On 26 January 2018, the European Commission published a report looking at Member State’s progress in implementing collective redress measures. This followed a European Commission recommendation in 2013 and a subsequent public consultation in 2017. The report shows that the EU still lacks consistency across Member States in terms of (i) availability of collective redress mechanisms and (ii) the implementation of safeguards against potential abuse. This report will feed in to the European Commission’s proposal for a “New Deal for Consumers”, which was announced as part of the 2018 work programme and is expected in Spring 2018. This “New Deal for Consumers” will aim to further strengthen enforcement and redress for consumers. Companies in the product supply chain should take note of this report and the wider context of additional enforcement and redress for consumers as it may increase risk in the European space if uptake and consistency is improved.

In 2013, the European Commission adopted a recommendation on common principles for injunctive and compensatory collective redress mechanisms in the Member States concerning violations of EU law rights. This report assesses the practical implementation of that recommendation, focussing on developments in the Member States’ legislation; considers whether those developments have led to a more widespread and coherent application of the principles set out in the recommendation; examines practical experience at Member State level; analyses the extent to which the implementation of the recommendation has contributed to achieving its main aims; and sets out concluding remarks on whether there is a need for further action concerning collective redress at a European level.

Some key takeaways from the report include:

  • There has been limited legislative change as a result of the recommendation:
    • Only seven Member States have reformed their laws on collective redress since the recommendation and those reforms have not always followed the principles of the recommendation.
    • Nine Member States still have no compensatory collective redress mechanism in place.
  • Where collective redress is available, it is mainly used in the areas of consumer protection and related areas such as financial services or passenger rights. There is a “relative absence” of collective redress in other fields.
  • There are variations within Member States in relation to the rules on standing. These variations are of some significance: the stricter the rules for representative entities could lead to a limitation of the right to seek collective redress and to access to court.
  • The “loser pays” principle is generally followed, but there are diverging rules on costs of civil procedure across the Member States that may lead to “substantial divergences in the actual reimbursement of costs of the winning party in very similar proceedings, depending on the forum”.
  • No Member State has regulated third party funding in any way, let alone in accordance with the recommendation. One Member State has pending legislative change in line with the regulation. Two Member States generally prohibit third party funding. As such, there is a risk of “unregulated and uncontrolled” third party financing that may create incentives for litigation in certain Member States. This area was identified as one where the recommendation had almost no impact on the laws of Member States.
  • Although there are no Member States that have general obstacles to the participation in legal proceedings in another Member State, the example of the car emissions case (which affected consumers across the EU) showed there were collective redress proceedings in four different Member States, which could lead to different results and incentivise forum shopping. There are also other risks, such as double compensation and conflicting decisions.
  • No Member State expressly provides for the general recognition of representative entities from other Member States (except in the Injunctions Directive, “which requires Member States to ensure that qualified entities may apply for injunctions to the courts or administrative authorities in other Member States where the interests protected by that qualified entity are affected by an infringement originating in that Member State”).
  • There’s a need to make injunctions more effective and to address issues such as length of procedure. Where collective actions are not available, the effectiveness of collective injunction procedures may be compromised.
  • Member States have a range of possibilities in terms of “opt-in” and “opt-out” collective actions. Although the majority apply an “opt-in” principle, the report concludes that the recommendation has had a limited effect on Member State rules.
  • Although all Member States have changed or are soon to change their laws in respect of out of court dispute resolution schemes, generally this does not cater for the specific context of collective redress.
  • The recommendation has had a very limited impact on the system of lawyer’s fees and there is no evidence of contemplated change in this area.
  • Most Member States don’t award punitive damages in mass harm situations.

The report concludes that while the recommendation made a “valuable contribution” to inspiring discussions, that it also provides a basis for “further reflection” as the evidence demonstrates that there has been limited follow-up to the recommendation. The Commission intends to:

  • Further promote the principles of the recommendation;
  • Carry out further analysis for some aspects of the recommendation (e.g. funding of collective actions); and
  • To follow up this assessment in the framework of the “New Deal for Consumers”.

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Posted by Jamie Humphreys

Jamie Humphreys is a litigation and regulatory lawyer. He is a strategic advisor to clients who face critical threats to their business at all stages of the product life-cycle, working with them to ensure the most favourable outcome and manage any reputational impact. He also provides policy advice to clients on proposed legislation and regulations that may introduce profound changes to their business. He has acted on high profile litigation across a range of different industries, internal investigations into allegations of fraud by global products manufacturers, major corruption investigations for Governments, and B2B product liability disputes, international recalls and consumer claims for well-known global brands. He is passionate about the impact that new technologies such as 3D printing, AI and Internet of Things will have in the products space and works with clients to ensure they prosper within a dynamic regulatory environment.