Agnieszka Trzaska-Śmieszek
Magdalena OsmędaIntroduction
On 2nd April 2024, another – the fifth – draft act 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 – i.e., the Representative Actions Directive (hereinafter: “Directive 2020/1828” or “RAD”) – was published on the website of the Government Legislation Centre (Rządowe Centrum Legislacji).
The draft act amending the Act on pursuing claims in group proceedings and certain other acts (UC16) is dated 25th March 2024 (hereinafter: “Draft of 25.03.2024”) and is largely based on the drafts prepared during the term of the previous Council of Ministers. The authority responsible for preparing the draft remains the President of the Office of Competition and Consumer Protection (Prezes Urzędu Ochrony Konkurencji i Konsumentów; hereinafter: „President of UOKiK”).
The implementation of Directive 2020/1828 was delayed in many Member States in part due to the difficult pandemic period and other challenges Europe has faced in recent years. Although the provisions implementing Directive 2020/1828 were supposed to be adopted by the Member States by 25th December 2022 and applied from 25th June 2023, at the beginning of 2023, 23 countries had not met the December deadline. In July 2023, the European Commission issued calls to 13 Member States to implement Directive 2020/1828. Currently, according to the official information published on EU websites, Poland is among the three countries that have still not implemented Directive 2020/1828 (alongside Luxembourg and Austria).
As part of the work carried out by the Government Legislation Centre (Rządowe Centrum Legislacji), several drafts of the act implementing Directive 2020/1828 have been created to date, i.e., the drafts of 6th December 2022, 5th July 2023, 17th August 2023, 14th November 2023, and the current draft of 25th March 2024 (hereinafter: „Draft of 25.03.2024”). Each subsequent draft is a revised version of the previous one.
The new Draft of 25.03.2024 is also based on the previous version of 14th November 2023, which was developed over several prior months. The changes introduced in the Draft of 25.03.2024, compared to the draft of 14th November 2023, are not numerous. The current Draft of 25.03.2024, among other things, replaces the term “entrepreneur” with “defendant” and introduces certain regulations aimed at protecting the defendant and ensuring balance between the parties in the proceedings (such as a prohibition on using pre-litigation notices to “harass” the entrepreneur and a prohibition for the qualified entity on using disclosed evidence for purposes other than the ongoing group proceedings). In addition, the Draft of 25.03.2024 abandons the requirement to attach the opinion of the President of UOKiK to the statement of claim in favor of information issued by the President of UOKiK (thus replacing the President’s subjective opinion with objective information which President of UOKiK possesses). The Draft of 25.03.2024 also introduces a novelty in the area of fees collected from group members. In the event of dismissal of the claim, those fees, together with statutory interest, will be refundable. Furthermore, the new Draft of 25.03.2024 provides for further liberalization of the consequences of improper third-party funding of the qualified entity and allows to change the qualified entity during the course of proceedings. Therefore it may be assumed that the Draft of 25.03.2024 is already close to the final version that will apply after the legislative process is completed.
The current Draft of 25.03.2024 will soon be adopted by the Council of Ministers and submitted to the Parliament (Sejm) of the 10th term. Due to information on the website of the Council of Ministers, the planned date of adoption of the draft is the first quarter of 2024.1 The discrepancies previously raised by the Minister of Justice and the President of the Government Legislation Centre still need to be clarified.
Below, we present the assumptions of the Draft of 25.03.2024.
Polish model of representative action – a new “subtype” of group proceedings
The Draft of 25.03.2024 assumes the implementation of Directive 2020/1828 through the introduction of amendments to three acts:
An analysis of the proposed provisions in light of the current regulation of the Class Action Act leads us to conclusion that, once the proposed amendments to the Class Action Act come into force, we will be dealing with a new “subtype” of group proceedings, or a special “procedure” within group proceedings. The group proceedings in their classic form (under the current wording of the Class Action Act) are classified as a sui generis civil court procedure. However, the Draft of 25.03.2024 introduces specific rules for group proceedings in a particular category of cases, i.e., cases concerning the cessation of practices infringing the general interests of consumers or claims related to the application of such practices.
[Scope of application] Not every civil case may be examined under the group proceedings procedure, but only one that meets the statutory conditions, referred to as the premises of the admissibility of group proceedings.
The first of them is the belonging of the case to a specific subject-matter category of cases. The current wording of the Class Action Act states that group proceedings may be initiated in all cases concerning consumer protection claims. The Draft of 25.03.2024 distinguishes, from the general category of consumer protection cases, cases regarding cessation of practices infringing the general interests of consumers or claims related to the application of such practices, thus expanding the statutory catalogue of cases.
