The implementation of EU Directive 2020/1828 on representative actions for the protection of the collective interests of consumers – the same style in a different colour?

Luca Angstmann
Buis Bürgi, Zurich
luca.angstmann@bblegal.ch

The third session of the IBA Annual Litigation Forum 2024 was held in the impressive building of the Netherlands Commercial Court (NCC). After welcoming speeches by Eveline de Greeve, President of the Amsterdam Court of Appeal, and Duco Oranje, President of the NCC Court of Appeal, participants had the opportunity to discuss dynamics and trends in class actions in a workshop format.

Workshop three dealt with the EU Directive 2020/1828 on representative actions for the protection of the collective interests of consumers (the ‘Directive’). The Directive was adopted in November 2020 and introduced a procedural mechanism for collective redress measures throughout the European Union.[1] Unlike previous legislation, the Directive requires Member States to ensure that, in addition to injunctive relief, remedies such as compensation, repair, replacement, price reduction, termination of the contract or reimbursement of the price paid can be sought.

Member States had to transpose the Directive into national law by 25 December 2022 at the latest. However, hardly any Member State has done so on time. To date, around two thirds of all Member States have adopted national implementing legislation.

The panel of workshop three consisted of experienced lawyers from different jurisdictions with a strong academic and professional background in the field of collective redress. Chaired by Dr Tobias Lühmann (Noerr, Germany), speakers Professor Dr Ianika Tzankova (Birkway, the Netherlands), Mariana Soares David (Morais Leitão, Portugal) and Esther de Félix Parrondo (Cuatrecasas, Spain) shared their experiences with the implementation of the Directive in their respective jurisdictions. The debate showed that much is still unclear, and only time will tell if the Directive delivers on its promises.

Germany, for example, has taken a rather strict approach when it comes to third-party funding by limiting any success fee promised to a funder to ten per cent of the claims recovered. This is likely to make it unattractive, if not impossible, to fund a collective consumer action in a complex situation. Furthermore, it is unclear how third-party funding of a collective action would work in practice. This is because the legislature has explicitly stated that the success fee may not be deducted from the collective total. As a result, it would be up to the consumers themselves to implement any contingency fee commitments and ultimately to distribute the funder's share of the proceeds. It is not yet clear how this will work in practice. 

Of the jurisdictions discussed in the workshop, the Netherlands certainly has, at least in theory, the most plaintiff-friendly approach to collective redress that goes beyond the standard set by the Directive. While the Directive is limited to collective redress for consumers, the pre-existing Dutch legislation has no such limitation and allows qualified entities to act on behalf of companies, investors, employees or even in the public interest. Furthermore, the Netherlands is the only country that has so far made use of the possibility of ad hoc organisations for domestic cases, that is, organisations that are set up exclusively for a specific mass claim. The Netherlands has a longstanding tradition and predominantly positive experiences with such institutional plaintiffs and has maintained that model for domestic actions under the Directive. 

In Spain, the Directive has not yet been fully transposed but there is a draft law, which – should it become binding – will certainly facilitate collective redress actions in Spain. Two points are worth highlighting in this respect: first, Spain will be following an opt-out model for consumers that are resident in Spain, that is, the collective redress action includes all consumers who have not opted out. An opt-in system is, however, available where the value of the performance due to each consumer exceeds €3,000 and the court considers it more advisable to ensure a good administration of justice. Second, third-party funding of collective actions is allowed without any limitation on the funder’s share in the proceeds, though it will be subject to judicial control. This may even attract cross-border litigation to Spain.

Lastly, Portugal has seen several mass actions in recent years, particularly in consumer and competition cases. This trend is likely to continue under the new legislation. Like Spain, Portugal is following an opt-out model for consumers resident in Portugal, just as occurred prior to the Directive. However, regarding third-party funding, Portugal takes a middle ground by limiting the third party's remuneration to a fair and proportionate amount, to be assessed by the court. Of course, it is yet to be seen in practice what that means. Nonetheless, under Portuguese law, plaintiffs benefit from several exemptions in terms of judicial fees and costs.

Overall, the Directive has certainly brought collective redress to the fore. However, it remains to be seen to what extent, and in which countries, it will increase the number of collective actions.

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