. If the entrepreneur does not cease the infringement within two weeks of receiving the consultation request, the qualified entity may immediately bring a representative action for application of injunctive measures to cease harmful practices.
Consultations with the entrepreneur are thus a kind of attempt to resolve the dispute amicably at the pre-litigation stage.
In a representative action, a qualified entity may request:
Ad. 1. Injunctive measures to cease harmful practices may be:
A qualified entity bringing an action for the imposition of injunctive measures to cease harmful practices is not required to prove actual loss or damage, nor intent or negligence on the part of the entrepreneur.
Directive 2020/1828 mandates that representative actions for injunctive measures to cease harmful practices must be conducted with due procedural expediency.
Ad. 2) Remedial measures are – depending on the case – measures such as compensation, repair, replacement, price reduction, termination of the contract, or reimbursement.
Remedial measures are aimed at granting consumers specific compensation for having been affected by a harmful practice. It is up to the Member States to choose the appropriate mechanism: opt-in (the action is brought on behalf of consumers who explicitly express their will to be represented), opt-out (the action is brought on behalf of all consumers affected by a given practice, unless a consumer declares they do not wish to be included in the action), or a combination of both. Directive 2020/1828 requires consideration of the legal traditions of the Member States in this regard. As for the traditions present in the Polish legal system, in the case of group proceedings, the legislator has adopted the opt-in model (the group proceeding includes persons who have submitted a declaration of joining the group).
Directive 2020/1828 stipulates that consumers who do not have their habitual residence in the Member State in which the representative action is brought must explicitly express their will to be represented (opt-in model).
Member States decide at which stage of the proceedings individual consumers may express, explicitly or implicitly, their will to be represented by a qualified entity and thus to be bound by the outcome of the proceedings. In the group proceeding present in the Polish legal system, one may join the group at the stage of filing the statement of claim as well as during the proceedings in its so-called second phase, within the time limit specified in the court-ordered public notice on the initiation of the group proceedings.
As for the minimum number of consumers who must be covered by a representative action concerning remedial measures, Directive 2020/1828 leaves this to the discretion of the Member States.
Directive 2020/1828 should not allow the imposition of punitive damages on entrepreneurs.
It depends on the model adopted by the Member State. Member States may introduce a one-stop-shop procedure – that is, allow injunctive measures to cease harmful practices and remedial measures related to practices infringing the collective interests of consumers to be sought in a single proceeding.
Directive 2020/1828 provides regulations concerning the financing of representative actions for remedial measures by third parties. As a rule, according to Directive 2020/1828, such financing is permitted; however, national law must ensure that such financing does not result in a conflict of interest and that financing by third parties who may obtain an economic benefit from bringing a representative action for remedial measures or from its outcome does not result in the representative action failing to protect the collective interests of consumers.
In particular, it must not be permitted for third parties, through financing, to exert undue influence on the decisions of qualified entities in the context of a representative action, including decisions regarding settlements, in a manner detrimental to the collective interests of consumers, or for a representative action to be brought against a defendant who is a competitor of the financing entity or against a defendant on whom the financing entity is dependent.
The idea is to prevent the use of the measures provided for in Directive 2020/1828 for purposes other than consumer protection (e.g., to harm a competitor by financing a proceeding brought against them).
The use of financing prohibited under Directive 2020/1828 may ultimately lead to the qualified entity being deprived of legal standing (i.e., the right to bring a representative action).
In summary, Directive 2020/1828 allows financing by a third party, provided that such financing complies with the requirements of transparency, independence, and absence of conflict of interest.
Proceedings concerning remedial measures may end in a settlement, and Directive 2020/1828 even indicates that this is a desirable way to conclude the proceedings, stating that collective settlements aimed at providing remedies to harmed consumers should be encouraged, as well as that the court or authority should have the ability to encourage the parties to enter into negotiations to conclude a settlement.
The settlement is subject to review by the court or administrative authority, which may refuse to approve it if it is contrary to the applicable provisions of national law or if the settlement contains terms that cannot be enforced.
Member States also have the option to establish provisions allowing the refusal to approve a settlement considered unfair.
In the event that the settlement is not approved, the court or authority continues to examine the representative action.
