Agnieszka Trzaska-Śmieszek
Magdalena OsmędaIn April, the government still had not adopted the draft law implementing Directive (EU) 2020/1828 of the European Parliament and of the Council of 25 November 2020 on representative actions for the protection of the collective interests of consumers and repealing Directive 2009/22/EC – commonly referred to as the Representative Actions Directive (hereinafter: “Directive 2020/1828” or “RAD”); the legislative work is still ongoing and has moved to the next stage.
As reported by the Government Legislation Centre, a meeting of the Legal Committee was scheduled for 25th and 26th April 2024. The results of the Committee’s work have not yet been published on the GLC website.
An updated draft bill – dated 11th April 2024 – amending the Act on Pursuing Claims in Group Proceedings and certain other acts (UC16) (hereinafter: the “Draft Act”) was submitted to the Legal Committee. The Draft Act included additional changes as compared to the draft of 25th March 2024, which we discussed in our previous post on Directive 2020/1828 from 9th April 2024.
Accordingly, below we present an updated overview of the proposed regulations concerning class action (group) proceedings, based on the most recent version of the Draft Act.
The key changes introduced in the latest Draft Act concern the following areas:
The implementation of Directive 2020/1828 has been delayed in many Member States, partly due to the challenging period of the pandemic and other issues Europe has faced in recent years. Although the provisions implementing Directive 2020/1828 were supposed to be adopted by Member States by 25th December 2022 and applied from 25th June 2023, as of early 2023, 23 Member States had missed the December deadline. In July 2023, the European Commission issued formal notices to 13 Member States urging them to implement the Directive 2020/1828. Currently, according to official information published on EU websites, Poland remains among the four countries that have not yet implemented the Directive, alongside Estonia, Luxembourg, and Austria.
As part of the work carried out by the Government Legislation Centre (RCL), several drafts of the act implementing Directive 2020/1828 have been prepared to date, namely the drafts dated 6th December 2022, 5th July 2023, 17th August 2023, 14th November 2023, 25th March 2024, and the current draft dated 11th April 2024, which has been submitted to the Legal Committee. Each subsequent draft constitutes a revised or improved version of the previous one.
The current Draft Act is expected to be adopted soon by the Council of Ministers and submitted to the 10th-term Sejm. The website of the Council of Ministers lists a new planned adoption date for the draft – the second quarter of 2024.1
Below, we present the key assumptions of the latest Draft Act.
The Draft Act provides for the implementation of Directive 2020/1828 by introducing amendments to three acts:
An analysis of the proposed provisions against the background of the current regulation of the Class Action Act leads us to conclusion that, once the proposed amendments to the Class Action Act enter into force, we will be dealing with a new “subtype” of group proceedings, or a special “procedure” within group proceedings. Group proceedings in their classical form (under the current wording of the Class Action Act) are classified as a sui generis form of civil judicial proceedings, whereas the Draft Act introduces distinctions in regard of group proceedings in a particular category of cases, namely, cases concerning determining the use practices infringing general interests of consumers or claims related with their use.
[Scope of application] Not every civil case can be heard in group proceedings – but only those that meet the statutory criteria/conditions, referred to as the admissibility requirements for group proceedings.
The first requirement is that the case falls within a specific subject-matter category. Under the current wording of the Class Action Act, group proceedings may be initiated in any case concerning consumer protection claims. The Draft Act distinguishes, from this general category, cases concerning determining the use of practices infringing general interests of consumers or claims related to use of such practices, thus expanding the statutory scope of cases eligible for group proceedings.
The new subtype/category of group proceedings in cases concerning determining the use of practices infringing general interests of consumers or claims related to use of such practices will apply to infringements of provisions of European Union law listed in Annex I to Directive 2020/1828, which infringe or may infringe the general interests of consumers. Annex I to Directive 2020/1828 contains a list of 66 legal acts, and it follows from this that the intention of the EU legislator was to cover by new regulation all industries that sell or provide services to consumers, especially on a mass scale (such as transport operators, distance service providers, food producers, cosmetics and medicinal product manufacturers, financial institutions and banks, insurers, travel agencies, etc.).
