As I have noted in prior posts, there has been in recent years a slowly developing E.U. initiative for the introduction of a rights of collective redress on a Union-wide basis. As discussed here, in April 2018, the European Commission introduced a proposal – as part of what it called a “New Deal for Consumers” – that would introduce a European collective redress right for consumers. More recently, on March 26, 2019, the EU Parliament, in plenary session, adopted the Commission’s proposal. The next step is that the Council of Europe will now take up the proposal, moving the E.U. one step closer toward the adoption of a pan-European collective redress mechanism for consumers that would be available in all of the member states.  The March 26, 2019 application on which the EU Parliament acted can be found here.



The European Commission’s New Deal for Consumers proposal on which the EU Parliament recently acted builds on a number of previously existing initiatives. The Commission, in its Fact Sheet about its proposal, said that the proposal is a “follow-on” to the Commission’s 2013 Collective Redress Directive. In this prior directive, member states were advised to adopt collective redress mechanisms and report back to the Commission by July 2017. Upon review of the member states’ responses to the prior directive, the Commission found (as it said in the Explanatory Memorandum for its proposal) that “a number of Member States still do not provide for collective compensatory redress mechanisms tailored to mass harm situations.”


The provision for the collective redress mechanism in the latest initiative is borne in part out of the recognition of the insufficiency of the procedures available in response to the VW Dieselgate situation. The Commission’s press release at the time of its April 2018 proposal said that “Recent cross-border consumer cases, such as the ‘Dieselgate’ scandal which affected consumers all over the EU, have confirmed that European consumer law should be strengthened.” The latest initiative is calculated to “ensure that all European consumers fully benefit from their rights, by helping Member States to enforce existing rights better, and by modernizing redress systems.”


The Commission’s April 2018 proposal was designed to allow qualified entities to launch representative actions on behalf of consumers. Prospective representative groups, such as for example a consumer organization or independent public bodies, are to be qualified under the supervision of judicial or administrative authorities in the Member States. The Commission recognized that in some Member states it is already possible to launch collective action in courts, but under the Commission’s proposal this possibility is to be available in all EU countries.


As described in the application on which the E.U. Parliament acted in March of this year (which largely coincides with the Commission’s proposal), the proposed framework would allow “qualified entities to bring representative actions seeking different types of measures as appropriate, depending on the circumstances of the case.” The measures could include temporary or permanent injunctive relief or redress orders or declaratory judgments. The framework would also allow for sector specific redress, to provide for collective protection of consumers the protection of collective interests of consumers in different economic sectors “such as financial services, energy, telecommunications, health and the environment.”


The “qualified entities” who would act on the consumers’ behalf “will have to satisfy minimum reputational criteria (they must be properly established, not for profit and have a legitimate interest in ensuring compliance with EU law).” The qualified entities will “also be required to disclose to the courts or administrative authorities their financial capacity and the origin of their funds supporting the action.” The jurisdictional courts or administrative authorities “will be empowered to assess the arrangements for third party funding.”


The framework also encourages procedural measures “to avoid procedural costs becoming a financial obstacle to bringing representative actions” and to “promotes collective out-of-court settlements, subject to court or administrative authority scrutiny.” Perhaps most importantly, a final decision by a court or administrative authority that a target firm has violated applicable legal duties will constitute “irrefutable evidence in redress actions (within the same Member State) or a rebuttable presumption that the infringement has occurred (for cases brought in another Member State).”


Of perhaps greatest interest to readers of this blog, in addition to consumer protection, a number of other areas of law and regulation relevant to businesses would also be subject to this new mechanism, including, according to one source, “data protection, financial services, travel and tourism, energy, telecommunications, environment and health.”


Should the European Council agree with the measures adopted by the European Parliament on the recommendation of the European Commission, each of the member states would then be required to implement collective redress mechanisms for violations of designated sections of the European consumer protection law.



The European  Commission’s consumer collective redress is just the latest initiative supporting the development of collective redress mechanisms. I have previously discussed (here) , the developments in the EU represents just one part of the global rise of collective investor actions. The pace and direction of these various initiatives are interesting on a number of levels, but of particular interest to me is that this moved toward collective procedural mechanisms are coming about despite near-universal disdain for the U.S. style class-actions.


To be sure, the proposed collective redress mechanism is intended to provide mechanisms for seeking redress for violations of consumer protection laws, not necessarily for redress of other violations. However, as noted above, the initiative assumes that the collective redress mechanisms would also be available for a wide variety of substantive violations, including, “data protection, financial services, travel and tourism, energy, telecommunications, environment and health.” The breadth of this potential reach means that this mechanism could become relevant in a wide variety of contexts, including contexts that could affect businesses and business interests.


Despite the relatively narrow areas that the mechanism is intended to address, the procedures could well be adapted to other contexts within the various member jurisdictions.  The reason I say this is based on prior experiences. For example, as I noted in a recent blog post, look at what happened in France after it first adopted a consumer collective action mechanism in October 2014. Within a two-year period after the enabling legislation first became effective, the legislation had been amended several times, each time adding provisions expanding the types of disputes for which collective redress may be sought.


In my view, with the adoption of collective redress mechanisms, it could prove to be a relatively short leap from what is already permitted to what may be next, which is the use of these kinds of procedures for a wider variety of kinds of disputes, including even corporate and commercial disputes. All it would take is for some corporate scandal to emerge resulting in widespread shareholder disgruntlement. At that moment, aggrieved investors might well turn to the existence of the class action model and seek to use it as a tool to seek redress; if the limitations on the model stymie their efforts, the ensuing result might well be legislative reform.


Whether any of that actually happens will remain to be seen. However, there is a reason why legal authorities increasingly are turning to collective redress mechanisms.  In the 21st century, the global economy is complex, which in turn means that claims and claims processes necessarily will be complex, in many instances. Consumer products affect thousands or even millions of consumers. Company misconduct can affect thousands of investors, in multiple jurisdictions. The existence of collective redress mechanisms may arguably be a necessary consequence of the complex global economy in which we live. It may not be inevitable that the initiation of collective consumer redress mechanisms will lead to the development of collective redress alternatives in other contexts – but in my mind the further extension of the collective redress model is at least among the range of possible outcomes.


Even without these larger possibilities, the EU collective redress initiative has already come in for criticism for what it represents in its current form. On April 11, 2018, the U.S. Chamber’s Institute for Legal Reform issued a statement warning that the Commission’s proposal could make the EU a “major global hub for abusive litigation” and said that the proposal “may result in a system that is as bad or worse than in the U.S.”  The proposal, the group said, could allow lawsuits by “undefined groups of consumers” without sufficient safeguards, and could risk “forum shopping” as claimants are drawn to countries most permissive laws. The proposal could also encourage redundant lawsuits as consumers file multiple claims in different jurisdictions over the same injury.


Readers who are interested will want to review the recent Akin Gump law firm memo (here), which criticizes the initiative in the form voted on by the European parliament for failing to incorporate a number of the safeguards built into the federal court class action procedures in the U.S.