D-Day: the Class Action has landed in Europe
Once again the Brits, Yankees and Canucks have come to our rescue, by setting the right example.
As of today, 25 June 2023, companies doing business in Europe face a new litigation landscape under the EU Directive on Representative Actions (“RAD”).
A quick overview:
(1) Representative actions are actions brought by Qualified Entities (“QE”) before national courts or administrative authorities on behalf of groups of consumers to seek injunctive measures (i.e., to stop a trader’s unlawful practices, redress measures (such as compensation) or both injunctive and redress measures.
(2) The representative actions can be domestic, initiated by a QE in the same Member State where it was designated or cross-border, initiated in a Member State other than the one where the QE was designated.
(3) National courts may dismiss (strike out) “manifestly unfounded cases” at the earliest stages of proceedings in accordance with national procedural rules.
(4) Member States have the choice to provide for an opt-in mechanism, or an opt-out mechanism, or a combination of the two. In an opt-in mechanism, only those consumers who explicitly expressed their wish to be represented will benefit from the action. In an opt-out mechanism all consumers on behalf of whom the QE decided to bring the action will be represented and bound by its outcomes unless they explicitly express their wish to be excluded from the action. Most Member States are opting for an opt-in regime.
(5) When Member States allow for the funding of the representative actions by funders who are not party to these actions, they need to ensure that conflicts of interests are prevented. They must also ensure that funding by third parties that have an economic interest in the bringing or the outcome of the representative action for redress measures does not divert the representative action away from the protection of the collective interests of consumers.
(6) Most Member States will probably allow QEs to file representative actions beyond the requirements of the Directive. Collective actions will therefore not be limited to consumer protection, such as data protection, financial services, and travel, but will be possible in other areas as well.