The Draft Act also refers to Annex I to Directive 2020/1828 in the proposed Article 1a of the Class Action Act, which states that a “practice infringing general interests of consumers” shall be understood as an act or omission of an entrepreneur that is contrary to the provisions referred to in that Annex or to the provisions implementing them.
[General interests of consumers] The concept of a “practice infringing general interests of consumers” is a new term in Polish consumer protection legislation. The Draft Act introduces a definition of the “general interests of consumers”, which has a broader meaning than the concept of the collective interest of consumers. Acts or omissions constituting a practice infringing general interests of consumers are those acts/omissions – “that infringe or may infringe general interests of consumers” (see proposed Article 1 Section 4 and Article 1a of the Class Action Act).
According to the draft Article 1 Section 2d of the Class Action Act: “The general interests of consumers shall mean the interest of the general body of consumers, including, in the case of proceedings concerning claims related to the use of practices infringing general interests of consumers, interests of a group of consumers.”
The notion of the general interests of consumers does not appear in our legislation. The Consumer Protection Act uses the category of collective interests of consumers, defining them negatively in Article 24 Section 3 of the Consumer Protection Act, according to which “The collective interest of consumers shall not be the sum of individual interests of consumers.” Directive 2020/1828, on the other hand, uses the term “collective interests of consumers” defined as “«collective interests of consumers» means the general interest of consumers and, in particular for the purpose of redress measures, the interests of a group of consumers.”
In the explanatory memorandum to the Draft Act, it was indicated that the concept of “collective interests of consumers” from Directive 2020/1828 has a different meaning than the concept of “collective interests of consumers” from the Consumer Protection Act, and hence arises the need to introduce a new concept of “general interests of consumers,” which combines both the collective and individual interests of consumers.
Therefore, the Draft Act provides for a new mechanism that will complement the existing system of consumer protection; to some extent competing with the actions of the President of the Office of Competition and Consumer Protection (as defined above: “the President of UOKiK”) in regard of proceedings concerning infringements of collective interests of consumers or in proceedings concerning determination of a contract template as prohibited (however the actions undertaken by the competition protection authority – the President of UOKiK – will take “precedence”, leading to the mandatory rejection of the statement claim if the President of UOKiK had previously initiated proceedings covering the same allegations as those in the statement claim – see proposed Article 10c of the Class Action Act).
Moreover, the President of UOKiK will be able to take part in the pending group proceedings in cases concerning the determination of the use of practices infringing general interests of consumers – in such cases, the provisions on the public prosecutor shall apply accordingly (see proposed Article 4a of the Class Action Act).
[Resolutions contained in the judgment] As for the possible resolutions that may be made in the proceedings in the event of recognizing the claim for determining the use of practices infringing the general interests of consumers – this is provided for in the proposed Article 23a of the Class Action Act. In the operative part of the judgment, the court shall: 1) recognize the defendant’s practice as infringing the general interests of consumers and order the defendant to cease its use and set a deadline by which the defendant is to cease using this practice, or 2) recognize the defendant’s practice as infringing the general interests of consumers and set a date on which the defendant ceased using this practice. Additionally, in the operative part of the judgment, the court may impose on the defendant the obligation to make a one-time or repeated statement, in an appropriate form and of appropriate content, regarding the use by the defendant of practices infringing the general interests of consumers (within the designated time frame). In case of delay in execution of a final and binding judgment issued in a case concerning the determination of the use of practices infringing the general interests of consumers, the court will be able to impose on the defendant a fine of up to PLN 5,000,000. Independently of the fine, the court may also impose on the defendant, by way of a ruling, a fine of PLN 50,000 for each day of delay in executing the final and binding judgment (however, no more than PLN 5,000,000). Therefore, in total, a defendant delaying execution of the judgment may face a fine of up to PLN 10,000,000.
