WIREDGOV

Parliament today endorsed a new law that will allow groups of consumers to join forces and launch collective action in the EU.

The new rules introduce a harmonised model for representative action in all member states that guarantees consumers are well protected against mass harm, while ensuring appropriate safeguards to avoid abusive lawsuits.

All member states must put in place at least one effective procedural mechanism that allows qualified entities (e.g. consumer organisations or public bodies) to bring lawsuits to court for the purpose of injunction (ceasing or prohibiting) or redress (compensation). This legislation aims to improve the functioning of the internal market by stopping illegal practices and facilitating access to justice for consumers.

More rights for consumers and safeguards for traders

The European class action model will allow only qualified entities, such as consumer organisations, to represent groups of consumers and bring lawsuits to court, instead of law firms.

In order to bring cross-border actions to court, qualified entities will have to comply with the same criteria across the EU. They will have to prove that they have a certain degree of stability and be able to demonstrate their public activity, and that they are a non-profit organisation. For domestic actions, entities will have to fulfil the criteria set out in national laws.

The rules also introduce strong safeguards against abusive lawsuits by using the “loser pays principle”, which ensures that the defeated party pays the costs of the proceedings of the successful party.

To further prevent representative actions from being misused, punitive damages should be avoided. Qualified entities should also establish procedures to avoid conflict of interest and external influence, namely if they are funded by a third party.

Collective actions can be brought against traders if they have allegedly violated EU law in a broad range of areas such as data protection, travel and tourism, financial services, energy and telecommunication.

Finally, the directive also covers infringements that have stopped before the representative action is brought or concluded, since the practice might still need to be banned to prevent it from recurring.

Click here for the full press release