On 22 June 2020, Parliament and Council negotiators reached a deal on the first EU-wide rules on collective redress.
The new rules introduce a harmonised model for representative action in all member states that guarantees consumers are well protected against mass harm, while at the same time ensuring appropriate safeguards from abusive lawsuits. The new law also aims to make the internal market function better by improving tools to stop illegal practices and facilitating access to justice for consumers.
The Representative Action Directive is a part of the New Deal for Consumers, launched in April 2018 by the European Commission, to ensure stronger consumer protection in the EU. It includes stronger consumer rights online, tools to enforce rights and compensation, penalties for violating EU consumer law and improved business conditions.
The main elements of the agreement are as follows.
1. Each Member State will name at least one qualified entity (an organisation or a public body) that will be empowered and financially supported to launch actions for injunction and redress on behalf of groups of consumers and will guarantee consumers’ access to justice.
2. On designation criteria for qualified entities, the rules distinguish between cross-border cases and domestic ones. For the former, entities must comply with a set of harmonised criteria. They have to demonstrate 12 months of activity in protecting consumers’ interest prior to their request to be appointed as a qualified entity, have a non-profit character and ensure they are independent from third parties whose economic interests oppose the consumer interest;
3. For domestic actions, member states will set out proper criteria consistent with the objectives of the directive, which could be the same as those set out for cross-border actions.
4. The rules strike a balance between access to justice and protecting businesses from abusive lawsuits through the Parliament’s introduction of the “loser pays principle”, which ensures that the defeated party pays the costs of the proceedings of the successful party-
5. To further avoid abusive lawsuits, Parliament negotiators also insisted that courts or administrative authorities may decide to dismiss manifestly unfounded cases at the earliest possible stage of the proceedings in accordance with national law.
6. Negotiators agreed that the Commission should assess whether to establish a European Ombudsman for collective redress to deal with cross-border representative actions at Union level.
7. The scope of collective action would include trader violations in areas such as data protection, financial services, travel and tourism, energy, telecommunications, environment and health, as well as air and train passenger rights, in addition to general consumer law.
Parliament as a whole and the Council will now have to approve the political agreement. The directive will enter into force 20 days following its publication in the Official Journal of the EU. Member states will then have 24 months to transpose the directive into their national laws, and an additional six months to apply it.
Click here to access the procedure file.