***
The following four issues should be considered as key ones of the new “subtype” of group proceedings:
Under the current provisions of the Class Action Act, standing to bring a group action is granted to the so-called group representative, who may be either a member of the group or a district (municipal) consumer ombudsman (the latter only in consumer-related cases); and, since March last year, to a limited extent, also the Financial Ombudsman.
In the case of group proceedings concerning the determination of the use of practices infringing the general interests of consumers or claims related to such practices, a so called qualified entity will be entitled to bring the action – in practice, a consumer organization – however, not every consumer organization, but only those that meet specific criteria of expertise and independence, and that are entered into the appropriate register.
The Draft Act provides that the regulations concerning the acquisition of the status of a qualified entity will be included in Chapter 2a of the Consumer Protection Act, titled “Qualified Entity” (Articles 46a–46w). The President of the Office of Competition and Consumer Protection (defined above as: “the President of UOKiK”) will maintain a register of qualified entities authorized to act in domestic group proceedings as well as cross-border group proceedings (a proceeding is considered cross-border if it is conducted before a court or administrative authority of a European Union Member State other than the one in which the qualified entity was designated; the list of qualified entities entitled to bring cross-border representative actions is maintained by the European Commission and is available at: https://representative-actions-collaboration.ec.europa.eu/cross-border-qualified-entities.
Moreover, the entity designated to bring actions on behalf of clients of a financial market entity as defined in Article 2 Point 1 of the Act of 5th August 2015 on the Handling of Complaints by Financial Market Entities, the Financial Ombudsman, and the Financial Education Fund, as well as in matters arising from a contract for the provision of services or performance of activities for a natural person by a financial institution as defined in Article 4 Point 4 of the Act of 5th August 2015 on Macroprudential Supervision over the Financial System and Crisis Management in the Financial System – shall be the Financial Ombudsman, who will be entered into the register ex officio.
The Financial Ombudsman may therefore act as an “ordinary” group representative (as permitted under the current regulations), as well as operate as a qualified entity in the scope of the above-mentioned matters.
A novelty introduced by the current Draft Act is the inclusion of an additional requirement regarding the content of the statement of joining the group. In the statement, the group member must indicate the method of communication with the qualified entity. Furthermore, a significant novelty is Article 19a Section 2 of the Class Action Act, which provides that if a group member withdraws from the group, the court discontinues the proceedings with respect to that member’s claim; and if a judgment has been issued by the court of first instance, the appellate court shall rescind that judgment and discontinue the proceedings as to the member’s claim. This provision is both interesting and surprising, as a group member is not a party to the proceedings in the procedural sense. It is inconsistent with the existing Class Action Act regulation and the current practice of applying its provisions.
Due to the specific requirements that a qualified entity must meet, the Draft Act provides for additional regulations concerning the examination of such entity’s standing to bring an action. In cases for determining the use of practices infringing the general interests of consumers and in cases related to such practices, the court will be obliged to determine whether the claim brought falls within the statutory objectives of the qualified entity and whether it concerns a sector covered by the scope of the qualified entity’s activities (see proposed Article 10 Section 4 of the Class Action Act). If these conditions are not met, the court shall reject the statement of claim (see proposed Article 10 Section 5 of the Class Action Act). For example, the court will reject a statement of claim if an entity dealing with consumer protection in the aviation sector brings an action concerning an infringement of provisions relating to consumer credits.
The provisions thus provide for a double verification of qualified entities – first at the stage of registration (by the President of UOKiK), and later at the stage of examining a specific statement of claim (by the court). The first verification concerns determining whether the criteria for entry into the register are met, while the second serves to determine whether the entity entered in the register is authorized to bring an action regarding a specific infringement.
Group proceedings in cases concerning the determination of the use of practices infringing the general interests of consumers, as well as claims related to such practices, will differ in certain respects from “classic” group proceedings. Particularly noteworthy and significant are the differences regarding the prerequisites for the admissibility of proceedings.
The prerequisites for the admissibility of proceedings are the case conditions examined by the court during phase I of group proceedings – the so-called certification of the claim (on the prerequisites for group proceedings see more broadly: When are group proceedings admissible?). This phase concludes with the issuance of a decision on the admissibility of hearing the case in group proceedings.
