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New rules allow EU consumers to defend their rights collectively

New rules allow EU consumers to defend their rights collectively

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Following the approval of a directive in June 2020, consumers across the EU will be granted broader access to collective redress.

The new rules will enable consumers to seek effective judicial protection collectively when traders’ infringements of EU laws deprive them of their rights. These new rules on collective redress would give consumers in all Member States the right to fight cases involving mass harm together, but also introduce safeguards to prevent the abuse of the procedure.

The directive requires Member States to establish a system of representative actions for the protection of consumers’ collective interests against infringements of EU law. It also empowers qualified entities designated as such by Member States to seek injunctions and/or redress, including compensation or replacement on behalf of a group of consumers.

Based on the eligibility criteria, the directive distinguishes between two types of qualified entities. The first group is entitled to bring actions in the Member State where they have been designated (domestic representative actions), while the second is entitled to bring actions in any other Member State (cross-border representative actions). For domestic actions a qualified entity will have to fulfil the criteria set out by the domestic law, whereas for cross-border actions it will have to fulfil the harmonized criteria set out in the directive.

By applying the “loser pays” principle, the EU Parliament aimed at protecting businesses against baseless lawsuits. By ordering the defeated party to pay the costs of the proceedings of the successful party, it may be ensured that the number of abusive lawsuits will be kept to a minimum. To further curb manifestly unfounded cases, the qualified entities are given the privilege of dismissing these cases at the earliest possible stage of the proceedings as regulated by domestic law.

Once the Parliament and Council have formally approved the agreement, Member States will have 24 months from the entry into force of the directive to transpose it into national law, with a deadline of additional 6 months to start applying these provisions.

By Adrienn Megyesi, Partner, KCG Partners Law Firm

Hungary Knowledge Partner

Nagy és Trócsányi was founded in 1991, turned into limited professional partnership (in Hungarian: ügyvédi iroda) in 1992, with the aim of offering sophisticated legal services. The firm continues to seek excellence in a comprehensive and modern practice, which spans international commercial and business law. 

The firm’s lawyers provide clients with advice and representation in an active, thoughtful and ethical manner, with a real understanding of clients‘ business needs and the markets in which they operate.

The firm is one of the largest home-grown independent law firms in Hungary. Currently Nagy és Trócsányi has 26 lawyers out of which there are 8 active partners. All partners are equity partners.

Nagy és Trócsányi is a legal entity and registered with the Budapest Bar Association. All lawyers of the Budapest office are either members of, or registered as clerks with, the Budapest Bar Association. Several of the firm’s lawyers are admitted attorneys or registered as legal consultants in New York.

The firm advises a broad range of clients, including numerous multinational corporations. 

Our activity focuses on the following practice areas: M&A, company law, litigation and dispute resolution, real estate law, banking and finance, project financing, insolvency and restructuring, venture capital investment, taxation, competition, utilities, energy, media and telecommunication.

Nagy és Trócsányi is the exclusive member firm in Hungary for Lex Mundi – the world’s leading network of independent law firms with in-depth experience in 100+countries worldwide.

The firm advises a broad range of clients, including numerous multinational corporations. Among our key clients are: OTP Bank, Sberbank, Erste Bank, Scania, KS ORKA, Mannvit, DAF Trucks, Booking.com, Museum of Fine Arts of Budapest, Hungarian Post Pte Ltd, Hiventures, Strabag, CPI Hungary, Givaudan, Marks & Spencer, CBA.

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