On 24 November, the European Parliament approved the final text of the EU Representative Actions Directive.
The approved directive will enter into force 20 days after its publication in the EU's Official Journal. Member States will then have 24 months to transpose the directive into national law and an extra six months in which to implement it. The new rules will apply to representative actions brought on or after its date of application. Although Member States can sometimes be slow on implementation, this means that we should expect these changes to be in full effect in the EU from mid-2023 onward.
The directive will impose the following key changes on consumer redress:
- Consumers will be better protected against domestic and cross-border 'mass harm.' A mandatory class action regime will be implemented at European (cross-border) and Member State (domestic) level. The discretion provided to Member States suggests the directive will result in stricter requirements for cross-border claims and more flexibility for domestic collective action mechanisms.
- Class action mechanisms will be opt out or opt in with Member States being given the discretion to decide on their approach for domestic claims. The EU’s steer is towards opt in.
- Safeguards will be in place to protect businesses against abusive lawsuits by using the 'loser pays principle.'
- Designated consumer organizations (the so-called "qualified entities") will be able to launch actions on behalf of consumers.
As noted in our Global Class Actions blog, the impact of this new law means that 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.
Now that the directive is to be implemented, attention will turn toward how Member States choose to exercise their discretion on the implementation of a local collective redress regime. At present, there are a number of collective litigation mechanisms in the EU with differing requirements and legal tests for class action claimants to overcome. The recent proposals for a general class action regime in France and the German 'Model Representative Action' are no exception.
In our recent Future of Disputes webinar on class actions, we discussed litigation strategy and practical tips to consider in the wake of the multiple class actions that are already underway and for class actions that will arise once this new directive is in force.