European Parliament votes in favour of representative actions for consumers

Should the Council and the European Parliament indeed find agreement on the European Commission's proposal, the Directive will require Member States to implement collective redress mechanisms for violations of specifically designated parts of EU consumer protection law. The Directive aims to enable qualified representative entities protecting the interests of consumer groups to initiate legal action to obtain a remedy (including monetary compensation) for an infringement of EU consumer protection laws by traders. The Directive leaves it to the Member States whether to establish collective redress mechanisms before national courts or before national administrative authorities.

The text adopted by the European Parliament includes several changes to the initial proposal of the European Commission. Some amendments resulted from discussions in the European Parliament (including its various subcommittees) and discussions among various stakeholders:

• Concerns were raised with respect to potential frivolous litigation that could result from the Directive's collective redress mechanism, especially in the context of cross-border claims. Compared to the European Commission's initial proposal, the amended version adopted by the European Parliament imposes stricter funding, transparency and governance (including admissibility) requirements for representative entities that will be authorized to initiate collective redress actions. The Directive provides for enforcement of these requirements by public authorities. In addition, the amended version adopted by the European Parliament makes clear that the Directive does not allow Member States to establish collective redress actions for punitive damages or other types of overcompensation.
• The amended version also aims to reduce the risk of overlapping claims, specifically by introducing an obligation for Member States to ensure that no other ongoing collective redress action has been initiated regarding the same facts and parties.
• The European Commission's initial proposal left it to the Member States whether collective redress actions require consumers to opt in, or whether it is sufficient to provide consumers with the possibility to opt out. However, the amended version that was approved by the European Parliament aims to limit the possibility of using an opt-out system. Under this amended version Member States should require an explicit opt-in from consumers living outside the Member State where the collective redress action is initiated.
• Another topic that sparked discussions was that the Directive explicitly allows Member States to keep existing redress mechanisms, or to establish national collective redress mechanisms. Some Member States had voiced concerns about the impact of adverse effects on existing national collective redress mechanisms. The amended version adopted by the European Parliament states that the "Directive is without prejudice to other forms of redress mechanisms provided for in national law" (Section 3 of Article 2). Furthermore, it states that the Directive "does not prevent Member States from maintaining their existing framework, neither does it oblige Member States to amend it" (Recital 24 of the Directive's preamble). Still, there remains some doubt as to how this European collective redress mechanism will interrelate with collective redress mechanisms that already exist in certain Member States. For example, if such national collective redress mechanisms impose more lenient (admissibility) requirements on qualified representative entities that could initiate collective redress actions, one could wonder whether or not this Directive would change that.

It remains to be seen whether the Council and the European Parliament are able to reach a common position on the European Commission's proposal. If so, this Directive will fundamentally change the landscape of enforcement of European consumer protection law. Whereas several Member States already allow for certain collective redress mechanisms (see for example our earlier Stibbe blog on the recent adoption of a legislative proposal allowing for collective actions for damages in the Netherlands), other Member States do not or only to a limited extent.