With Directive (EU) 2020/1828 on representative actions for the protection of the collective interests of consumers and repealing Directive 2009/22/EC (“the Representative Actions Directive”) in force and to be implemented by 25 December 2022, the EU has taken another step towards cross-border consumer participation in civil law court actions. The Representative Actions Directive expressly acknowledges that consumers concerned may not habitually reside in the Member State of the court or administrative authority before which the representative action is brought. It is interesting to note that the term “cross-border representative action” does not relate to the fact that consumers may come from different Member States, but merely to the fact that the qualified entity bringing the action is designated in a Member State which is not the one of the court or administrative authority. We are going to take a look at the Representative Actions Directive’s expectations regarding cross-border consumer participation, and, because the national implementing laws are only emerging at this point, illustrate the current status in France and Germany.
Cross-border aspects of the Representative Actions Directive
The question is whether we are going to see EU-wide classes of consumers participating cross-border in representative actions brought by qualified entities.
While the Representative Actions Directive differentiates between domestic and cross-border representative actions by referring to the Member State in which the qualified entity is designated, there is only one definition of “consumer”, and that definition does not take into account where the consumer is habitually resident. “Consumer” means any natural person who acts for purposes which are outside that person’s trade, business, craft or profession (Article 3(1)). Often, the Representative Actions Directive simply refers to the consumers concerned by an action or by an infringement. Having said that, some provisions refer to residence.
First, Recital 45 tells us that in order to ensure the sound administration of justice and to avoid irreconcilable judgments, an opt-in mechanism should be required regarding representative actions for redress measures where the consumers affected by the infringement do not habitually reside in the Member State of the court or administrative authority before which the representative action is brought. In such situations, consumers should have to explicitly express their wish to be represented in that representative action in order to be bound by the outcome of the representative action. This is then implemented in Article 9(3), obliging Member States to set up an opt-in mechanism to that end.
Second, Recital 49 states that Member States should require qualified entities to provide sufficient information in support of representative actions for redress measures, including a description of the group of consumers affected by the infringement and the questions of fact and law to be dealt with in that representative action. The qualified entity should not be required to individually identify every consumer concerned by the representative action in order to initiate the representative action. In representative actions for redress measures, the court or administrative authority should verify at the earliest possible stage of the proceedings whether the case is suitable to be brought as a representative action, given the nature of the infringement and characteristics of the alleged harm suffered by the consumers affected. Article 7(2) requires qualified entities, when bringing a representative action, to provide the court or administrative authority with sufficient information about the consumers concerned by the representative action.
Third, Recital 31 tells us that qualified entities from different Member States should be able to join forces within a single representative action in a single forum, subject to the relevant rules on jurisdiction. Consequently, Article 6(2) requires Member States to ensure that where the alleged infringement of EU law affects or is likely to affect consumers in different Member States, the representative action can be brought before the court or administrative authority of a Member State by several qualified entities from different Member States in order to protect the collective interests of consumers in different Member States.
All this means, in a nutshell, that cross-border participation of consumers is generally possible and is even promoted by the Representative Actions Directive.
Impact of the Representative Actions Directive in case of cross-border consumers
It clearly results from the Representative Actions Directive that consumers from other Member States cannot be subject to opt-out mechanisms. Yet, this may create disparities within a Member State. Indeed, Member States are free to establish an opt-in or opt-out system for domestic actions. Thus, Member States choosing to adopt an opt-out mechanism will necessarily also need to accommodate for the opting in of foreign consumers. This could lead to discrepancies within the same representative action between the regime applicable to local consumers residing in the Member State and the regime applicable to foreign consumers. It is also important to keep in mind that Member States may choose to allow domestic representative actions for a scope going beyond the Directive’s intended application.
This could also generate lis pendens issues in case of a consumer who resides in an opt-out jurisdiction having joined a representative action started in another Member State before a second action was initiated in his/her home country. As per Regulation (EU) 1215/2012 of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (knows as “Brussels Ia”), the judgment in the second action would likely be given precedence (especially if handed down first) because Brussels Ia Regulation will provide the State Member of the consumer’s domicile means to block the recognition and enforceability of any judgment resulting from the first action that could not be reconcile with the domestic judgment. This example shows in any case that there is room for complicated procedural situations which defendants may have to face.
Defendants should know whether they face a domestic or cross-border class of consumers early on in the proceedings. Indeed, from the outset, the group of consumers concerned must be clearly described by the qualified entity bringing the representative action.
Furthermore, several qualified entities from different Member States can bring the action jointly. The latter option, however, does not appear as a mandatory prerequisite for cross-border consumer participation.
But, in practice, how will consumers abroad know about the actions? The Representative Actions Directive requires qualified entities and the Member States to provide certain information on pending representative actions. This includes information by qualified entities about the representative actions they have decided to bring before a court or administrative authority and the status of the representative actions they have brought before a court or administrative authority. For an EU-wide class of consumers the language barriers may be an issue. Awareness may be higher where qualified entities from different Member States join forces within a single representative action in a single forum.
