Cross-border representative actions: publication of requirements for Dutch organisations seeking designation as ‘qualified entities’

Background

In late 2020, the EU Representative Actions Directive (2020/1828) (Richtlijn representatieve vorderingen; the Directive) was adopted as part of the European Commission’s New Deal for Consumers, aimed at strengthening the enforcement of EU consumer law. The Directive obligates each Member State to provide for at least one national representative action procedure for organisations representing consumers.

The Directive has been implemented in Dutch law in the form of the Representative Actions Directive Implementation Act (Implementatiewet richtlijn representatieve vorderingen voor consumenten; the Implementation Act – available only in Dutch), which went into force on 25 June 2023. As the existing Dutch collective action regime (the WAMCA) already met most of the Directive’s requirements, the Implementation Act has brought few legislative changes. The most notable change in Dutch law relates to so-called ‘cross-border representative actions’, meaning a collective claim brought by a consumer organisation in an EU Member State other than the one in which the organisation is established. Article 4(1) of the Directive provides that cross-border representative actions pertaining to consumer interests may be brought only by organisations that have been designated as qualified entities by a Member State.

Foreign organisations may therefore only bring representative actions on behalf of consumers before the Dutch courts if they have been designated as qualified entities by their home Member State. Conversely, Dutch organisations may apply to be designated as qualified entities to bring collective actions pertaining to consumer interests in other Member States. The Implementation Act sets various requirements for the designation of Dutch organisations as qualified entities. On 13 July 2023, the Dutch Minister for Legal Protection (Minister voor Rechtsbescherming; the Minister) issued the Decree on Qualified Entities for Cross-border Representative Actions (Besluit bevoegde instanties grensoverschrijdende representatieve vorderingen; the Decree – available only in Dutch), which provides further rules for such designation and the application procedure.

Requirements for designation as a qualified entity

The requirements for designation as a qualified entity for bringing cross-border representative actions are mostly the same as the requirements that already applied to Dutch organisations bringing collective actions before the Dutch courts.

Under Article 3(2) of the Decree, the main requirements for a Dutch organisation to be designated as a qualified entity on application are that it:

• is a foundation (stichting) or association (vereniging) with full legal capacity incorporated under Dutch law;
• provides information along with its application that shows that it meets certain requirements set out in Article 3:305a of the Dutch Civil Code (available only in Dutch), i.e. that it (i) operates on a non-profit basis; (ii) has a supervisory body; and (iii) has appropriate and effective mechanisms in place for the participation or representation in decision-making of the persons whose interests the action seeks to protect;
• provides the following documents and information: (i) a recent excerpt from the Dutch Chamber of Commerce; (ii) its most recent management report and annual accounts; and (iii) a description of the persons it represents and if possible, the number of persons; and
• has a publicly accessible website containing:
  • the information that, according to its articles of association, the organisation represents consumer interests;
  • the information that it has publicly done so during the twelve months prior to its application; and
  • various other documents and information, such as the organisation’s articles of association, its governance structure, its objectives, methods of operation and general sources of funding and the most recent management and supervisory body report.

The requirement that the organisation has represented consumer interests during the year prior to the application acts as a threshold against ad hoc organisations (i.e. organisations established for bringing a specific claim) bringing a cross-border representative action.

The application for designation as a qualified entity must be submitted in writing, either by letter or by email, to the Minister (Article 2(2) of the Decree). If the application is submitted by email, it must be sent to collectieveactie@minjenv.nl. The Minister must then respond to the application within six weeks (Article 3(1) of the Decree). This response can be either a decision on the application or a notice that the Minister needs more time to decide. Since six weeks appears to be a rather short term to decide on the application in light of all the requirements that must be assessed, it seems likely that in many cases the Minister will extend this term.

List of qualified entities

The Minister is not obligated to publish the decision on the application. However, each Member State must communicate a list of the organisations it has designated as qualified entities to the European Commission by 26 December 2023 at the latest. It is not yet known where the list will be published online, but we expect a link will be placed on the European Commission's web page on the Representative Actions Directive. The Member States’ lists and the combined list compiled by the European Commission must be published. Member States must keep the European Commission updated on changes to the list (Article 5(1) of the Directive). That will be managed through the new Representative Actions Collaboration Tool (europa.eu).

