There have been a number of recent developments in relation to consumer collective redress in Europe. We are pleased to bring you some highlights to be aware of since we last blogged about this topic.
One to watch – representative actions in the EU
The EU’s proposed Directive on representative actions for consumers is currently under negotiation. As we have blogged previously, this proposal forms part of the European Commission’s “New Deal for Consumers” and would create a new right for ‘qualified entities’ to bring representative actions against EU businesses on behalf of groups of consumers for remedies including compensation, repair or replacement.
The European Commission’s proposal was adopted at first reading by the European Parliament in March last year (as we reported here). The version adopted made a number of significant amendments to the Commission’s proposal, including:
- National registers – Member States would establish registers of:
- qualified entities (with at least one designated), that would be non-profit-making, independent of market operators and have procedures to prevent conflicts of interest – including no financial agreements with law firms;
- representative actions, which should be available publicly and free of charge;
- unlawful acts that have been subject of injunction orders (which create a rebuttable presumption of evidence of breach in actions brought in other Member States); and
- Loser pays principle – the losing party in a collective redress action would reimburse the winning party’s legal costs (subject to national laws, and provided such costs were not unnecessarily incurred or disproportionate to the claim).
Since then, the European Council adopted its general approach, which proposed, amongst other things:
- creating a distinction between domestic and cross-border representative actions – with the criteria for the designation of qualified entities for cross border actions common across the EU, whereas Member States would decide the national criteria themselves;
- removing the provision on distributing small amounts of financial compensation to public purposes serving consumer protection (which the Commission had proposed for cases where many consumers had each suffered a very small amount of loss, such that it would be disproportionate to distribute sums to each and every consumer); and
- delaying the application of the directive by a year and a half.
On 13 January 2020, the decision to open negotiations on the basis of the European Parliament’s first-reading position was announced in plenary. The first informal trilogue took place on 14 January and the second one on 2 March 2020. Trilogues for April were cancelled due to the COVID-19 crisis and we are currently waiting to hear new dates.
Although the COVID-19 crisis may cause some delay in the trilogue negotiations, there is a widespread desire to finalise the proposed Directive and, in our view, not a significant difference between the European Parliament and Council Positions. This means we would expect to see the proposal agreed in fairly short order (in European legislative terms, anyway) when negotiations recommence. Once agreed, the Directive has the potential to significantly shake up the existing EU consumer rights landscape.
Group Actions in the UK – Spotlight on Scotland
Our contacts at Burness Paull in Edinburgh have highlighted a new group claims procedure that is being introduced in Scotland, which could be in place by this summer.
The Scottish Civil Justice Council recently held a consultation on proposals for a regime that would govern group proceedings in the Court of Session. This would see the introduction of rules to cover the key aspects of group proceedings, with the Court empowered to tailor the exact procedure for each group. Whilst this gives the Court a degree of flexibility, it leaves uncertainty around exactly how the procedure will work in practice. In particular, it remains to be seen whether there will be further detail on what criteria must be met to be a “representative party” who can bring the group proceedings.
There are other questions that were not addressed in the consultation, including whether it will apply to lower value claims; how easy it will be for consumers outside of Scotland to participate; how costs and expenses liability will be addressed; and whether companies can join group proceedings.
As such, it remains to be seen to what extent Scotland’s approach will mirror the representative actions or Group Litigation Order (“GLO”) mechanisms available in England and Wales, which cover claims that give rise to common or related issues of fact or law (GLOs), or claims by persons with the same interest (representative actions).
Although questions remain, the intention of the legislation is to make it easier for claims to be brought in Scotland, so it’s fair to assume that the procedure will lead to an increase in consumer claims – particularly for companies selling pharmaceuticals, medical devices, financial services, automotive and consumer products, as well as for energy suppliers and companies who hold or process large volumes of personal data. This would include companies based outside of Scotland, but selling products in Scotland, or with a presence in Scotland.
If you would like more information about the new procedure in Scotland, please do let us know and we can put you in touch with our contacts at Burness Paull.