Consumer representative actions: Is the EU’s new system better?
Oliver Holland and Walker Syachalinga explain the differences between the European Union’s new system for bringing representative legal action and the system that still applies in England and Wales.
Posted on 19 October 2022
On 25 November 2020, the European Parliament introduced Directive (EU) 2020/1828 on representative actions for the protection of the collective interests of consumers.
It enables consumers from EU Member States to collectively bring legal action against businesses in the courts of any EU Member State for the infringement of certain consumer focused EU regulations.
The Directive, which must be adopted and published by EU Member States by 25 December 2022, aims to empower consumers by recognising certain non-profit making organisations as ‘qualified entities’ that can represent the collective interests of consumers in legal proceedings against businesses.
The Directive has been praised for helping to reshape Europe’s litigation landscape, however, with the UK now out of the EU, it does not apply to England and Wales, so what are the main differences in bringing a collective action in the EU and in these countries?
Comparing the key features
In England and Wales representative actions are governed by Civil Procedure Rule (CPR) 19.6. This allows someone to bring representative proceedings on behalf of a group of individuals if they have the same interest in a claim. The court’s decision given in a judgment or order applies to everyone represented in the claim.
In Lloyd v Google LLC UKSC 50 the Supreme Court identified six key features of representative actions under the law of England and Wales. We will compare those features with the EU Directive on representative actions.
- The “same interest” requirement – English law requires anyone bringing representative actions to have the same interests as the people represented so that the representative can be relied on to promote and protect the interests of those represented (Lloyd at [71] and [72]).
The EU Directive allows only ‘qualified entities’ such as public authorities or consumer protection organisations to bring representative actions (Art 7(6). The qualified entity must be a legal person with 12 months’ actual public activity, a legitimate purpose in the protection of consumer interests, be non-profit making, not subject to insolvency proceedings and be independent and not influenced by parties acting as a trade, business, craft or profession (Arts 3(4) and 4).
- Discretion of the court – Even where a person satisfies the court that they have the same interest as those they are representing, English law gives the court the discretion whether to allow their claim to proceed by considering whether it meets the overriding objective of dealing with cases justly and at proportionate cost (Lloyd at 75]).
Under the EU Directive, the courts can examine whether the statutory purpose of the ‘qualified entity’ justifies it bringing the representative action (Art 6(3)), assess the admissibility of a representative action (Art 7(3)) and can dismiss “manifestly unfounded cases at the earliest possible stage of the proceedings in accordance with national law” (Art 7(7)).
- No requirement of consent – Under English law there is no requirement for a person bringing a representative action to obtain the consent of all persons being represented (Lloyd at [77]).
The EU Directive is similar (Art 8(3) and 9(2)) except that non-residents of a Member State are required to expressly opt-in (Art 9(3).
- The class definition – setting out the number and identities of individuals being represented is not a precondition for bringing a representative action under English law. While doing so may be desirable the court retains the discretion to decide whether a representative group has been adequately identified (Lloyd at [78]).
- Under the EU Directive, where a remedy being sought does not name individuals entitled to benefit from it, it must describe the group of consumers entitled to benefit (Art 9(5)).
- Liability for costs – as people represented by a representative claimant or defendant will not usually have joined the claim themselves, they will not usually have to pay any costs incurred by the person who brought (or defended) the claim. That does not prevent the court from making an order requiring a represented person to pay or contribute to costs and giving permission for the costs order to be enforced against that person under CPR 19.6(4)(b) (Lloyd at [79]).
Similarly under the EU Directive the default rule is that the unsuccessful party pays the successful party’s costs while individual consumers are not required to pay the costs of proceedings except in exceptional circumstances (Art 12). Member States are required to provide ‘qualified entities’ with financial help, including legal aid (Art 20(3).
- The scope for claiming damages – it does not matter that the facts giving rise to the claim may differ for each represented person or that individuals are seeking from the court a combination of compensation or some other monetary relief. However, what limits the scope for claiming compensation in representative actions is the principle that damages for a civil wrong are awarded with the aim of putting each individual in the same position as if the wrong had not occurred. In most cases it becomes necessary to assess each individual’s claim, hence representative actions are not suited to such situations (Lloyd at [80]).
- Under the EU Directive, ‘qualified entities’ can ask the court to compel the defendant to cease or prohibit an act or to make amends by compensation, repair, replacement, price reduction, contract termination or reimbursement of the price paid (Art 7(4)).
Conclusion
On the face of it, the Directive suggests a wide-ranging mechanism through which consumer representative actions can be brought. It applies to a number of European laws including data protection, product liability, environment and energy. The Directive also enables ‘qualified entities’ to ask the court to prevent a business from taking certain steps and provides for a wide range of options for financial compensation as well as options for external funding.
The position under English law is more flexible as any individual can bring a representative action provided they can satisfy the court they have the same interests as those they are representing. Under the Directive only a ‘qualified entity’ that meets set criteria can bring the action.
However, in reality the ‘same interest’ requirement under English law demands an individualised assessment of each damages claim which cannot effectively be carried out without the participation of everyone being represented. This can be a seriously prohibiting factor as the claimant in Lloyd discovered.
The English courts have seen very few claims brought under the representative action mechanism and people usually prefer to bring a group action under a Group Litigation Order under CPR 19.11.
For English law to become more like the US style class action system, or indeed the Directive, the strict ‘same interest’ requirement would need to be loosened.
Time will tell how each Member State will interpret and apply the Directive and how restrictive the requirement for a ‘qualified entity’ to be the claimant will be. The Directive is clearly a step in the right direction to enabling greater access to justice in multi-party actions and hopefully the UK Government’s recent announcement of reforms to UK consumer protection rules will bring us in line with Europe.
Profile
Oliver Holland
Oliver specialises in international cases involving multinational corporations where environmental harm or human rights abuses have been alleged
Profile
Walker Syachalinga
Walker is an associate solicitor in the international and groups claims department
Landing Page
