On 2 May 2013, a "Consumer" Bill was submitted to the French Council of Ministers, which aims at improving the information provided to consumers and strengthening their contractual rights, as well as strengthening the powers of the enforcement authorities. The Bill also provided for the introduction of class actions "à la française" in the French Consumer Code.
As our readers know, the debate on the introduction of class actions is not recent in France. Over the years, several bills have been submitted without ever being adopted. The current Bill was finally adopted by the French National Assembly on 3 July 2013 and subsequently modified by the French Senate on 13 September 2013. It will now be submitted one more time to each assembly with a final adoption expected in early 2014.
A limited scope
The Bill aims to establish a system different from the U.S. class action system. According to the text, a professional may be targeted by a class action for the breach of its legal or contractual obligations, whether in the context of the sale of goods or the provision of services. Only a nationally representative consumer protection association, as defined in Article L. 411-1 of the French Consumer Code, will be entitled to obtain compensation before civil courts for individual losses sustained by a group of consumers.
Unlike U.S. lawyers, French lawyers would not be particularly involved in the class action introduction process, their role being limited to representing consumer associations. As the no-win, no-fee system does not exist under French law, the associations will have to advance the costs of the proceedings.
For the time being, class actions will only be available in order to obtain compensation for financial losses resulting from damages to consumers' tangible assets. Losses resulting from bodily or moral injury are excluded. The pharmaceutical industry should, therefore, not be affected by this type of proceeding. Similarly, it will not be possible to sue the manufacturers of consumer goods in such proceedings if one of their products is affected by a serial defect causing bodily harm. The financial services sector and the industries providing services and intangible goods such as telephony services (landline or mobile telephony), electricity, gas and water will probably be the sectors most targeted by these new proceedings.
However, application to other sectors has been extensively discussed in the French Senate, resulting in a modification of the adopted Bill to provide that the Government will have to consider the possible evolutions of the scope of application of class actions, "by examining its extension to the health and environmental sectors". Benoît Hamon, the Minister in charge of Social and Cooperative Economy and Consumer Affairs, has announced that a procedure applicable to health issues will be proposed as early as 2014.
The choice of an opt-in system
The Bill adopted by the French National Assembly was designed to grant jurisdiction to a limited number (around a dozen) of civil courts in France. This would allow few jurisdictions to develop an expertise in class actions, with the aim of reducing judicial uncertainty and obtaining more consistent case law. Unfortunately, the French Senate has deleted this provision.
Once seized with a case, the court will hand down a decision that:
will determine whether the conditions required to launch a class action are met and will rule, should the case proceed, on the liability of the professional;
will define the group of consumers effected by the professional's liability;
will set the time periods and conditions for becoming a member of the group and obtaining compensation for the loss (i.e., opt-in); and
will determine the amount of the losses or all the elements required to assess them.
In order to be part of the group, consumers will have to be in an identical or similar position, having sustained a loss caused by the same company. A minimum or maximum amount of damages that may be granted to consumers in the context of class actions is not contemplated. Being a member of the group will not prevent the consumer from acting under the common contract or tort law options to obtain compensation for losses that do not fall under the scope of application of the class action.
When all the possible recourses against this decision have expired or been exercised, the court will order, at the company's expense, the measures needed to inform consumers who may belong to the group in question.
Assessment of losses
Compensation for losses will either be obtained directly from the defendant company or through the representative consumer protection association which can be assisted by a third party in charge of checking compensation claims.
In the event of difficulties during the liquidation of the losses, the court determining the company's liability will settle them by ruling, in the same judgment, on all the claims for compensation that have not resulted in payment. Consumers who have not received compensation from the company will be represented by the association in order to obtain the enforcement of the judgment ordering the payment.
Payment orders will become res judicata for all the members of the group who received compensation.
The "simplified" procedure
The French National Assembly added a "simplified" version of the class action procedure. The text provides that "when the identity and the number of injured consumers are known and when these consumers have suffered a loss of the same amount or of an identical amount over a period of reference, the court, after having ruled on the company's liability, may order such company to indemnify them directly and individually, within the time and conditions it deems appropriate". This tool is designed to deal with easily determinable serial losses, particularly in the banking sector. A Decree must define the conditions of application of this procedure. It should provide, notably, for the articulation between the regular and the simplified procedures. Despite the fact that class actions have already been the subject of debate for years in France, this simplified procedure appears to be a sign that the suggested regular procedure has not been sufficiently prepared. Should the group be defined prior to the ruling on liability, this would enable the defendant company to decide to propose a settlement, early in the process, to the members of the groups who are likely to be its own customers as is the case in the scenario set forth in the simplified procedure. This would allow the company and the judicial system to save time and money, bearing in mind that, in this context, individual losses are likely to be very modest.
Application in time
One of the main issues raised by companies is whether claims concerning past actions, for which the limitation period has not yet expired, could lead to class actions. At this stage, it is not known whether class actions will be available only for events occurring after the law has come into force or whether they can also be applied to previous events. This point is addressed in the Bill only for cases involving anti-competitive behaviour. In such cases, class actions will have to be initiated within five years from the date on which a national or European authority or court with jurisdiction has handed down a ruling against the professional. In this case, the Bill specifically provides that only rulings delivered after the publication of the law could give rise to class actions. In order to avoid an opportunistic flow of class actions being launched immediately after the Bill enters into force, it is important that this rule be clarified.
Issues to be clarified
While the second examination of the Bill by each assembly (the Senate and the French National Assembly, the latter having the final word) will clarify some uncertainties, major practicalities (including the terms and conditions required to initiate a class action) will be addressed in a Decree, a draft of which is still not yet available. The debate concerning the introduction of class actions in France is thus far from being over, especially since the need for this reform is debatable. Unsurprisingly, this hastily drafted Bill raises concerns for companies in current French economic circumstances. This revolution seems to be neither necessary, nor timely.