Collective Redress & Class Actions 2023 Comparisons

In May 2010, at the request of the president of the European Commission (the “Commission” or EC), Professor Mario Monti presented a report: “A New Strategy for the Single Market: At the Service of Europe’s Economy Strategy” to the EC. In his report Professor Monti highlighted, along with other topics relevant to the single market, the need for Europe to adopt its own legislation on collective redress, saying that “traditional litigation is not practical or cost-efficient for consumers and businesses”.

In February 2011, the Commission published a consultation document called “Towards a Coherent European Approach to Collective Redress” which paved the way for collective redress to be a new area of focus for the EU.

In June 2013, an EC recommendation was published calling on member states to put collective redress mechanisms in place. The aim was to ensure a coherent approach across the member states.

In 2017, the Commission oversaw a review of its 2013 recommendation to ascertain which member states had implemented a collective redress mechanism in the four years since the recommendation. This culminated in a report which confirmed that:

• there had been limited legislative change since the recommendation; and
• there remained a disparity of access to collective redress between the different member states.

The EU Directive

In April 2018, a suite of legislation was proposed by the Commission, called “A New Deal for Consumers” which, amid a variety of wide-ranging reforms for consumer laws in the EU, included a Draft EU Directive on representative actions for the protection of the collective interest of consumers (2018/0089).

It took two years for the text of the EU Directive on collective redress to be agreed, due to extensive debate and negotiations between the European Parliament and the Commission. It should be noted that Professor Monti had specifically warned against implementing a US-style class action regime in his report to the Commission in 2010. Some member states were therefore concerned that the proposed EU regime would be too similar to the US system. During the course of negotiations, the European Parliament also pushed to add some regulations to the Annex of the Directive which sets out the scope for the representative actions.

Eventually, the European Parliament endorsed the Directive in November 2020 and it was published in the Official Journal of the EU in December 2020.

The final text of the law, the EU Directive 2020/1828 on representative actions for the protection of the collective interests of consumers, came into force on 24 December 2020 (the “Directive”). Member states were given two years until 25 December 2022 to transpose the Directive into their domestic laws. The Directive took effect on 25 June 2023.

The drive behind the Directive was primarily the necessity to ensure consistency across the different member states and better access to justice, and to offer more (systematic) protection to consumers in Europe, by giving them access to a new form of redress.

Although it is no doubt influenced to some limited extent by regimes available in other countries (including the USA), the EU Directive establishes its own unique regime distinct from other jurisdictions. For instance, the Directive includes the option of having either an opt-in or opt-out system, whereas most US states have chosen an opt-out regime. Overall, the EU’s intention appears to be to implement the most robust regime in the world.

By 25 June 2023, only seven member states had implemented the Directive into national law. These were Croatia, Hungary, Italy, Denmark, Slovakia, Lithuania and the Netherlands. However, many other member states were advanced in drafting implementing legislation and in September 2023, the Directive was also implemented in Germany, Greece, Ireland, Italy and Latvia.

At an EU-level, the EU Directive 2020/1828 on representative actions for the protection of the collective interests of consumers, is the law on collective redress. The legislation came into force on 24 December 2020. Member states were given two years to transpose the Directive into their domestic laws, with it taking effect on 25 June 2023. When such domestic laws are enacted, they provide the mainstay source of law for collective redress in their respective EU member states (see 1.3 Implementation of the EU Collective Redress Regime).

Representative actions in the EU are limited in scope, as the alleged infringement for which they seek redress covers only certain EU Directives and Regulations as defined in Annex I of the Directive, including:

• the Product Liability Directive 85/374/EEU;
• the Bank Charges Directive 2014/92/EU;
• the General Data Protection Regulation 2016/679 (GDPR);
• the Supply of Digital Content and Digital Services Directive 2019/770;
• the Medical Devices and In-Vitro Regulations 2017/745 and 746; and
• the Cross-Border Online Content Services Regulation (EU) 2017/1128.

As can be seen from the above, the scope is quite wide and includes product liability and safety laws, data protection, financial services, telecommunications and travel. 

There are currently 66 EU Directives and Regulations listed in Annex I. However, many new EU legislative proposals, such as the AI Act, the AI Liability Directive and the Green Claims Directive, are intended to interact with the Directive, and will therefore be added to Annex I once they are approved.

The Directive sets out the following definitions of different types of representative actions available under Article 1:

• “representative action means an action for the protection of the collective interests of consumers that is brought by a qualified entity, as a claimant party on behalf of consumers to seek an injunctive measure, a redress measure, or both”;
• “domestic representative action means a representative action brought by a qualified entity in the member state in which the qualified entity was designated”; and
• “cross-border representative action means a representative action brought by a qualified entity in a member state other than that in which the qualified entity was designated”.

Member states are, however, responsible for determining the procedural mechanisms in practice – which are ordinarily normal court processes applicable in those countries – and deciding which domestic courts will have jurisdiction to hear such actions.

The actual procedure for commencing collective redress actions is determined by national procedural law, and usually relies on general court processes relevant to the specific member state in question.

Only “qualified entities” are allowed to bring an action according to the Directive. They are defined by the Directive as: “any organisation or public body representing consumers’ interests which has been designated by a member state as qualified to bring representative actions in accordance with this Directive” (Article 1).

