The European Commission today presented a series of common, non-binding principles on national collective redress mechanisms so that citizens and businesses can assert their rights under Union law in the event of violations of those rights.
The recommendation aims to ensure a coherent horizontal approach to collective redress across the European Union without harmonizing Member States' systems.
National collective redress mechanisms should be available in a number of areas where EU law confers rights on citizens and businesses, including consumer protection, competition, environmental protection and financial services.
By recommending to Member States the creation of national collective redress mechanisms, the Commission aims to improve access to justice, while ensuring adequate procedural safeguards to avoid abusive legal proceedings.
The Recommendation complements the proposal for a Directive on damages actions for antitrust breaches, which will help victims of breaches of antitrust rules to obtain compensation through the legal remedies available in the Member States.
The Recommendation invites Member States to create collective redress mechanisms, while the Directive, for its part, leaves it up to the Member States whether or not to introduce collective redress in the context of the application of competition law at the initiative of private parties.
“Member States have very different legal traditions on collective action and the Commission intends to respect them. Our initiative aims to improve coherence when EU law is at stake,” said Viviane Reding, EU Commissioner for Justice.
"This recommendation constitutes a balanced approach, aiming to improve citizens' access to justice, while avoiding a US-style group action system and the risk of unfounded claims and abusive court proceedings," he added.
Vice President Joaquín Almunia, responsible for Competition Policy, said: “Citizens and businesses, especially SMEs, when they are victims of infringements of competition rules often face major obstacles to obtain effective compensation. To overcome these difficulties, we have proposed a directive on antitrust damages actions. As the victims of damages can be numerous, collective action mechanisms should also exist. This Recommendation is therefore a useful complement, which sends a clear message to the Member States'.
Commissioner Borg, responsible for Consumer Protection, added: “Today we take an important step towards the creation of an EU framework for collective action. We invite all Member States of the Union to provide European consumers with the necessary tools to enable them to assert their rights and obtain compensation for the damage caused by the violation of EU law. Member States must ensure that collective redress procedures are fair, equitable, swift and not unreasonably expensive'.
Most important principles of the Commission Recommendation
The Commission Recommendation invites all Member States to establish national collective redress systems and sets out a set of common European principles that must be respected in this context:
· Member States must have a collective redress system enabling natural and legal persons to obtain a court order to stop infringements of their rights under EU law ('injunctions') and to claim damages for the damage caused by such infringements ('remedial measures') when many people have been harmed by the same unlawful practice.
· Member States must ensure that collective redress procedures are fair, equitable, swift and not unreasonably expensive.
· Collective action systems must, as a general rule, be based on the principle of express consent ('opt-in'), according to which the claiming parties are formed by injured parties who have expressly consented to the exercise of the collective action. Any exception to this principle, provided for by law or ordered by court decision, must be duly justified on grounds of good administration of justice. At the same time, the Recommendation emphasizes the need to provide information to potential applicants who want to join the collective action.
· The Commission recommends important procedural safeguards to ensure that there are no incentives to misuse this procedure. Member States should not allow results-based fees that could encourage abuse. On the other hand, the entities that represent the applicants must have a non-profit purpose, so as to be guided only by the interests of the injured parties in cases of mass damages. Another way to avoid abusive proceedings is to prohibit punitive damages, which normally increase the economic interests involved in these types of actions. Interested parties should only obtain full compensation for their damages when the court confirms that their claims are substantiated.
· In the case of class action, the central role must rest with the judge, who must evaluate the process effectively and be aware of possible abuses. The Commission does not exclude the financing of European collective actions by third parties, but proposes to subject it to several conditions, mainly related to transparency, to ensure that there is no conflict of interest.
· The Recommendation also favors alternative ways of resolving disputes, proposing that this possibility be presented to the parties on a consensual basis.
Next steps: In the Recommendation, Member States are invited to put in place the appropriate measures within a maximum period of two years. No later than two years after the implementation of the Recommendation, the Commission will assess the situation, on the basis of Member States' annual reports, to determine whether additional measures are needed to strengthen the horizontal approach presented in the Recommendation.
What is collective action and why it is necessary
A class action is a procedural mechanism that allows, for reasons of procedural economy and/or effectiveness of application, that several individual requests (related to the same process) are brought together in a single lawsuit.
This is a broad concept that includes injunctions (lawsuits aimed at putting an end to illegal behavior) and remedial measures (lawsuits demanding compensation for damages caused).
It should be clearly distinguished from the so-called 'class actions' (group actions), which are common in the US legal system. In Europe, collective redress procedures have been introduced in several Member States, but these may vary considerably between them.
The Commission, as a public institution and guardian of the Union Treaties, ensures compliance with EU law. At the same time, individuals, economic operators and entities representing the interests of different groups in society may seek to assert their rights under Union law before national courts.
In some cases, violations of Union law can trigger multiple individual lawsuits. In these cases, collective action can complement enforcement by public authorities.
Current EU legislation provides for the possibility of bringing collective actions for injunctions in consumer law, but national legal systems diverge considerably on financial markets, competition, environmental protection and other legal areas.
The situation between Member States is even more divergent in cases where several consumers or companies seek compensation for damages in the same case. In preparing this Recommendation, the Commission carried out a wide-ranging public consultation in 2011 to assess whether, and under what conditions, a European approach to collective action could provide added value for Union citizens and businesses.
It also took into account the European Parliament resolution "Towards a coherent European approach to collective action" which calls for the creation of a horizontal framework for collective action.
Commission action on collective action
The Commission has worked for several years on defining European standards for collective action in the fields of competition law and consumer protection.
The Commission adopted a Green Paper on antitrust damages actions in 2005 and a White Paper in 2008 on the same, both of which include a chapter on collective action.
In 2011, the Commission held a public consultation in which around 300 institutions and experts and 10 000 citizens expressed their views on a European framework for collective redress.
The public consultation demonstrated that there is a divergence of views among stakeholders and a need for balanced solutions.
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