Compensation for Moral Damages in Class Actions in Chile: A Review of SERNAC v Enel

On 29 August 2024, the 4th Civil Court of Santiago handed down a judgment in case No 8477-2021, case No 8477-2021, National Consumer Service v Empresa Eléctrica de Colina Limitada (“SERNAC v Enel”), accepting the lawsuit for the defence of the collective interest of consumers or class action filed by the National Consumer Service (Servicio Nacional del Consumidor, or SERNAC) against the electricity distribution companies Enel Distribución Chile SA and Enel Colina SA and Enel Colina SA due to a series of unjustified power outages that occurred in the metropolitan region between 29 January 2021 and 2 February 2021.

SERNAC v Enel: an emblematic case

The judgment in SERNAC v Enel is emblematic for a number of reasons, including:

• being the first judgment in Chile to apply Article 25 A of Decree with the Force of Law (Decretos con Fuerza de Ley, or DFL) 3 ‒ which establishes the revised, co-ordinated and systematised text of Law No 19,496 establishing rules on the protection of consumers’ rights (the “Consumer Rights Protection Law”) ‒ to interruptions of electric services; and
• the fact that it determines the complementarity between DFL No 4/20,018 ‒which establishes the rewritten, co-ordinated and systematised text of the DFL No 1 of 1982 of the Ministry of Mining (the “General Law of Electrical Services”) ‒ and the Consumer Rights Protection Law regarding compensation to users.

However, the judgment stands out mainly for the compensation granted to consumers for collective moral damages ‒ placing an issue of growing and special importance in the matter back on the table once again.

Thus, this article will focus on the analysis of the current regulation on collective moral damages or moral damages in class actions in relation to the treatment given to them by the above-mentioned landmark judgment.

Facts of the case

Between 29 January and 2 February 2021, there were several cuts in the residential electricity supply in different communes of the Metropolitan Region of Santiago, whose electricity distribution depends on the companies Enel Distribución Chile SA and Enel Colina SA. More than 127,756 customers were affected.

As a result of these supply cuts, a charge was filed against the aforementioned company by the sectoral agency in charge of overseeing compliance with electricity regulations (Superintendencia de Electricidad y Combustibles), based on the exceeding of the time limit for supply replacement to customers. Such exceeding of the time limit constitutes an unlawful act that violates the electricity regulations in force.

At the same time, SERNAC filed a lawsuit in defence of the collective interest of consumers, requesting:

• that the court ‒ based on the background briefly described earlier  ‒ order the defendants to pay the maximum fines allowed for the infractions committed, which can be classified as serious and repeated violations of consumer regulations;
• that the defendants be ordered, in addition, to compensate the consumers for the proportional discount in the collection or reimbursement of the price paid during the interruption of the electricity supply;
• that the companies also be ordered to pay the direct and automatic compensation derived from the aforementioned interruption; and
• that, on the basis of the liability configuration of the defendants, the economic and especially moral damages caused to the consumers be compensated.

Court decision: compensation for non-pecuniary damage

As previously mentioned, the 4th Civil Court of Santiago accepted the claim filed by SERNAC, ordering ‒ among other matters and as far as this article is concerned ‒ direct and automatic compensation to consumers for each subgroup affected, as follows:

• CLP10,000 to each customer affected for more than four continuous hours (52,262 customers); and
• CLP1,666 to each customer affected for less than four continuous hours (75,494 customers).

Regarding compensation for moral damages, the court ordered the payment of CLP50,000 to each of the 127,756 customers ‒ ie, a total compensation for moral damages of CLP6,387,800,000 (approximately USD6.8 million) – substantiating this compensation in the following terms: “Thus, with regard to the moral damage, being this a damage caused by the violation of the intimate feelings of a person, this appears in a manifest way in consumers, given the mere fact of being prevented from using and enjoying an essential basic service, such as electric energy, whose interruption or suspension extended up to 83 continuous hours as was accredited by the background accompanied by both parties to the trial. During a period of sanitary alert and quarantine, including electro-dependent users, the requirement demanded by the norm in question is accredited, given the physical or psychological integrity or the dignity of the consumers was affected.”

This condemnatory judgment is not only an important jurisprudential precedent, as mentioned previously, but is also an invitation to examine the current regulation of moral damages in the context of class actions in Chile. In so doing, the relevant regulatory problems can be identified.

Evolution of the regulation of moral damages in class actions in Chile

The regulation of the issues associated with moral damages in class actions is closely related to the enactment of Law No 21,081, known as the “Law for the strengthening of SERNAC”, which came into force in March 2019.