The new subtype/category of group proceedings in cases concerning cessation of practices infringing the general interests of consumers or claims related to the application of such practices will apply to violations of European Union law provisions 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 it that the EU legislator intended to cover under the new regulation all industries concerning selling products or providing services to consumers, especially on a mass scale (such as carriers, entrepreneurs providing distance services, producers of food, cosmetics, medicinal products, financial institutions and banks, insurers, travel agencies, etc.).
Annex I to Directive 2020/1828 is also referenced in the proposed Article 1a of the Class Action Act in the Draft of 25.03.2024, which states that a “practice infringing the general interests of consumers” shall be understood as an act or omission by an entrepreneur that is inconsistent with the provisions referred to in that Annex, or with the provisions implementing them.
[General interests of consumers] The term “practice infringing the general interests of consumers” is a new concept in Polish consumer protection legislation. The Draft of 25.03.2024 introduces a definition of “general interests of consumers”, which has a broader meaning than the notion of the collective interests of consumers in current Polish law. Acts or omissions constituting a practice infringing the general interests of consumers are acts/omissions “which infringe or may infringe the general interests of consumers” (see proposed Article 1(4) and Article 1a of the Class Action Act).
According to the proposed Article 1(2d) of the Class Action Act: “The general interests of consumers shall mean the interest of all consumers, which, in the case of proceedings concerning claims related to the application of practices infringing the general interests of consumers, includes the interests of a group of consumers.”
The concept of the general interests of consumers does not appear in Polish legislation. The Consumer Protection Act uses the category of collective interests of consumers, defining it negatively in Article 24(3) of the Consumer Protection Act: “The collective interest of consumers is not the sum of individual consumer interests.” 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 purposes of redress measures, the interests of a group of consumers.”
The explanatory memorandum to the Draft of 25.03.2024 explains that the term “collective interests of consumers” in Directive 2020/1828 has a different meaning than the term “collective interests of consumers” in the Consumer Protection Act. Hence, there is a need to introduce a new concept – “general interests of consumers” – which in polish meaning combines both the collective and individual interests of consumers.
The Draft of 25.03.024 introduces a new mechanism that complements the current consumer protection system – to some extent, it will function in parallel (and potentially compete) with the actions of the President of UOKiK in proceedings concerning violations of collective consumer interests or proceedings for declaring contract terms abusive. However, actions taken by the competition authority – President of UOKiK will have ‘priority’ leading to a mandatory suspension of the group proceedings with respect to identical allegations and further to discontinuance of the group proceedings; see proposed Article 10c of the Class Action Act. In addition, the President of UOKiK will be allowed to participate in pending group proceedings related to practices infringing general consumer interests. In such cases, the provisions concerning the public prosecutor will apply accordingly (see proposed Article 4a of the Class Action Act).
[Rulings included in the judgment] Concerning the possible rulings that may be issued in proceedings if the claim for cessation of practices infringing general consumer interests is upheld — this is governed by 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 general consumer interests and order the defendant to cease the practice, setting a deadline by which the defendant is obliged to stop applying this practice, or 2) recognize the defendant’s practice as infringing general consumer interests and setting the deadline for ceasing the practice by the defendant. Additionally, the court in the operative part of the judgment shall impose on the defendant the obligation to make a one-time or repeated statement, in an appropriate form and with appropriate content, concerning the application by the defendant of practices infringing general consumer interests (within a set deadline).
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The key issues of the new “subtype” of group proceedings should be considered as follows:
a. active legal standing, that is, who can bring the action;
b. differences in the certification phasecompared to the “classical” group proceedings;
c. funding of the proceedings by third parties;
d. disclosure of evidence.
A. The institution of the qualified entity – who can bring the new “type” of action?
Under the current provisions of the Class Action Act, active legal standing (the right to bring a group action) is granted to the so-called group representative, who may be a member of the group or a district (municipal) consumer ombudsman (the latter in consumer-related cases). Additionally, since March of last year, also the Financial Ombudsman may be a group representative, but in a limited scope of cases. In the group proceedings concerning the cessation of practices infringing the general interests of consumers or claims related to such practices, the action may be brought by a so-called qualified entity – in practice, a consumer organization, but not just any; only one that meets specific criteria of expertise and independence and is entered into the relevant register.
