A new EU directive on representative actions for the protection of the collective interests of consumers took a step closer to becoming law, after the European Parliament and Council reached an agreement on the draft directive on 22 June 2020. If the directive is adopted by the European Parliament and Council, when they vote on the proposal, it would enter into force in Autumn 2020, with a two-year period for EUs governments to transpose into national law.

The European Commission proposed the draft directive in April 2018, following demands from various bodies, but particularly the European Parliament, not least in response to the ‘dieselgate’ scandal.

At the heart of the directive is a provision enabling collective redress for consumers who have suffered collectively from unfair or illegal practices by a business. Currently in the EU, consumer organisations or independent public bodies can bring legal or administrative actions in the name of consumers only to stop infringements of consumer legislation. Under the draft directive, such bodies would be able to demand compensation for consumers as well.

The scope of collective action would include trader violations in areas such as data protection, financial services, travel and tourism (including passenger rights), energy, telecommunications, environment and health, in addition to general consumer law.

Among the various detailed provisions in the agreement reached on 22 June, the European Commission would be mandated to study the possibility of creating a European body (a consumer ombudsman) for collective redress, who would deal with cross-border representative actions (similar to class actions) at EU level.

Key provisions

• Each EU member state would nominate at least one body (an organisation or a public body) that would have the power to take actions for injunction and redress on behalf of groups of consumers, and ensure consumers have access to justice.
• In order to be deemed eligible to fulfil the role, the nominated bodies must fulfil criteria set out in the directive. For example, they should be non-profit, have over one year’s experience in consumer protection, and should be independent from commercial entities that could be responsible for infringing consumer rights.
• The designated bodies will receive financial support.
• The directive creates the ‘loser pays principle’, both to enable access to justice for consumers and to protect businesses from abusive lawsuits. According to this principle, the defeated party pays the costs of the proceedings of the successful party.
• To further avoid abusive lawsuits, courts or administrative authorities may decide to dismiss manifestly unfounded cases at the earliest possible stage of the proceedings in accordance with national law.
• The European Commission is tasked with assessing whether to create a European body (a consumer ombudsman) for collective redress to deal with cross-border representative actions (similar to class actions) at EU level.

Timeline and next steps

• April 2018 - Draft directive proposed by the European Commission on representative actions for the protection of the collective interests of consumers.
• 22 June 2020 - European Parliament and Council reach legislative agreement on the draft directive.
• Autumn 2020 - Directive scheduled to be adopted by the European Parliament and Council, and will enter into force 20 days following its publication in the Official Journal of the EU.
• Autumn 2022 - Member states will then have 24 months to transpose the directive into their national laws, and an additional six months to apply it.
• In the meantime, the European Commission is set to study the possibility of creating a European body (a consumer ombudsman) for collective redress to deal with cross-border representative actions (similar to class actions) at EU level.