The EU Directive on consumer representative actions enters into force

After decades of debate on collective redress in the EU, Directive (EU) 2020/1828 on representative actions for the protection of the collective interests of consumers and repealing Directive 2009/22/EC (the Directive) entered into force on 24 December 2020. The 27 EU member states now have two years to transpose the Directive into national law and a further six months before the new rules must be applied.

As part of the EU's New Deal for Consumers package, the Directive aims to modernise and replace the Injunctions Directive (2009/22/EC) by providing redress and injunctive measures for groups of consumers that have been affected by specific infringements of EU law. 

The EU Directive on consumer representative actions in a nutshell

Under the Directive, Member States must ensure that so called „qualified entities“ can bring representative actions to seek redress in national courts of respective Member States against infringements of specific, consumer-related provisions of EU law. The areas affected include general consumer law, data protection, financial services, travel and tourism, environment and energy, telecommunications, digital services and product liability. In these areas, qualified entities (i.e. consumer bodies that represent the collective interest of a group of consumers) must be given the opportunity to bring a representative action in order to facilitate not only injunctive but also remedial measures such as compensation, repair or termination of the contract. For more details please see our Article of November 2020.

Relationship to the Germany model case declaratory action

From a German law perspective, the EU representative action at first glance seems to resemble the model declaratory action (§ 606 et seq. of the German Code of Civil Procedure (Zivilprozessordnung, ZPO)), which the German legislator introduced in atumn 2018 in response to the Volkswagen diesel claims. However, a closer look at the Directive clearly shows that the scope of application as well as the legal implications of the EU representative action go significantly beyond that of the model declaratory action. Most importantly, the EU representative action is not limited to declaratory relief. Instead, direct claims for damages, repair, replacement, price reduction, rescission of the contract or reimbursement of the price paid can be initiated (Art. 9 (1) of the Directive). Further, the requirements for the entities entitled to bring an EU representative action are significantly lower than for the model declaratory action. In particular, the EU representative action does not provide for a minimum number of members or for a register of complaints. Taken together, it therefore seems inevitable that the model declaratory action (in its current form) will lose importance, at least as far as consumer protection rights are concerned. 

Race for the most promising forum for representative actions 

By laying down only certain minimum requirements, the Directive leaves the Member States a wide discretion in implementing the Directive in national legislation. Member States may therefore be inclined to implement the Directive in the most consumer-friendly way possible in order to make their own jurisdiction appear more lucrative. After all, qualified entities are not obliged to file lawsuits in the Member State that has authorised them as such. Rather, they can also bring cross-border actions, provided that the other Member State has jurisdiction over the action filed. In this respect, the Directive provides for very wide range of options. Accordingly, jurisdiction can be established not only in the Member State in which the defendant company has its registered office, but also in any Member State in which it has a branch. Furthermore, the Member State in which the consumer concerned is domiciled also qualifies as a suitable venue. The representative action thus opens up a multitude of possible jurisdictions in different member states and risks provoking competition for the most promising forum for representative actions.

In this context, Germany too faces the challenge of, on the one hand, maintaining its existing restrictive collective redress system and, on the other hand, gaining a share of the profitable litigation industry. It remains to be seen how the German legislator will resolve this conflict.

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