The Draft of 25.03.2024 assumes that the regulations concerning obtaining 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 UOKiK will maintain a register of qualified entities entitled to act in domestic representative actions and cross-border representative actions (a proceeding is of a cross-border nature when it takes place before a court or administrative authority of a Member State of the European Union other than the state 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 within the meaning of Article 2(1) of the Act of 5th August 2015 on the handling of complaints by financial market entities, on the Financial Ombudsman and the Financial Education Fund, as well as in cases arising from a contract for the provision of services or performance of activities for a natural person by a financial institution within the meaning of Article 4(4) of the Act of 5th August 2015 on macroprudential supervision over the financial system and crisis management in the financial system – will be the Financial Ombudsman entered into the register ex officio.
The Financial Ombudsman will therefore be able to act as an “ordinary” group representative (such a possibility is provided for in the current regulations), as well as will be able to act as a qualified entity in the aforementioned cases.
Due to the specific requirements that a qualified entity will have to meet, the Draft of 25.03.2024 provides for additional regulations regarding the examination of the legal standing of such an entity to bring an action. In cases concerning the cessation of practices infringing the general interests of consumers and in cases concerning claims related to such practices, the court will be obliged to determine whether the action brought falls within the statutory activities of the qualified entity and concerns the sector covered by the scope of the qualified entity’s operations (see proposed Article 10(4) of the Class Action Act). If these requirements are not met, the court will dismiss the claim (see proposed Article 10(5) of the Class Action Act). For example, the court will dismiss a claim if a qualified entity dealing with consumer protection in the aviation sector brings an action on breaches of consumer credit regulations.
Therefore the provisions provide for a two-stage verification of qualified entities – first at the registration stage (by the President of UOKiK), and later at the stage of examining a specific lawsuit (by the court). The first verification concerns determining whether the criteria for registration are met, while the second aims to determine whether the qualified entity entered in the register is entitled to bring an action regarding a specific infringement.
B. Specific features of the certification stage in the newly proposed “subtype” of group proceedings
Group proceedings concerning the cessation of practices infringing the general interests of consumers and related claims will differ in certain respects from “classic” group proceedings. Particularly noteworthy and important are the differences concerning the premises of the admissibility of group proceedings.
The admissibility premises are the conditions of the case examined by the court in the first phase of group proceedings, known as the certification of the claim (for more on the admissibility premises of group proceedings, see: When are group proceedings admissible?). This phase ends with a court decision on the admissibility of hearing the case in group proceedings.
[A common legal basis for the group members’ claims as an alternative to the premise of a common factual basis] Firstly – and in our view most importantly – the Draft of 25.03.2024 modifies one of the admissibility premise for hearing a case in group proceedings, i.e. the requirement that the claims included in the group proceedings be based on a common factual basis. In practice, this premise has caused the most doubt since the introduction of the Class Action Act into the legal system, and usually, the entire “battle” over the certification of a case revolves around whether or not this premise is met in a specific case.
Under the current wording of the Class Action Act, it is accepted that a common factual basis of claims exists when the claims are the same or of the same kind, meaning there is a commonality of facts that make up the basis of the claims (e.g., the group consists of several individuals harmed by the same event, such as a tort).
The newly drafted Article 1(2c) of the Class Action Act provides that in cases concerning the cessation of practices infringing the general interests of consumers or claims related to such practices, the claims may also be based on the same legal basis. The Draft of 25.03.2024 thus introduces a significant liberalization of the premise of a common basis of claims, as a common legal basis may apply to different factual situations (claims with similar legal grounds). This means that group proceedings in the aforementioned cases may be conducted even when there is no common factual basis for the claims of the group members.
The explanatory memorandum to the draft act provides an example of a situation in which consumers’ claims have a common legal basis: the offering of financial instruments by an entrepreneur in breach of the law, e.g., instruments that are inadequate and unsuitable for the characteristics, objectives, and needs of consumers.
Undoubtedly, the proposed amendment may raise concerns among potential defendants (market participants, entrepreneurs), as it would allow for the initiation of group proceedings even when the factual basis of individual consumers’ claims differ significantly, unlike under the current model, where only minor differences are admissible within a common factual basis. However, it is worth noting that the introduction of the premise of a common legal basis was already considered in 2009 during the drafting of the Act on pursuing claims in group proceedings, but the idea was abandoned in the course of the legislative process.
[Numerosity premise] In proceedings concerning the cessation of practices infringing the general interests of consumers, there will be no obligation to define the group or to submit declarations on joining the group. As stated in the explanatory memorandum to the Draft of 25.03.2024, this provision is intended to allow group proceedings to be initiated without the requirement that the group consist of at least 10 individuals.