Continuous obligation to meet requirements

A designation as a qualified entity is valid for five years (Article 4(1) of the Decree). If during that period any developments occur that may influence whether the entity meets the abovementioned requirements, the entity must inform the Minister immediately (Article 5 of the Decree).

If a qualified entity ceases to meet the designation criteria, the relevant Member State must withdraw the designation. If this happens during a cross-border representative action by the organisation in question, the court will decide on the consequences, e.g. inadmissibility of the organisation’s claim, rejection of the claim, or suspension of the proceedings so that another qualified entity can resume the proceedings in its place (see the Explanatory Memorandum to the Implementation Act, p. 39 – available only in Dutch).

If another Member State or the European Commission doubts whether a qualified entity meets or still meets the designation requirements, it may raise its doubts with the specially appointed national contact point of the Member State that has designated the organisation in question as a qualified entity. As stated in the Explanatory Memorandum to the Decree (p. 7 – available only in Dutch), the national contact point to raise such doubts with in the Netherlands is the Minister. Defendants in collective actions may also raise such doubts, either with the relevant national contact point or with the court (Article 5(4) of the Directive and Explanatory Memorandum to the Implementation Act, p. 27). As the assessment of an application as a qualified entity is, in principle, solely based on information provided by the applicant itself, defendants may bring forward relevant information on the applicant’s compliance with the designation requirements that has not yet been taken into account.

Limited scope

Designation as a qualified entity in the sense of the Directive specifically pertains only to cross-border representative actions. Nonetheless, Dutch qualified entities will likely attempt to use their designation as a qualified entity to argue that they have standing to bring their claims in Dutch collective actions. Although the designation provides for a good prima facie argument, it does not exempt Dutch consumer organisations from an ex officio assessment by the court of the statutory admissibility requirements. If the defendant raises counter-arguments, the court will also need to take those into account.

Actions in the Netherlands by foreign qualified entities

Organisations that have been designated as qualified entities in other Member States may bring collective actions on behalf of consumers before the Dutch courts. In this case, the Dutch courts are, in principle, not allowed to assess ex officio whether the organisation meets the designation criteria. Nonetheless, if the defendant raises doubts about the qualified entity’s compliance with the designation requirements (see above), the court will have to examine those doubts and possibly attach consequences. This may lead it to deny standing to the foreign organisation (Explanatory Memorandum to the Implementation Act, p. 27).

In any case, the court must assess whether the admissibility requirements relating to the specific claim are met. For example, the court must assess whether the claim has a sufficient connection with the jurisdiction of the Dutch courts, whether the qualified entity has sufficient resources to bear the costs of bringing this particular action and whether it has sufficient control over the litigation strategy.

Key takeaways

• Under the Representative Actions Directive, organisations may bring collective actions in other EU Member States only if they have been explicitly designated in advance by their home Member State as ‘qualified entities’.
• The Dutch Minister for Legal Protection has issued a Decree detailing the requirements for the designation of Dutch organisations as qualified entities and the application procedure.
• Qualified entities have a continuous obligation to meet the designation requirements. In the Netherlands, doubts about an entity’s compliance with these requirements may be raised with the Minister by another Member State, by the European Commission or by defendants in collective actions.
• Potential defendants in collective actions in the EU should note that:
  • they can consult the lists of qualified entities to be published by the Member States and the European Commission as from around 26 December 2023, in order to identify potential claimants in cross-border collective actions;
  • they may face collective actions brought by consumer organisations from other EU Member States that have been designated as qualified entities by their home Member State;
  • in that case, in principle, the court is not allowed to verify the qualified entity’s compliance with the designation requirements, but may only assess the admissibility requirements relating to the specific claim;
  • however, defendants may challenge the entity’s compliance with the designation requirements by raising their doubts with the court (in addition to the possibility to raise such doubts with the Minister). The court may subsequently declare the claims inadmissible or attach other consequences.
• To date, no applications for designation as a qualified entity have been published. By 26 December 2023 at the latest, and possibly sooner, we will know which organisations have successfully applied and will thus be able to bring cross-border representative actions within the EU.

Contact us

Our Litigation team has vast experience with the Dutch collective action regime and is currently involved in multiple collective actions. For example, we represented Ernst & Young in a collective action in which the District Court of The Hague recently denied standing to two claim foundations (see our post on LinkedIn). Please do not hesitate to contact us if you have any questions about the above.