Litigation monitoring on the rise: representative actions for the protection of collective interests are here to stay

Now, "Qualified Entities" ("QEs") (e.g. a non-profit organisation protecting the interests of consumers) have the right to request "injunctive" and/or "redress" measures for breaches of consumer laws. Injunctive measures include provisional and final orders to cease a breach of consumer laws and may be granted without consumers sustaining any actual loss. Redress measures encompass a variety of remedies, such as compensation, price reduction or contract termination.

Subject to the new collective action regime are any claims based on breaches of consumer laws that occurred on or after 25 June 2023.

What does that mean in individual jurisdictions?

Austria

In Austria, the "Austrian-style Class Action" as well as the Austrian Association of Consumer Protection (VKI) and the Austrian Chamber of Commerce (AK) as "QEs" filing collective actions against companies, are nothing new. In many CEE jurisdictions, however, the possibility to request compensation in a collective action is, in fact, new and will materially change the litigation landscape. As QEs may issue not only local but also cross-border representative actions in other EU Member States, a simple litigious case in one state could eventually lead to a class action in another. Hence, litigation monitoring takes on a completely new meaning.

Hungary

Hungary introduced "opt-in proceedings", where customers actively participate in the lawsuit, back in 2018, so this type of collective lawsuit existed way before the EU Directive 2020/1828 came into play. Later, in December 2022, Hungary introduced representative actions, where customers do not participate in the lawsuit, or what's commonly referred to as an "opt-out action" with entry into force as of June 2023.

Even though the current legal system offers both types of actions now, they have not yet become popular, as consumers still prefer to launch individual claims that are for free in a consumer protection case. Also, there is no Hungarian private organisation authorised to handle representative actions yet. Still, since organisations from other EU Member States were granted authority to launch representative actions in Hungary, this could, in the future, pave the way for an uplift in Hungarian class action practice. However, Hungarian law does not recognise the concept of punitive or exemplary damages, which could be demotivating for a long-lasting lawsuit.

Slovenia

The Directive has not yet been implemented in Slovenia as of September 2023, but the applicable 2017 Collective Actions Act, which was based on the EU Commission's Recommendation of 11 June 2013, already includes many of its key features, including the possibility to bring a collective compensatory action. While only a few collective actions were brought during the first years of the applicability of the Act, this trend changed over the last three years, when a total of 19 collective (compensatory) actions were filed against the likes of Apple Inc., leading Slovenian banks and telecoms providers. As of September 2023, all 19 actions are still in the preliminary (certification) stage, but they are expected to soon put various aspects of the law – such as the commonality requirement, the rules around standing and reasonableness of litigation funding – to test before Slovenian courts. 

Poland

Class actions, even though present in the Polish legal framework since 2009, have been a rather unpopular solution so far due to the inefficient procedure. The recently published draft law implementing the Directive provides for important simplifications applicable in cases regarding violation of consumers' interests. Such actions are to be initiated by an entitled consumer organisation without specifying the group of represented consumers. The requirement to identify participants of the group is yet to be applicable if the lawsuit covers further claims stemming from the violation of their interests (e.g. claims for damages). However, as opposed to the current general provisions, the amounts of such claims will no longer have to be unified. The proposed facilitated procedure may prove to be an important new legal measure for consumers and trigger an increase in the number of class actions before Polish courts.

Slovakia

The Slovak Class Actions Act was already adopted on 21 June 2023, with the date of effectiveness being 25 July 2023, despite the President of the Slovak Republic using her veto right, which was ultimately broken through by the Slovak parliament. The president justifiably emphasised potential practical hurdles and "weak" points for consumers that might occur in practice in the future. In particular, the so-called "intention of claim" could contribute to a reduction of consumer protection and in fact increase the bureaucratic burden on consumers prior to filing a class action in court, ultimately demotivating consumers to initiate any steps. The president also highlighted the requirement to obtain at least 20 consumers for the intention of claim to be able to file a class action, all within a two-month period, as a potential roadblock for effective consumer protection.

Czech Republic

Unlike other EU countries, the Czech legal system has so far lacked a suitable collective rights protection instrument. The implementation of the Directive into Czech national law thus has been long awaited and has provoked intense discussion among the retail sector, legal advisors and non-profit organisations.

Although the bill implementing the Directive was still in the legislative process when this article was being written, the introduction of a brand-new legal tool for protecting collective consumer interests is obviously a hot topic in the Czech Republic.

Clearly a US-style class action regime will not be introduced. Class actions may only be brought by consumer organisations approved by the state. The opt-in model is applied and at least 20 consumers are needed to file.

Still, this is a significant change from the Czech legal perspective, one that will affect already established consumer-business relationships. Retail sector businesses in particular should prepare for new rules focusing on compliance with legal standards of consumer products and services and should monitor the outcome of the legislation carefully.

Schoenherr's class action info corner outlines the most important issues on the implementation of the Directive in each of our CEE jurisdictions.

authors: Marguerita Sedrati-Müller, Sebastian Lukic, Dóra Halmosi, Bálint Bodó, Marko Frantar, Miriam Gajšek, Hanna Kosińska, Ján Farbiak, Maria Gabriella Manzone, Natálie Rosová