The numerosity premise will apply in cases concerning claims related to the application of practices infringing the general interests of consumers. In such cases, declarations on joining the group will have to be attached to the statement of claim. However, these declarations will not need to include consent to the person of the representative (more precisely, the qualified entity), as is generally required in “classic” group proceedings, except in situations where the action is brought by the Financial Ombudsman.
[Standardization of claims and subgroups] A significant novelty is the exclusion, in cases concerning claims related to the application of practices infringing the general interests of consumers, of the requirement to unify the claims of group members by equalizing the amounts of claims pursued by the group or subgroup members. This is also a major change that could indeed facilitate the pursuit of claims, and we generally view it positively – perhaps the requirement to unify claims should also be removed in other types of group proceedings.
[Specific regulations on the statement of claims and additional formal requirements of the statement of claims] The newly proposed provisions of the Class Action Act also introduce specific regulations regarding the statement of claims in the new “subtype” of group proceedings, which are linked to the nature of the cases that will be examined under this procedure. Depending on the type of case and the factual circumstances, the statement of claims may include a demand to establish a practice as infringing the general interests of consumers, a demand to cease the practice, a demand to confirm the discontinuation of the practice, or other demands specified by separate regulations.
An interesting solution is also the introduction of the possibility to demand that the defendant make a one-time or repeated statement, in an appropriate form and with appropriate content, regarding the application by the defendant of practices infringing the general interests of consumers (in cases concerning the cessation of such practices).
A new additional formal requirement for a statement of claim in cases concerning the cessation of practices infringing the general interests of consumers will be the obligation to attach to the lawsuit a copy of the notice addressed to the entrepreneur, together with proof of service or proof that it was sent to the entrepreneur (potential defendant) by registered post. The draft legislation imposes on the qualified entity the obligation to first call on the entrepreneur to cease the practice within 14 days of service of the notice. Only after the ineffective expiry of that period (i.e., if the entrepreneur fails to cease the practice within the set time limit) the qualified entity will be allowed to bring an action.
In the Draft of 25.03.2024, it is clarified that the notice (addressed to the entrepreneur) must not include any other demands or claims of the qualified entity, in particular requests for the transfer of financial resources to that entity. As explained in the explanatory memorandum to the Draft of 25.03.2024, the intention is, among other things, to ensure that the notice does not contain a demand for the payment of a specific amount in exchange for withdrawing from pursuing claims in court. This amendment should be assessed positively – it will help prevent a form of “blackmail” against entrepreneurs and avoid situations where a qualified entity profits from “harassing” entrepreneurs under the pretext of protecting consumer interests. One can easily imagine a scenario in which an entrepreneur might prefer to pay the qualified entity to avoid litigation, even if the potential claim is unfounded and there is a high likelihood that the claim would be dismissed. The mere initiation of proceedings often carries reputational risks and may negatively affect the entrepreneur’s current operations.
Moreover, in cases concerning the cessation of practices infringing the general interests of consumers, it is mandatory to attach to the lawsuit the information from the President of UOKiK. The issuance of the information will be governed by the relevant provisions of the Consumer Protection Act. Before filing the lawsuit, the qualified entity must notify the President of UOKiK, who will provide the entity with any relevant information in their possession that may be significant to the case, including whether proceedings concerning the same infringement by the same entrepreneur are already pending before the President of UOKiK. In an earlier draft, it was proposed that the President of UOKiK would issue a “reasoned opinion on the merits of bringing the action, together with information on whether proceedings are pending before the President of UOKiK in relation to the same infringement by the same entrepreneur indicated in the notification. This change is also seen positively — previously the opinion of the President of UOKiK would have to be issued even if the President of UOKiK did not have sufficient material to issue such an opinion. Given that the President of UOKiK is a highly specialized authority in the field of competition and consumer protection, such an opinion could have had a significant influence on the court’s ruling.
In summary, the proposed amendments concerning the admissibility premises of group proceedings in cases on the cessation of infringing practices and related claims are expected to broaden the scope of cases eligible for group proceedings and make them more likely to pass the certification stage. The regulations governing this new “subtype” of group proceedings significantly liberalize the premises of admissibility of the group proceedings compared to those applicable in “classic” group proceedings.
On the other hand, the additional formal requirements that will apply in certain cases (such as the prior notice to the entrepreneur and the information from the President of UOKiK) are important from the perspective of promoting amicable dispute resolution and ensuring consistency between the actions of the qualified entity and those of the President of UOKiK, who is a specialized authority in the field of competition and consumer protection.
