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