The European Commission's most recently published legislative proposal for representative actions for the collective interest of consumers, is the much anticipated change to the approach to European collective actions.
Today, 11 April 2018, the Commission issued its proposal for a new Directive on representative actions for the protection of the collective interests of consumers (the "Proposed Directive"), which is set to repeal the Injunctions Directive 2009/22/EC. The proposal grew out of the initiative "A New Deal for Consumers – revision of the Injunctions Directive", exploring several options for EU-spanning collective consumers' redress and possibilities of actions against traders.
The Proposed Directive will undoubtedly inspire much discussion in the coming days and months, about the approach to provide for a redress mechanism based on injunctions, the individual rules within the draft, and the impact on the European economy. As the Commission points out, it is necessary to implement safeguards against abusive litigation and prevent misuse or elements such as punitive damages. Given the legal nature of the Proposed Directive, Member States will have to implement the rules in their national laws.
Below you will find few key features of the detailed Proposed Directive:
Representative action for an injunction without a mandate by consumers
The Proposed Directive sets out rules enabling qualified entities to seek representative actions aimed at the protection of the collective interests of consumers. Within the scope of the action are infringements by traders of certain provisions of the Union law. Member States are required to ensure that cross-border representative actions are possible. It shall apply to domestic and cross-border infringements, including where those infringements have ceased before the representative action has started or before the representative action has been concluded.
In order to seek injunction orders, qualified entities shall not have to obtain the mandate of the individual consumers concerned or provide proof of actual loss or damage on the part of the consumers concerned or of intention or negligence on the part of the trader.
Ad hoc designated plaintiffs
Member States may designate a qualified entity on an ad hoc basis for a particular representative action, at its request, if it complies with the criteria established for qualified entities.
Compensation measures by redress order or declaratory decision
Member States shall ensure that qualified entities are entitled to bring representative actions seeking measures eliminating the continuing effects of the infringement. For this purpose, Member States shall ensure that qualified entities are entitled to bring representative actions seeking a redress order, which obligates the trader to provide for, inter alia, compensation, repair, replacement, price reduction, contract termination, or reimbursement of the price paid, as appropriate.
A Member State may require the mandate of the individual consumers concerned before a declaratory decision is made or a redress order is issued. Alternatively, Member States may empower a court or administrative authority to issue, instead of a redress order, a declaratory decision regarding the liability of the trader towards the consumers harmed by an infringement of Union law, in certain duly justified cases. Mandate by consumers is not compulsory in certain cases.
The redress obtained through these measures shall be without prejudice to any additional rights to redress that the consumers concerned may have under Union or national law.
Overarching effects of final decisions of an administrative authority or a court
Member States shall ensure that an infringement harming collective interests of consumers established in a final decision of an administrative authority or a court, including a final injunction order, is deemed as irrefutably establishing the existence of that infringement for the purposes of any other actions seeking redress before their national courts against the same trader for the same infringement. Member States shall ensure that a final decision taken in another Member State is considered by their national courts or administrative authorities as a rebuttable presumption that an infringement has occurred.
Penalties for the infringing trader
Member States shall lay down the rules on penalties applicable to non-compliance with the final decisions issued within the representative action and shall take all necessary measures to ensure that they are implemented. The penalties provided for must be "effective, proportionate and dissuasive" and may take the form of fines. When deciding about the allocation of revenues from fines, Member States shall take into account the collective interests of consumers.
Suspension of limitation period for the consumers concerned
Member States shall ensure that the submission of a representative action shall have the effect of suspending or interrupting limitation periods applicable to any redress actions for the consumers concerned, if the relevant rights are subject to a limitation period under Union or national law.
Information on representative actions to consumers
Member States shall ensure that the court or administrative authority shall require the infringing trader to inform affected consumers at its expense about the final decisions providing for redress measures, and approved settlements, by means appropriate to the circumstance of the case and within specified time limits, including, where appropriate, through notifying all consumers concerned individually.
What comes next
The abovementioned features, along with many others - including the settlement option, the rules for funding, and the assistance for qualified entities - will be discussed in the upcoming legislative process.
As for the timeline, the Proposed Directive foresees that Member States shall adopt and publish the laws, regulations and administrative provisions necessary to comply with the Directive within 18 months from the date of entry into force of the Directive. Member States then shall apply these provisions from six months after the transposition deadline.
It is not yet clear when the Proposed Directive will come into effect. The upcoming European elections in 2019 may interfere with the process. Nevertheless, it is to be expected that the Commission will push the legislative project within the remaining sixteen months of the current legislative period.