[Common legal basis for the claims of group members as an alternative to the requirement of a common factual basis] Firstly – and in our opinion most importantly – the Draft Act modifies one of the prerequisites for the admissibility of hearing a case in group proceedings, namely the requirement that the claims covered by the group proceedings be based on a common factual basis. In practice, since the inception of the Class Action Act, this requirement has raised the most doubts – and typically the entire “battle” over the certification of a case revolves around whether or not this prerequisite is met in a given matter.
Under the current wording of the Class Action Act, it is accepted that a common factual basis for claims exists when the claims are the same or substantially similar – meaning there is a commonality of facts forming the basis of the claims (e.g., the group consists of several individuals harmed by a single event, including a tort).
The newly proposed Article 1 Section 2c of the Class Action Act provides that in cases concerning the determination of the use of practices infringing the general interests of consumers, or in cases concerning claims related to such practices, claims may also be based on the same legal basis. Thus, the Draft Act introduces a significant relaxation of the requirement for the commonality of the basis of claims – since a common legal basis may relate to different factual circumstances (i.e., claims with similar grounds). This means that group proceedings in the aforementioned types of cases may proceed even in the absence of a common factual basis for the claims of the group members.
The explanatory memorandum to the Draft Act gives, as an example of a situation in which there is a common legal basis for consumers’ claims, the offering of financial instruments by a trader in breach of the law, e.g., offering instruments that are inadequate or inappropriate for the characteristics, objectives, and needs of consumers.
Undoubtedly, the proposed change may raise concerns among potential defendants (market participants, entrepreneurs), as it will allow for the initiation of group proceedings even in cases where the factual grounds of individual consumers’ claims differ much more significantly than is currently permitted – where only minor differences are allowed under the common factual basis requirement. It is worth recalling, however, that the introduction of a common legal basis as a condition for group proceedings was already considered in 2009 during the drafting phase of the Act on Pursuing Claims in Group Proceedings, but at the time, the idea was abandoned during the legislative process.
[Requirement of the group numerosity] In cases concerning the determination of the use of practices infringing the general interests of consumers, there will be no requirement to form a group and submit declarations of participation in the group. As noted in the explanatory memorandum to the Draft Act, this provision is intended to allow group proceedings to be initiated without the requirement that the group consists of at least 10 persons.
The requirement of the group numerosity, however, will apply in cases concerning claims related to the use of practices infringing the general interests of consumers – in which declarations of group membership will have to be attached to the statement of claim. Importantly, these declarations will not need to include consent to the appointment of a group representative (more precisely – a qualified entity), as is generally required in “regular” group proceedings, except where the action is brought by the Financial Ombudsman.
[Unification of claims and subgroups] Another significant novelty is the removal of the obligation to unify the claims of group members by equalizing the amount of claims pursued by members of the group or subgroup. This is a major change that could genuinely facilitate the pursuit of claims, and overall we assess it positively. Interestingly, the latest Draft Act provides that the removal of the unification requirement will apply to all group proceedings involving consumer claims, not just those related to practices infringing general interests of consumers. Since the author of the Draft Act have expanded the scope of this exemption, perhaps the requirement to unify claims should also be removed from other types of group proceedings, beyond those concerning consumer claims.
[Specific provisions concerning the statement of claim and additional formal requirements of the statement of claim] The newly proposed provisions of the Class Action Act also introduce specific regulations regarding the relief sought in the statement of claim under the new “subtype” of group proceedings, which are linked to the nature of the cases to be examined in such proceedings. Depending on the type of case and the factual situation, the relief sought may include: a demand to determine the practice as infringing the general interests of consumers, a demand to cease the use of the practice, a demand to determine that the practice has been ceased, or other demands specified in separate regulations.
An interesting solution is also the possibility of requesting the defendant to issue a single or multiple declarations in an appropriate form and of appropriate content regarding the use of practices infringing the general interests of consumers.