In addition, there will be specific legal aspects to cross-border participation in a representative action that will not be directly governed by the Representative Actions Directive. Article 2(3) provides that the Directive is without prejudice to EU rules on private international law, in particular rules regarding jurisdiction and the recognition and enforcement of judgments in civil and commercial matters and rules on the law applicable to contractual and non-contractual obligations.
Thus, any cross-border consumer representation under the Representative Actions Directive must be in line with international private law and the Brussels Ia Regulation. It will be an important point to determine how the requirements of Article 2(3) will be implemented and enforced by the Member States. Jurisdiction will need to be confirmed vis-a-vis all consumers who are willing to participate in a representative action filed in another Member State.
More generally, one should also bear in mind that this incitement to cross-border participation in representative actions may result in forum shopping practices. Indeed, beyond jurisdiction and enforcement questions that arise with cross-border litigation, there is also an applicable law question. Despite the harmonization introduced by EU law (in particular Regulation (EC) 864/2007 of 11 July 2007 on the law applicable to non-contractual obligations (“Rome II”)), national courts still have large leeway in the determination of the applicable law which may lead some litigants to prefer courts of some Member States over others.
Defining these issues around the class of consumers concerned thoroughly is paramount to avoid conflicts, because those represented are not allowed to bring an action individually with the same cause of action and against the same trader after opting in (Article 9(4)). There is experience from Germany regarding the problems in connection with registration of consumers without vetting of their admissibility (see below).
The Representative Actions Directive has not yet been implemented in France. However, France has known several types of class actions for a few years now (with different frameworks applicable depending on the subject matter: consumer law & antitrust, health products, data privacy etc.). The French example shows that the rather complex procedural set up designed for class actions a la française has not been very attractive to claimants and plaintiffs Counsels and only a few handfuls of cases have been brought under this specific procedural configuration.
This being said, the French litigation landscape has seen a growing number of mass tort cases, sometimes involving thousands of claimants, in particular in the health industry. What is striking is that there is actually no specific framework applicable to mass cross-border cases because the procedural regime of French class actions is not mandatory for claimants. In practice, this means that a group of claimants (regardless of how large it is) may decide to introduce an action simply bundling their claims altogether without resorting to the class action mechanism.
If some of these cases involve exclusively or predominantly French nationals, there are already examples of litigation involving consumers from different countries and such cases have shown how difficult it may become to handle certain French procedural law requirements in the presence of claimants from multiple jurisdictions. Some procedural rules are simply inadequate in such a context (e.g. on service on the parties themselves, applicable timeframes, questions around enforceability of decisions in a cross-border environment etc.). One could even question whether fair trial rights are fully complied with in certain instances, especially if the court does not have sufficient resources to deal with cases of a mass cross-border magnitude.
Against this background, it remains to be seen to which extent the French lawmakers will consider the French system needs to be revisited to account for the implementation of the Representative Actions Directive.
Germany has yet to publish a bill for transposition of the Representative Actions Directive. Currently, collective actions in consumer matters are possible by an instrument called the Musterfeststellungsklage. The Musterfeststellungsklage is a mix of representative action and class action elements. Only qualified entities with a specific standing to sue can bring such actions. The final decision is a declaratory judgment which the registered consumers can invoke as binding for their own case. If an action passes the initial admissibility test and is published in the litigation register, consumers belonging to a class concerned by the action can register their claims to the action.
Registration is free of charge. It can be made online via an electronic form provided by the Federal Office of Justice. The information provided by the consumer or their lawyer is not vetted by the office. Consumer can also de-register up to a certain stage of the proceeding. This concept has led to some uncertainties. Registered consumer cannot bring an action individually with the same cause of action and against the same defendant. Registration and de-registration must thus be assessed individually in civil actions. The concept entails that the merits of the registration are usually only assessed in subsequent dispute between the consumer and the defendant where the binding effect of a final decision is invoked.
The German Code of Civil Procedure has no specific provisions for participation of consumers from other Member States in a Musterfeststellungsklage. There is already a precedent for cross-border participation of consumers. In January 2021, the Higher Regional Court of Braunschweig allowed for publication of an action by an Italian qualified entity concerning products bought by purchasers in Italy. The plaintiff invokes application of German law, alternatively also application of Italian law. As of 5 March 2021, 632 consumers registered their claims. According to the court, the by far largest group of these consumers is habitually resident in Italy with only few exceptions.
For traders serving consumers in the EU, it will be key to assess (or re-evaluate) their potential litigation exposure as the Member States all proceed with their national transposition of the Representative Actions Directive. Businesses can no longer expect that they will mainly face litigation in their “home country” within the EU and need to anticipate the hurdles that may come not only with an increase in class actions type of litigation but also with cross-border participation of consumers in such cases.
Hogan Lovells’ class action group will monitor how Directive (EU) 2020/1828 is implemented in the Member States.