Prior to the entry into force of this law, the Consumer Rights Protection Law excluded compensation for moral damages in class actions. In effect, Article 51° No 2 of the law in question ‒ in the paragraph referring to the special procedure for the protection of the collective or diffuse interest of consumers ‒ established that “the compensations determined in this procedure may not be extended to the moral damage suffered by the plaintiff”.

Such categorical exclusion was modified by Article 1° No 32 letter b) of Law No 21,081, which repealed said Article 51° No 2 and replaced it with the following tenor: “The indemnities determined in this procedure may be extended to moral damage whenever the physical or psychological integrity or dignity of consumers has been affected. If the facts invoked have caused such effects, it will be a substantial, pertinent and controversial fact in the resolution that requires proof.”

In this article, Law No 21,081 establishes the proceeding conditions, the procedure and the judge’s powers to determine the moral damages compensation in class actions.

Effects on physical or psychological integrity of consumers

As can be inferred from Article 1° No 32 letter b) of Law No 21,081, the legislator makes collective moral damages compensation conditional on the effects on the physical or psychological integrity or dignity of consumers. In this respect, there is a doctrinal tension in Chile between those who understand that such moral damage can be configured by individual effects on persons within a group and those authors who are of the opinion that there must be effects on supra-individual goods or injuries to group interests for collective moral damage to be configured.

Moral damage as a relevant and disputed material fact

A second essential characteristic of the collective moral damages regulation in Chile is that, as stated in Article 1° No 32 letter b) of Law No 21,081, if the facts invoked have caused damage to the physical or psychological integrity or dignity of consumers, this situation must constitute a substantial, relevant and disputed fact in the decision to hear the case at trial. The new law established, in such terms, an imperative rule for the judge to establish as a proof object the causal relation between the facts on which the action is based and the alleged moral damage.

Power of judge to determine the minimum common amount

After determining moral damages conditions in the context of class actions, the Article 51° No 2 of the Consumer Rights Protection Law in analysis establishes and regulates ‒ particularly in its fourth paragraph ‒ the judge’s power to establish a “common minimum amount” in the moral damages determination. In addition, this allows the judge to order an expert opinion for the common minimum amount’s determination, which must be paid for by the defendant if found responsible for the alleged infringements.

Furthermore, the law allows those consumers who consider that their damage exceeds this common minimum amount to pursue the compensation difference in a subsequent summary trial that will have as its object this determination and that must be followed before the same court that heard the class action.

As a final relevant issue concerning the minimum common amount, Article 51° No 2 determines a fast and expeditious registration system to be made available to consumers by SERNAC, which will allow them to avail themselves of the mechanism for determining the minimum common amount.

The regulation of the topic of the “minimum common amount” reinforces the thesis that moral damage in class actions in Chile, thus regulated, expresses the idea (as a part of the doctrine has held) of a mere general effect on homogeneous individual interests and not a collective, common or supra-individual legal interest ‒ particularly when taking into account the right of consumers to request, individually and in a different trial, the increase of the compensation amount by alleging to have suffered greater moral damages.

In addition, but equally related to the minimum common amount, the judgment in SERNAC v Enel exposes a formal tension in the regulation that has substantive consequences. The lack of a rule ordering the judge to make explicit in the judgment that they are awarding a “common minimum amount” allows that, as in the case of SERNAC v Enel, the moral damages compensation awarded to all affected consumers equally can be understood either as a “common minimum amount” or as a single, equal and therefore “maximum” compensation for all affected consumers. This regulatory gap may result in the fact that the lack of explicitness in the judgment to expressly indicate that the award of moral damages compensation effectively constitutes a “common minimum amount” hinders the consumers’ right to claim a higher amount in a subsequent trial ‒ a matter that a regulation that aims precisely to protect their rights and provide certainty must necessarily avoid.

Regarding this point, and in the opinion of these authors, it is a normatively coherent solution to use Article 2 ter of the Consumer Rights Protection Law. This was recently added to the regulatory body by Law No 21,398, published on 24 December 2021, which establishes measures to encourage the protection of consumer rights. In this regard, said article enshrines the pro-consumer principle, expressly stating that “the rules contained in this law shall always be interpreted in favour of consumers, in accordance with the pro-consumer principle and, in a complementary manner, according to the rules contained in paragraph 4 of the Preliminary Title of the Civil Code”.

In such terms, this alternative of gap integration regarding the “common minimum amount” through the application of the pro-consumer principle will allow understanding that ‒ in the absence of express determination thereof by the judge in the judgment ‒ whenever the supplier is condemned to the compensation of an amount for moral damages, without distinction of class or group, it will be a common minimum amount, reserving the right to request a higher compensation to those consumers who consider that the moral damages suffered were greater.