The Council of the European Union adopted its position at first reading on the draft directive on consumer collective redress in the EU.
Last week the Council of the European Union adopted its position at first reading on the draft directive on consumer collective redress in the EU. The draft was agreed at the end of June (see our update here) and forms part of the ‘New deal for consumers’ package (see our blog here). The Directive is intended to address the risk that large numbers of consumers may be harmed by the same unlawful practices, given increased market globalisation and digitalization.
The proposals we reviewed over the Summer contained collective redress measures with the potential to transform the liability landscape across Europe for many companies, including product manufacturers. The Council’s adoption of the draft suggests that the scheme is on track to pass through the EU’s legislative process without significant changes. While the Directive stops short of creating US-style plaintiff attorney-driven class actions, it will make the prospect of large numbers of relatively low-level claims being brought in the EU more likely than before. This will be a concern for manufacturers (as well as their insurers – see our blog here).
What will the directive do?
The proposed directive will put in place a system of representative actions for the protection of consumers’ collective interests under EU law. These representative actions will cover product safety and liability, EU consumer protection and data protection, amongst other issues. “Qualified entities” (generally, consumer organisations) will be able to bring group actions to obtain injunctions and/or redress from traders for breach of EU laws. Redress measures will include compensation, repair, replacement, price reduction, contract termination or refund. Qualified entities can bring actions in a single EU country or, in one of the biggest changes, cross-border actions in multiple countries in the EU. Further details on how this works can be found in our previous blog here.
What are the timeframes?
It’s expected that the European Parliament will approve the Council’s position at first reading before the end of the year, leading to formal adoption. It will enter into force 20 days after publication in the Official Journal of the European Union, then Member States will have 2 years to transpose the Directive into their national laws, and an additional six months to apply it.
Will this apply in the UK?
No, not automatically, as the directive will not apply until after the end of the Brexit Transition Period. However, it’s worth noting that the UK already has established collective redress procedures – with mechanisms for bringing both representative claims, and group actions. We expect to see these UK mechanisms used more frequently as a result of the new EU directive. Moreover, we anticipate that learnings from the UK model (and, in particular, consumer organisations with experience bringing these actions in the UK courts) will be influential in bringing representative actions at an EU-level.