Member states have discretion when it comes to setting out the criteria to determine what can qualify as such an entity as far as domestic actions are concerned. There are, however, set criteria for those entities wishing to bring a cross-border representative action. These include being an established entity, being independent, having a non-profit status and a legitimate interest in consumer protection. Some jurisdictions, such as Ireland, have elected to apply some of these more stringent criteria to domestic representative actions.

However, at least one “qualified entity” must be designated by each member state. The EU Commission is tasked with keeping a list of all designated “qualified entities” across the EU.

Actions can only be brought on behalf of consumers.

The Directive includes the option for the member state to have an opt-in or an opt-out system, or a combination of both, for participants in the collective action. The choice of option has been left to the member states, as the Directive recognises the need to “respond to their legal traditions”.

In an opt-in system, consumers are required to express their wish to be represented by the qualified entity, whereas consumers in an opt-out system are automatically represented by the qualified entity until they expressly state that they do not wish to be. It is up to member states to decide at which stage of the proceedings consumers need to exercise their right to either opt in or opt out. Consumers who reside in a different member state to where the representative action is being brought will be required to opt in to the action.

The Directive makes it clear that in an opt-in system, member states need to ensure that consumers still have an opportunity to join the action after it has been brought.

The specific court procedures applicable to joining further parties to collective redress/class actions are determined by member state laws.

The Directive does not include any provision about the power of member states’ courts in terms of case management. Member states therefore retain discretion on this issue which will vary depending on their national procedural laws. It may be that some member states wish to have mechanisms in place, such as test cases or lead cases.

This will vary from one member state to another depending on procedural laws and practice.

It should, however, be noted that the Directive provides that: “Member states shall ensure that representative actions for injunctive measures referred to in Article 8 are dealt with with due expediency.”

These mechanisms vary from one member state to another, depending on the locally applicable laws in place.

The Directive permits third-party litigation funding (TPLF) in so far as it is permitted by the laws of each member state. Although the Directive does not prohibit TPLF, it does restrict its use and promote transparency. In particular, it is up to member states to ensure that:

• there is no conflict of interest between a funder and the claimant(s);
• decisions made by a qualified entity are not in fact unduly influenced by a funder; and
• the representative action is not funded by a competitor of the defendant trader.

Article 10 of the Directive provides that: “Member states shall ensure that courts or administrative authorities in representative actions for redress measures are empowered to assess compliance” and “to take appropriate measures” in relation to the above.

As the TPLF market in Europe continues to grow at a pace, some member states, such as Bulgaria, have introduced new rules permitting the use of TPLF, albeit with some safeguards. TPLF remains largely unregulated across Europe although a proposal for a directive on its regulation was first published in June 2021. This remains under parliamentary review (see 5. Legislative Reform).

The rules around disclosure and privilege vary from one member state to another, depending on locally applicable laws.

However, it should be noted that Article 18 of the Directive provides that, to a certain extent, disclosure of evidence may be ordered by the domestic courts against the defendant (and a “qualified entity” or any third party, as applicable). This is subject to domestic procedural rules and EU and domestic rules regarding confidentiality and proportionality.

There are several forms of redress listed as being available under the EU Directive:

• injunctions, eg, for a trader to put an end to the alleged infringement; and
• specific redress, eg, compensation, reduction in price and replacement.

It should be noted that, unlike in the USA, punitive damages are not available.

These vary from one member state to another, depending on locally applicable laws.

Recital 53 of the EU Directive provides that: “Collective settlements aimed at providing redress to consumers that have suffered harm should be encouraged in representative actions for redress measures”. This is a clear message that collective settlements should be preferred, which will no doubt be attractive for businesses, as such settlements end actions more quickly and cost less.

Judgments and enforcement of judgments vary from one member state to another, depending on local laws.

There are no reported policy developments.

The manner in which the member states implement their laws continues to be a topic of interest and debate among social and legal commentators. Amendments to regimes regarding third-party funding are becoming more prevalent in member states now, given the express introduction of this topic within the Directive and the novelty of this for some member states.

The draft proposal for a directive governing the regulation of TPLF, first published in June 2021, is on hold while the EC conducts a study to collate information on the current regulations and practices on TPLF in member states. It is unlikely that any firm proposals for TPLF regulation will be made until the Directive on representative actions has been implemented by all member states.

As a result of Brexit, the Directive has not been implemented in the United Kingdom. The UK’s lack of participation in the EU-wide mechanism may give rise to additional forum shopping, which is likely to arise between member states as it is, given that discretionary aspects of the Directive are likely to be implemented differently across the EU. However, the UK has historically been a jurisdiction favoured by those bringing group litigation and this remains the case post-Brexit.  For further information, see the UK Law and Practice and Trends and Development chapters. 

Increased focus on achieving net zero targets and reducing carbon emissions, coupled with companies and their shareholders coming under scrutiny in respect of their corporate governance obligations and disclosures, is giving rise to an increased risk of ESG-related class actions across Europe. 

This risk has already manifested in jurisdictions such as the Netherlands, which has an established class action regime which was already broadly in line with the provisions of the Directive. The Netherlands has already entertained a number of high-profile class actions brought against the Dutch government as well as Dutch corporations such as KLM Royal Dutch Airlines (KLM). For example, in 2022, the NGO Fossil Free filed a class action lawsuit against KLM involving allegations of greenwashing. In September 2023, a class action lawsuit was filed against a US chemical company in respect of environmental damage caused by per- and polyfluoroalkyl substances (PFAS). 

This trend for ESG-related class action litigation is expected to increase as the Directive is implemented into the domestic laws of all member states.