C. Third-party funding of the proceedings
One of the key issues addressed by Directive 2020/1828 is the third-party funding of proceedings initiated by a qualified entity.
The Polish draft act allows for the possibility of group proceedings initiated by a qualified entity to be financed by a third party, but only under certain conditions (broadly outlined in Directive 2020/1828).
Third-party funding must not affect the independence of the qualified entity’s actions and must not adversely affect the protection of consumers’ interests.
The draft provides that the compliance of the qualified entity’s funding with the statutory conditions set out in Article 46h(5) of the Consumer Protection Act should be supervised by the court hearing the group case (see proposed Article 10aa(1) of the Class Action Act). When determining whether third-party funding of the qualified entity’s actions remains without impact on the proper assurance of protection of consumer interests, the court shall examine in particular whether the said third party finances the action brought and whether it influences the decisions of the qualified entity concerning the action brought, including settlement, in a manner contrary to the interests of the consumers covered by the statement of claims, and whether the defendant is an entrepreneur who is a competitor of another entity funding the qualified entity or an entrepreneur on whom another entity funding the qualified entity is dependent.
The Draft of 25.03.2024 introduces further changes aimed at mitigating the consequences of non-compliant third-party funding, allowing the situation to be “remedied” and preventing the dismissal of the claim. Previous drafts provided that if the court found that the funding of the qualified entity by another entity affected the proper protection of consumer interests in the pending group proceedings, the court would dismiss the claim. Subsequently, in the draft of 14th November 2023 it was stipulated that in such a case, the court, under the sanction of dismissing the claim, would call upon the qualified entity to take appropriate measures within a specified time frame to ensure that the funding complies with the applicable regulations.
The Draft of 25.03.2024 goes even further — following the currently proposed Article 10aa(4) of the Class Action Act, the court is to summon the qualified entity to take appropriate measures within a specified time (no shorter than one month) and to provide information on the measures taken. If the qualified entity fails to take the appropriate measures or does not provide information on their implementation, the court will summon the qualified entity to inform each group member in writing about the impact of third-party funding on the proper protection of consumer interests in the proceedings and about the possibility of changing the qualified entity within six months from the date the court order is issued. In the order, the court will set a deadline for the qualified entity to fulfill this obligation. Only if the qualified entity is not changed within six months from the date of the order, the court will dismiss the claim.
This clearly shows the evolution of the proposed regulations on third-party funding toward strengthening the protection of consumers participating in group proceedings by enabling the situation to be “remedied” and allowing for changes in representation so that the group proceedings may be continued.
The Draft of 25.03.2024 takes into account the comments raised during the legislative process, emphasizing that Directive 2020/1828 implies that the court should be entitled not only to reject the legal standing of a qualified entity but also to take less severe measures, such as ordering the qualified entity to refuse certain funding or to modify its terms.
D. Disclosure of evidence – a sample of “disclosure” in Polish law
The proposed provisions introduce a novelty to the Class Action Act in the form of extensive regulations aimed at facilitating the collection of evidence relevant to the case – by the institution of disclosure of evidence, which constitutes a sample of „disclosure” in Polish law.
The draft act provides for extensive regulations concerning the disclosure of evidence (see proposed Articles 16a–16j of the Class Action Act). The obligation to disclose evidence may be imposed not only on the defendant or a third party but also on the qualified entity. Importantly, in the Draft of 25.03.2024 it was clarified that a qualified entity submitting a request for the disclosure of evidence must undertake that the evidence obtained in this manner will be used solely for the pending proceedings. In previous draft, such an obligation was imposed only on the defendant who submitted a request for the disclosure of evidence. Again, this change is also positive and ensures the equality of the parties to the proceedings. Allowing the qualified entity to use a request for the disclosure of evidence for a purpose other than for the pending proceedings had no justification.
A court decision regarding a request for the disclosure of evidence or the annulment or amendment of a final and binding decision ordering such disclosure will be subject to a complaint to the court of the second instance.
Failure to disclose the evidence will entail specific procedural consequences (such as the facts being deemed established or being ordered to bear the costs of the proceedings) as well as financial consequences (a fine).
1 https://www.gov.pl/web/premier/projekt-ustawy-o-zmianie-ustawy-o-dochodzeniu-roszczen-w-postepowaniu-grupowym-oraz-niektorych-innych-ustaw2; accessed: 03.04.2024, 16:10.