A new, additional formal requirement for a statement of claim in cases concerning the determination of the use of practices infringing the general interests of consumers will be the obligation to attach a copy of the summons addressed to the entrepreneur, together with proof of delivery (under the current draft, proof of sending by registered mail alone will not suffice). The Draft Act imposes on the qualified entity an obligation to first request the entrepreneur to cease the use of the practices within 14 days of delivery of the summons. Only after the ineffective expiry of that deadline (i.e., if the entrepreneur does not cease the use of the practice within the set timeframe) the qualified entity will be allowed to bring a claim.
The Draft Act clarifies that neither the summons nor any other correspondence addressed by the qualified entity to the entrepreneur before filing a statement of claim may contain any additional demands or claims, in particular any request for the transfer of financial resources to the qualified entity or any other entity. As explained in the explanatory memorandum to the Draft Act, this is intended to prevent the inclusion of demands for payment of a specific amount in exchange for withdrawing from pursuing claims in court. This proposed regulation should be viewed positively – it will help to avoid the use of a form of “blackmail” against entrepreneurs and to prevent situations where the qualified entity (or other entities) profits under the guise of protecting consumer interests by harassing entrepreneurs. It is not difficult to imagine a scenario in which an entrepreneur might agree to pay a certain amount just to avoid litigation, even if the potential claim is unfounded and there is a strong chance that the case would be dismissed. After all, the mere initiation of proceedings can negatively impact an entrepreneur’s reputation and its current operations.
Furthermore, in cases involving the determination of the use of practices, the statement of claim must also be accompanied by information issued by the President of the Office of Competition and Consumer Protection (defined above as: “the President of UOKiK”), the issuance of which is to be regulated by the relevant provisions of the Consumer Protection Act. Before filing a lawsuit, the qualified entity must notify the President of UOKiK, who then provides the qualified entity with any relevant information in its possession that may be important for the statement of claim, including an information whether proceedings concerning the same infringement by the same entrepreneur are already pending before the President of UOKiK. At one stage of the legislative process, it was proposed that the President of UOKiK would issue an “opinion on the validity of bringing a lawsuit, along with information on whether proceedings in connection with the same infringement indicated in the notification by the same entrepreneur are pending before the President of the Office”. In our view, that proposition was misguided, and the requirement to attach an opinion was rightly changed into a requirement to attach information from the President of UOKiK. An opinion of the President of UOKiK would have had to be issued even if the President of UOKiK lacked sufficient material to issue such an opinion. Meanwhile, as the President of UOKiK is a specialized authority in competition and consumer protection, such an opinion (which, unlike information, is of an evaluative, subjective nature) could have a very significant impact on the court’s decision.
In addition, the latest Draft Act provides that if the qualified entity relies on third-party funding, the lawsuit must also be accompanied by the agreement with the funding entity (see proposed Article 6 of the Class Action Act).
To summarize, the proposed changes concerning the admissibility criteria for group proceedings in cases involving the use of practices and claims related to such practices should contribute to increasing the scope of cases that will be eligible for examination in group proceedings and will successfully pass the certification stage. The regulations governing this new “subtype” of group proceedings significantly relax the admissibility requirements compared to those applicable in standard group proceedings.
At the same time, the additional formal requirements that will apply in certain cases (like the prior summons of the entrepreneur, the information from the President of UOKiK, the requirement to attach the agreement with the funding entity) are crucial for promoting amicable dispute resolution and for ensuring the alignment of the qualified entity’s actions with those of the President of UOKiK, which is a specialized authority in the field of competition and consumer protection. These regulations are also important for safeguarding the rights of the entrepreneur-defendant.
One of the most important issues addressed by Directive 2020/1828 is the third-party funding of proceedings brought by a qualified entity.
The Polish Draft Act provides that third-party funding of group proceedings initiated by a qualified entity is permissible but subject to certain conditions (broadly outlined in Directive 2020/1828).
Such third-party funding must not affect the independence of the qualified entity’s actions nor undermine the protection of consumer interests.
