The European class action is born!

The Directive on representative actions for the protection of the collective interests of consumers (the Directive) was initially proposed by the European Commission in April 2018. It is part of the European Commission's 2018 "New Deal for Consumers" initiative that aims at strengthening EU consumer law enforcement and modernising EU consumer protection rules. The text has considerably evolved and changed since 2018.

In a context of digitalisation and globalisation of products and services, the Directive is meant to be a response to various scandals that left number of consumers vulnerable to unlawful practices.

The Directive was finally endorsed by the European Parliament on 24 November 2020.

What is it about?

In a nutshell, the Directive enables mass claims and provides redress and injunctive measures for group of consumers that have been affected by a breach of EU legislation in a range of policy areas.

What kind of infringements are concerned?

The scope of the Directive covers all infringements of EU law by traders that harm or may harm the collective interests of a group of consumers. A trader is any natural or legal person that is acting, directly or through another person, for purposes relating to that person's trade, business, craft or profession.

The Directive provides a list of EU laws to which an action can be brought (Annex 1). It encompasses a variety of areas such as health, cosmetics, food information, data protection, environment, energy and the rights of passengers.

Which entities can bring the representative actions?

The Directive only allows "qualified entities" to bring representative actions. An organization must fulfil six criteria to be considered as a qualified entity:

1. It is a legal person, properly constituted according to the law of the Member State, which has been engaged in activities on the protection of consumer interests during the previous 12 months;

2. It has a legitimate interest in consumer protection;

3. It is non-profit;

4. It is not subject to insolvency;

5. It is an independent entity; and

6. It publicly discloses its sources of funding.

What kind of remedies can be sought?

"Qualified entities" can bring representative actions to seek injunction measures and/or redress measures:

• Injunction measures: It includes provisional or definitive measures to cease or prohibit an infringing practice. It is worth mentioning that the qualified entity does not have to demonstrate any actual loss or damage of the individual consumers, nor any intention or negligence of the trader;

• Redress measures: It encompasses remedies such as compensation, repair, replacement, price reduction, contract termination and reimbursement of the price paid. Member states can choose an opt-in mechanism (the consumers have to agree to be represented) or an opt-out mechanism (the consumers are automatically included unless they mention that they do not want to be represented by the "qualified entity") or a combination of both. The opt-in mechanism is mandatory for consumers domiciled in a Member State other than the state in which the representative action is brought.

What will be the impact in the EU Member States?

Under the Directive, EU Member states do not have to give up their existing national systems. Instead, they have to make sure that the mechanisms provided by the Directive are established as well.

• France: The French class action was introduced in 2014, but did not prove to be successful. For instance, only three class actions were introduced in the healthcare are so far. The transposition of the Directive could be a good opportunity to improve the class action system in France;

• UK: As the Brexit transition period will end before the Directive comes into force, it will not be implemented in the UK. However, similar procedures are already available to UK consumers (for example, group litigation orders, representative actions and collective actions over competition law claims);

• Germany: In 2018, the collective consumer suit called "Musterfeststellungsklage" was introduced. Its prerequisites and procedure are similar to the EU representative action. However, redress measures are not possible under the "Musterfeststellungsklage". The "Musterfeststellungsklage" could continue existing as it is or be completely replaced;

• The Netherlands: The "Collective Damages Act" that came into force on 1 January 2020 introduced a class action system similar to the American one. The Directive and the "Collective Damages Act" share similarities, but several requirements that the EU Directive provides are different from those provided for in the "Collective Damages Act". The Dutch legislature could incorporate the Directive into the "Collective Damages Act" or create a separate new action.

What is next?

The Directive will enter into force 20 days from the date of its publication in the Official Journal of the EU. EU Member States have 24 months to transpose the directive into national laws, and an additional six months to apply it. The new rules will apply to representative actions brought on or after the date of application of the Directive.

To be continued in 2023...