Moreover, Member States may establish provisions allowing individual consumers to give or refuse consent for the settlement to be binding on them.
Directive 2020/1828 provides for the “loser pays” principle, according to which the costs of the proceedings should be borne by the party that loses the case (excluding costs that were unnecessarily incurred).
Directive 2020/1828 generally provides that consumers do not bear the costs of proceedings concerning remedial measures – what is consistent with the construction of the representative action, which is based on the assumption that consumers are not parties to the proceedings and do not influence the actions taken within the proceedings.
In exceptional circumstances, there should be the possibility of requiring individual consumers covered by a representative action concerning remedial measures to bear those costs of the proceedings that were incurred as a result of their intentional fault or negligence, e.g., by prolonging the proceedings through unlawful conduct.
In addition, it is permissible to establish provisions allowing qualified entities to collect low fees for joining or other similar charges from consumers who have expressed their will to be represented by that qualified entity in a specific representative action.
Directive 2020/1828 includes provisions on making information available about representative actions.
Above all, qualified entities should provide on their websites information concerning the actions they have decided to bring, the progress of proceedings in pending actions, and the outcomes of representative actions.
Directive 2020/1828 also requires providing information to consumers affected by a pending representative action concerning remedial measures.
Directive 2020/1828 also directly imposes information obligations on entrepreneurs, providing that the court or administrative authority shall impose on the entrepreneur an obligation to inform, at the entrepreneur’s expense, the consumers affected by the representative action about any final decisions providing for injunctive or remedial measures and any approved settlements, in a manner appropriate to the circumstances of the case and within a specified time limit, including, where appropriate, informing all concerned individual consumers individually. This obligation does not apply if the consumers concerned are informed about the final decision or approved settlement in another way.
However, a Member State can introduce provisions under which the entrepreneur will be obliged to provide such information to consumers only upon request from the qualified entity.
The winning party may recover the costs related to providing information to consumers following the “loser pays” principle.
The information obligations (beyond the obvious goal of spreading information among interested consumers) and the related reputational risks for the entrepreneur are also intended to discourage entrepreneurs from infringing consumer rights.
A representative action concerning injunctive measures to cease harmful practices results, in relation to consumers, in the suspension or interruption of the limitation period, so that consumers are not deprived of the opportunity to bring an action for remedial measures.
A representative action concerning remedial measures also results in the suspension or interruption of the limitation period in relation to consumers covered by the representative action.
As a rule, evidentiary proceedings fall under the procedural autonomy of Member States, which independently regulate the rules governing such proceedings. Directive 2020/1828, however, provides a limited way for specific rules regarding evidence.
Member States must ensure that a final decision of a court or administrative authority of any Member State on the existence of an infringement harming the collective interests of consumers may be used by all parties as evidence in the context of any other actions brought before their national courts or administrative authorities concerning remedial measures against the same entrepreneur in relation to the same practice, following national rules on the evaluation of evidence.
Directive 2020/1828 also provides for the obligation to ensure that if a qualified entity presents reasonably accessible evidence sufficient to support a representative action and indicates the existence of additional evidence held by the defendant or a third party, at the request of the qualified entity, the court or administrative authority may order disclosure of that evidence by the defendant or third party, following national procedural law, subject to applicable Union and national rules on confidentiality and proportionality. Member States must ensure that, at the request of the defendant, the court or administrative authority may also order the qualified entity or a third party to disclose relevant evidence, per national procedural law.
This means that an entrepreneur may be required to present evidence in their possession.
In the event of failure or refusal to comply with an injunctive measure to cease harmful practices or with the information obligations regarding informing consumers affected by the representative action or with obligations regarding the disclosure of evidence, the Member State will be obliged to apply sanctions that are effective, proportionate, and dissuasive, including sanctions in the form of financial penalties.
1 https://eur-lex.europa.eu/legal-content/EN/NIM/?uri=CELEX:32020L1828 [Accessed: 20.02.2024, 10:10]
2 Annex I to Directive 2020/1828 lists 66 EU legal acts – directives and regulations in the field of consumer law, but also other areas such as data protection, financial services, travel and tourism, energy, telecommunications, environment and health, and communication.
