European parliament ratifies class actions

Authors: Mgr. Michal Nulíček, LL.M., Mgr. et Mgr. Ing. Jan Tomíšek, CIPP/E, Mgr. Petr Zábranský, Mgr. Ondřej Kašpar

The European Parliament has unequivocally passed the draft Directive on Representative Actions for the protection of consumer interests. After a lengthy legislation process lasting almost two years, member states will finally see the first balanced regulation of collective (in the jargon of the Directive, representative) actions.

The concept of representative actions for the protection of collective interests of consumers will be applicable in case of the violation of a broad spectrum of EU regulations, namely both general consumer protection regulations (particularly from the Civil Code and the Act on Consumer Protection), and specific regulations from the financial services, energy and telecommunications sectors. Class actions will make even minor (so-called “small”) claims more enforcible, which were rarely enforced by consumers before the court due to the financial burden of the costs of proceedings and legal representation. Consumers will now be represented before the court by authorized representatives that will be able to make the same claims as consumers (e.g. compensation for damage, repayment of paid sums or termination of contracts).

Although member states have been given 30 months to transpose the Directive, followed by a period of one year for entry into force, businessmen should pay attention now already, for in terms of the time for submission, claims will not be limited by the Directive, or the relevant transposed legislation, coming into force. Therefore, representative actions will allow the enforcement of any claims that are not time-barred at the moment when the action is filed, i.e. even claims existing prior to when the transposed legislation comes into force. The same principle should apply in the domestic legislation of class actions (Act on Class Proceedings), which is awaiting hearing by the Chamber of Deputies.

Thus, from the standpoint of businessmen, class actions represent a double risk. On the one hand, litigation will become more accessible to consumers (both in terms of finances and procedure – in the form of legal representation). In addition, upon losing a dispute, businessmen may be obliged to compensate for damage or pay unjust enrichment to all the consumers concerned, or possibly to cover appropriate costs of a public measure serving the common interests of consumers, if the damage to individual consumers was minor.

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