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Commission recommends Member States to have collective redress mechanisms in place to ensure effective access to justice

The European commission in a press release of 11 June 2013 informed that it recommends Member States to have collective redress mechanisms in place to ensure effective access to justice.

“The European Commission has set out a series of common, non-binding principles for collective redress mechanisms in the 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.

“Member States have very different legal traditions in collective redress and the Commission wants to respect these. Our initiative aims to bring more coherence when EU law is at stake”, said Vice-President Viviane Reding, the EU’s Justice Commissioner. “This Recommendation is a balanced approach to improve access to justice for citizens while avoiding a US-style system of class actions and the risk of frivolous claims and abusive litigation.”

Vice President Joaquín Almunia, in charge of competition policy, said: “When they are victims of infringements of competition rules, citizens and businesses – particularly SMEs – often face strong obstacles in obtaining effective compensation. To overcome these difficulties we have proposed a Directive on antitrust damages actions. Since the harm may be shared by many injured parties, collective actions mechanisms should also be in place. This Recommendation is therefore a useful complement, sending a clear message to Member States.”

Consumer Policy Commissioner Borg added: “Today we are making an important step towards an EU framework for collective redress. We are inviting all EU Member States to equip EU consumers with the tools to enforce their rights and obtain compensation for the harm caused by violations of EU law. Member States should ensure that the collective redress procedures are fair, equitable, timely and not prohibitively expensive.”

Main Principles of the Commission Recommendation

The Commission’s Recommendation invites all Member States to have national collective redress systems and sets out a number of common European principles that such systems should respect:

Member States should have a system of collective redress that allows private individuals and entities to seek court orders ceasing infringements of their rights granted by EU law (so called “injunctive relief”) and to claim damages for harm caused by such infringements (so called “compensatory relief”) in a situation where a large number of persons are harmed by the same illegal practice.

Member States should ensure that the collective redress procedures are fair, equitable, timely and not prohibitively expensive.

Collective redress systems should, as a general rule, be based on the “opt-in” principle, under which claimant parties are formed through directly expressed consent of their members. Any exception to this principle, by law or by court order, should be duly justified by reasons of sound administration of justice. In parallel, the Recommendation stresses the need to provide information to potential claimants who may wish to join the collective action.

The Commission is recommending important procedural safeguards to make sure there are no incentives to abuse collective redress systems. Member States should for example not permit contingency fees risking creating an incentive for abuses. In addition, the entities which are representing claimants have to be of non-profit character, to ensure that they are guided by the interests of those affected in situations of mass damages. Another way of preventing abusive 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.

The central role in the collective litigation should be given to the judge, who should effectively manage the case and be vigilant against any possible abuses. The Commission has not ruled out third party financing for European collective redress, but proposes conditions, in particular related to transparency, to ensure there is no conflict of interests.

The Recommendation also promotes Alternative Dispute Resolution, requiring that this possibility is offered to the parties on a consensual basis.

Next steps: The Recommendation asks Member States to put in place appropriate measures within two years at the latest. Two years after implementation of the Recommendation, at the latest, the Commission will assess the state of play, based on the yearly reports of the Member States to evaluate whether further measures to strengthen the horizontal approach reflected in the Recommendation are needed.


What is Collective Redress and why is it needed

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. It is a broad concept that includes injunctive relief (lawsuits seeking to stop illegal behaviour) and compensatory relief (lawsuits seeking damages for the harm caused). It needs to be clearly distinguished from so-called “class actions” that are common under the US legal system. In Europe, collective redress procedures have been introduced in some Member States. However, where introduced these procedures vary widely.

The Commission, as a public authority and guardian of the EU Treaties, enforces EU law. In parallel, individuals, business and entities representing interests of different groups of society can seek enforcement of their rights under EU law in national courts. In some cases, the violation of EU law may trigger multiple individual lawsuits. In these cases collective redress can complement public enforcement. Current EU law already provides for the possibility of pursuing collective actions for injunctions in the field of consumer law, but the national legal systems vary considerably concerning financial markets, competition, environmental protection, and other areas of law. The situation is even more diverse among Member States when several consumers or businesses want to seek damages in the same case. In preparing its Recommendation, the Commission carried out a broad public consultation in 2011 to assess if and under what conditions a European approach to collective redress can bring added value to European citizens and businesses (IP/11/132). It also took into account the European Parliament’s Resolution “Towards a coherent European approach to collective redress” asking for a horizontal framework for collective redress.

Commission Action in the area of Collective Redress

The Commission has worked for several years on developing European standards of collective redress in the field of consumer and competition law. The Commission adopted a Green Paper on antitrust damages actions in 2005 and a White Paper in 2008, both of which include a chapter on collective redress. In 2011, the Commission carried out a public consultation, in which around 300 institutions and experts as well as 10,000 citizens expressed their views on the European framework for collective redress. The public consultation demonstrated a divergence of views among stakeholders and a need for balanced solutions.”