EC Recommendation on collective redress
11 June 2013by eub2 -- last modified 11 June 2013
The European Commission has set out a series of common, non-binding principles for collective redress mechanisms in the EU Member States so that citizens and companies can enforce the rights granted to them under EU law where these have been infringed. The Recommendation aims to ensure a coherent horizontal approach to collective redress in the European Union without harmonising Member States' systems. National redress mechanisms should be available in different areas where EU law grants rights to citizens and companies, notably in consumer protection, competition, environment protection and financial services. By recommending to Member States to put in place national collective redress mechanisms the Commission wants to improve access to justice, while ensuring appropriate procedural guarantees to avoid abusive litigation. The Recommendation complements the proposal for a Directive on antitrust damages which will help the victims of violations of antitrust rules to obtain compensation through the legal actions available in Member States (see IP/13/525, MEMO/13/531). While the Recommendation calls on Member States to put in place collective redress mechanisms, the Directive leaves it to Member States whether or not to introduce collective redress actions in the context of private enforcement of competition law.
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What is collective redress?
Collective redress is a procedural mechanism which allows for reasons of procedural economy and/or efficiency of enforcement, many single claims (relating to the same case) to be bundled into a single court action. Bundling claims reduces the burden on claimants and therefore facilitates access to justice. It thus constitutes a key mechanism to ensure that rights do not only exist on paper but are enforced. Collective redress is a broad concept that includes injunctive relief (lawsuits seeking to stop illegal behaviour) and compensatory relief (lawsuits seeking damages for the harm caused).
Why is the Commission making this Recommendation and presenting this Communication?
The Commission supports the development of collective redress as a means of law enforcement at national level with the aim to improve the enforcement of rights granted under European law.
Collective redress proceedings improve access to justice for citizens and companies in disputes concerning European law. It is a supplement to public enforcement in some areas such as competition law.
To counter possible abuses of collective redress, the European Commission is recommending a number of important procedural safeguards. Member States should for example not permit contingency fees for legal services. Those Member States that exceptionally allow for contingency fees should provide for appropriate national regulation of those fees in collective redress cases. Another way of preventing abuse litigation is the prohibition of punitive damages which usually increases the economic interests at stake in such actions. Instead, full compensation should reach individuals once the court confirms that they are right in their claims.
What are the savings for citizens and businesses?
The introduction of collective redress mechanisms in Member States will save litigation costs for both EU citizens and businesses. Collective redress allows all claims related to a similar dispute to be handled in one single proceeding thus avoiding many different individual proceedings possibly in various Member States. This will lead to procedural economy with beneficial results in terms of costs and time not only for claimants and defendants but also for the court system and therefore for public resources in general.
Which areas would be covered by the recommendation?
The Commission's Recommendation advocates a horizontal approach, and its content therefore also applies to the field of competition law, an area for which certain other specific rules – justified by the specificities of competition law – are included in a proposal for a Directive on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union. This is in line with the European Parliament's Resolution "Towards a coherent European approach to collective redress" asking for a horizontal framework for collective redress.
How will the Commission avoid the introduction of US-style "class actions" in Europe?
The Commission recommends that Member States' legal mechanisms on collective redress comply with a number of procedural safeguards which will ensure a coherent approach to collective redress in the European Union without harmonising Member States' systems. Such safeguards aim, in particular, to avoid abusive litigation.
The European principles on collective redress may be outlined as follows:
As a general rule, the Commission recommends opt-in systems of collective redress. This means that the claimant group should in principle include only those individuals or legal persons who actively decided to join the represented group for purposes of the specific case at hand. Opt-out principles systems are the exception and should be duly justified by reasons of sound administration of justice.
Such mechanisms should be available horizontally, in different areas where Union law grants rights to citizens and companies (such as consumer protection, competition, environment protection, financial services, data protection);
The collective redress mechanisms established at national level should be accompanied by important procedural safeguards aimed at protecting the procedural rights of the parties and avoiding incentives to abuse the collective redress systems. For instance it should be verified at the earliest possible stage of litigation that manifestly unfounded cases are not continued. Member States should also avoid lawyers' fees calculated as a percentage of the compensation awarded (contingency fees) and punitive damages (awarded in excess of actual damage or loss suffered by the claimants).
As such, the European approach to collective redress clearly rejects the US style system of "class actions".
How will collective actions interact with enforcement by public authorities?
In fields of law, such as competition, where public authorities are particularly effective in enforcing the EU rules, collective actions should not jeopardise public enforcement. The Recommendation therefore encourages collective actions to be taken once the public authority has found an infringement. That saves costs for claimants and avoids litigation against innocent companies.
In case public proceedings only start once a collective action has already been brought, the Recommendation calls upon national courts to avoid giving a judgement that would conflict with the planned decision of the public authority. To ensure this consistency, courts may consider staying their proceedings.
Who will be affected?
The Recommendation is addressed to the EU Member States, asking them to provide for collective redress mechanisms in their national law and/or ensure that such mechanisms comply with the common European principles. The introduction of collective redress will also affect citizens and companies when they are involved in a litigation concerning a 'mass harm situation' where a large number of persons are harmed by the same illegal practice.
What else is the EU doing to enhance access to justice for citizens and companies in Europe?
The EU is acting continuously in order to improve access to justice. Most recently, the Union has given an important boost to the resolution of disputes out of court; in spring 2013, the European Parliament and the Council adopted a new legislation on consumer Alternative Dispute Resolution (ADR) and consumer Online Dispute Resolution (ODR), its publication in the Official Journal of the European Union is foreseen for this month.
The Commission also intends to improve access to justice for citizens in low value disputes by an amendment of Regulation (EC) No 861/2007 establishing a European Small Claims Procedure (IP/12/985).
In addition, the Commission continues working on the development of e-justice aimed at reducing costs and time of litigation in Europe:
What are the next steps following today's Recommendation?
Member States will have two years to put in place the principles set out in the Recommendation. At the latest within two years after the implementation the Commission will assess the state of play on the basis of practical experience. In this context it will evaluate in particular its impact on access to justice, on the right to obtain compensation, the need to prevent abusive litigation, the functioning of the single market, and consumer trust. The Commission will also assess whether further measures are necessary to consolidate and strengthen the horizontal approach reflected in the Recommendation.
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