The Ministry of Economic Development has conducted a public consultation on the draft Law on Class Actions. The primary reason for adopting a special law which regulates matters related to the collective protection of consumers is, above all, the harmonization of Montenegrin legislation with EU law, specifically with Directive (EU) 2020/1828 on representative actions for the protection of the collective interests of consumers and repealing Directive 2009/22/EC. The goal is to prevent and sanction mass violations of consumer rights by traders in the market, while also ensuring fair compensation for harmed consumers. In this text, we briefly present the most important amendments and innovations introduced by the draft Law on Class Actions.
It is important to note that the current Consumer Protection Law includes only 12 articles regulating collective consumer protection and foresees only one type of class action – an injunction relief class action. In contrast, the Law on Class Actions provides more detailed regulation of collective consumer protection and introduces, among other things, a new type of class action for damages. Consequently, the provisions related to collective consumer protection in the current Consumer Protection Law will be repealed upon the adoption of the new Law on Class Actions.
- a) Who is authorized to file a class action?
It is essential to distinguish between entities authorized to file class actions seeking injunctive relief and/or damages and those entitled to file only for injunctive relief. In the first case, the right to initiate class actions is granted to independent organizations and legal entities competent for consumer protection under the law, as well as consumer organizations registered in the records kept by the competent ministry and which meet the conditions for filing class actions as stipulated by the Law on Class Actions and the Consumer Protection Law. In cases of collective actions seeking only injunctive relief, the right to file is also granted to chambers of commerce and trade interest associations.
- b) Filing of collective actions for damages
As mentioned earlier, the provisions of the Consumer Protection Law only allow for collective actions seeking to stop actions by traders that infringe upon the collective interests of consumers. On the other hand, the new Law on Class Actions introduces the possibility of filing class actions for damages.
The legislator has opted for an “opt-in” system, meaning that consumers must give explicit consent to join the class action. However, consumers whose interests are represented in the class action are not considered as the party to the proceedings. This means they do not enjoy the same rights as parties but do have certain rights, such as the ability to submit a statement of opinion to the court on issues relating to the approval of a class action for damages. The declaration of participation is irrevocable and cannot be withdrawn after the expiration of the deadline set by the court in its notification approving the class action sent to group members. Furthermore, consumers who have expressly stated their intention to be represented in the class action may not be represented in other class actions with the same claim against the same trader, nor may they initiate individual actions with the same claim against the same trader.
- c) Assessment of damages
The Law on Class Actions differentiates between two situations – one where individual assessment of damages is possible, and another where it is not.
For damages to be individually assessed, the following conditions must be met: (1) all group members must be identifiable; (2) justified claims can be decided upon in the proceedings; and (3) that this does not disproportionately burden the procedure. In such cases, the court will specify in its judgment all group members and the amount of each damage or other claims the defendant must compensate or fulfill to each of them.
A judgment given based on class action for damages which includes individually determined amounts for each group member serves as an enforceable title, allowing each member to initiate enforcement proceedings to collect the amount owed from the defendant.
If individual assessment of damages is not possible, the court may alternatively determine in its judgment (i) the amount of collective compensation or (ii) an amount or otherwise determinable value, expressed for example as a percentage of the price or per unit, or other obligation to be fulfilled, which each included group member will receive upon proving they meet the criteria set by the judgment. The court also assesses the expected total liability of the defendant.
When the court issues a judgment based on class action for damages, without individual assessment of damages, it appoints a notary as the collective compensation administrator. The administrator is obliged to draft a list of the injured parties and group them accordingly based on participation declarations and accompanying evidence, within 30 days of appointment. The plaintiff and defendant have the right to object to the draft list. The court will schedule a hearing to discuss and adopt the final list of individuals who suffered damage.
The adoption of the new Law on Class Actions represents a significant step for Montenegro in aligning its legislation with EU law. The new legislative framework provides new opportunities for effective collective protection of consumer rights. On the one hand, introducing the possibility of filing for damages through an opt-in system should ensure consumer autonomy and procedural certainty. On the other hand, it aims to overcome the problem of consumer interference in filing individual lawsuits due to high litigation costs, procedural complexity, lack of knowledge, or the low value of individual claims.
By Amra Ademovic, Partner, and Mina Coguric, Associate, JPM Partners Montenegro