Article V -Representative Actions: a new level of consumer protection in the EU

by , on Nov 03, 2021 06:00:29 AM

Whilst consumers have been at the heart of EU legislation since the early inception of the European Union, Directive (EU) 2020/1828 of 25 November 2020 on representative actions for the protection of the collective interests of consumers and repealing Directive 2009/22/EC (hereinafter the ‘Directive’) is expected to bolster the avenues that may be availed to ensure the proper and effective enforcement of EU consumer protection laws. –

The Directive, which entered into force on 24th of December 2020, shall be transposed by EU Member States by 5th December 2022, with the resultant na6tional measures to have effect as from 25th June 2023.  

The Directive aims at granting more powers to public bodies situated within the European Union to seek injunctive or redress measures on behalf of groups of consumers through the introduction of the so-called ‘representative actions’.  

 

Representative actions 

Specific organisations (referred to as ‘qualified entities’) are empowered by the Directive with the right to bring collective actions, also knows as ‘collective redress’, in instances of ‘mass harm’ violations under more than sixty directives listed in Annex I. These Directives refer to product liability, unfair terms in consumer contracts, unfair commercial practices, e-commerce, passenger rights, and financial services.  

 

Qualified Entities  

EU Member States are permitted to designate entities (also known as ‘qualified entities’) that would be entrusted with the task of bringing representative actions on behalf of consumers, which entities are to be listed in a public register maintained by EU Member States and the European Commission respectively.  

In turn, one of the obligations of qualified entities is to provide competent courts with sufficient information about the consumer, the underlying claims and the remedies being sought, which would enable courts to determine the admissibility of representative actions. The cooperation between qualified entities from various Member States is considered beneficial for a more effective resort to cross-border representative actions, acting as an enabler for actions of such nature. 

 

Redress 

The Directive introduces a variety of consumer redress mechanisms including injunctive measures aimed at ceasing or prohibiting a current practice or prevent an imminent one, monetary compensation, product replacement or repair, termination of a contract, price reduction, and reimbursement of the price paid, as the case may be. 

In this regard, Member States must ensure that:  

• consumers who expressed their wish, whether explicitly or tacitly, to be represented in a representative action cannot be represented in another representative action or bring an individual action against the same trader for the same cause;  
• consumers cannot be compensated more than once for the same cause; and 
• redress measures allow consumers to benefit from remedies without having to initiate another action on their own stead. 

It is noteworthy that the remedies contemplated by the Directive are without prejudice to any existing remedies that may be availed of under EU or national law and which are not expressly attached to representative actions. 

 

Settlements 

The EU Member States must also guarantee that: 

• the qualified entity and the trader can jointly propose a redress settlement to the cause; 
• the court or administrative authority in question, after consulting with the qualified entity and the trader, may invite the parties of the case to reach a settlement; 
• settlements approved by the court or administrative authority will be binding upon the qualified entities, the defendant traders, and the consumers, as parties to the case. Nonetheless, Member States are given the leeway to allow consumers to either accept or reject the settlement. 

 

Cost of proceedings  

The costs of legal proceedings can be spread as follows:  

• the default position is that it will be incumbent upon the losing party to pay the costs of the proceedings; 
• states must ensure that costs of the proceedings related to representative actions do not impede qualified entitled from seeking injunctive measures;  
• Member States may demand individuals who wish to take part in a specific representative action for obtaining redress to pay a small fee for their participation. 

 

Penalties 

Member States are empowered to impose penalties for failure or refusal to comply with an injunctive measure, provision of information obligation or disclosure of evidence obligation.  

 

Ambit of the Directive and discretion of Member States  

Member States may exercise their discretion to extend the scope of applicability of the procedural and redress mechanisms contemplated by the Directive to disputes falling outside the remit of Annex I. Furthermore, Member States are free to determine whether such mechanisms are to be applied through administrative or judicial proceedings. 

 

Impact of the Directive  

One of the major areas of concern experienced in the field of EU Consumer Law has been the disparity between consumer protection on paper and in practice, leading to a situation of a lack of enforcement of consumer rights with a prevalence of non-compliance with consumer protection laws.  

Acknowledging this market failure, the Directive has introduced a new EU-wide representative action to protect consumers when there are continuous violations of their rights under the more than sixty Directives listed in Annex I to the Directive.  

The implementation of the Directive will further contribute to strengthening consumer confidence in the EU internal market, as well as ensuring the availability of concrete and tangible measures of redress, specific monetary compensation from traders who infringe the rights of consumers across a vast array of product and service offerings. 

 

For further information on the implications of the EU’s proposed Digital Services Act and how it may impact you, please do not hesitate to contact us at [email protected]. 

Author: Stephanie Marinova 

 

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