The Draft Act assumes that the compliance of the financing of the qualified entity with the statutory conditions set out in Article 46h Point 5 of the Consumer Protection Act should be supervised by the court hearing the class action (see proposed Article 10aa Section 1 of the Class Action Act). When determining whether third-party funding of the qualified entity does not affect the proper protection of consumer interests, the court will examine in particular whether the third party is: funding the action brought or whether the third party influences the decisions of the qualified entity regarding the action brought, including settlement decisions, in a manner contrary to the interests of the consumers covered by the action; and, in addition, whether the defendant is an entrepreneur who is a competitor of another entity financing the qualified entity or an entrepreneur from whom another entity financing the qualified entity is dependent.
The current Draft Act (based on the version dated 25th March 2024) provides relaxed consequences for non-compliant third-party funding, allowing the situation to be “remedied” and the dismissal of the claim to be avoided. Earlier versions of the Draft Act stipulated that if the court determined that the funding of a qualified entity by another entity affected the proper protection of consumer interests in the pending group proceedings, the court would reject the statement of claim. Then, in the version dated 14th November 2023, it was proposed that in such a situation, the court would order the qualified entity, under the threat of rejection of the statement of claim, to take appropriate measures within a specified period to ensure that the funding complied with the regulations.
The current Draft Act goes even further – according to proposed Article 10aa Section 4 of the Class Action Act, the court is to order the qualified entity to take appropriate measures within a specified period (no less than one month) and to provide information on the steps taken. If the qualified entity fails to take appropriate measures or fails to provide information about them, the court will order the qualified entity to inform each group member (using the communication method indicated in their opt-in declaration) about the impact of the third-party funding on the proper protection of consumer interests in the proceedings and the possibility to change the qualified entity within six months from the date of the court’s order. In the order, the court will set a deadline for the qualified entity to comply with the imposed obligation. Only if no change of qualified entity occurs within six months from the date of the court’s order, the court will reject the statement of claim.
This demonstrates the evolution of the proposed provisions on funding of the proceedings toward strengthening the protection of consumers participating in group proceedings – by allowing the rectification of the situation and a change in representation – so that the group proceedings can continue.
At the same time, the latest Draft Act introduces an important change regarding actions brought by the Financial Ombudsman as a qualified entity. The above-described rules on third-party funding of proceedings will also apply to cases where the Financial Ombudsman acts as the qualified entity (whereas an earlier draft had excluded such application).
The Draft Act takes into account comments raised during the legislative process emphasizing that under Directive 2020/1828 the court should be empowered not only to reject the legal standing of a qualified entity but also to take less severe actions, such as ordering the entity to refuse specific funding or to change the source of funding.
The proposed provisions introduce a novel mechanism to the Polish Class Action Act, aiming to facilitate the gathering of evidence relevant to the case through the institution of disclosure of evidence, which serves as a Polish substitute of the disclosure mechanism known in common law systems.
The Draft Act provides extensive regulations on the disclosure of evidence (see proposed Articles 16a-16j of the Class Action Act). A defendant, a third party, or even a qualified entity may be obliged to disclose evidence. The current version of the Draft Act stipulates that a qualified entity requesting disclosure must prima facie demonstrate a case. This is a significant change, enhancing the protection of the defendant’s interests. Moreover, the qualified entity, when filing a motion for disclosure, must commit to using the disclosed evidence solely for the ongoing proceedings. Similarly, the defendant requesting disclosure will also be required to undertake to use the evidence exclusively for the current proceedings.
A court order regarding a motion for disclosure or a motion to revoke or amend a final order requiring disclosure will be subject to interlocutory appeal before the court of the second instance.
Failure to comply with the obligation to disclose evidence will entail procedural consequences (e.g., presumption of facts, cost-shifting) and financial sanctions (e.g., fines).
1 https://www.gov.pl/web/premier/projekt-ustawy-o-zmianie-ustawy-o-dochodzeniu-roszczen-w-postepowaniu-grupowym-oraz-niektorych-innych-ustaw2; accessed: 9 May 2024, 12:40 PM.
